SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                ---------------
                                    Form 20-F


                    Annual Report pursuant to Section 13 or
                    15(d) of the Securities Exchange Act of 1934

                  For the fiscal year ended December 31, 2000.
                         Commission file number 0-28882
                                ---------------
                             World Heart Corporation
             (Exact name of Registrant as specified in its charter)

                                     Ontario
                 (Jurisdiction of incorporation or organization)

                                 1 Laser Street
                             Ottawa, Ontario, Canada
                                     K2E 7V1
                     (Address of principal executive office)


Securities registered or to be registered pursuant to Section 12(b) of the Act:

                                      None

Securities registered or to be registered pursuant to Section 12(g) of the Act:

                                  Common shares

 Securities for which there is a reporting obligation pursuant to Section 15(d)
                                  of the Act:

                                      None

         Indicate  the  number of  outstanding  shares  of each of the  issuer's
classes of capital or common stock as of the close of the period  covered by the
Annual Report.

        Common shares..................................15,117,427

         Indicate  by check  mark  whether  the  registrant:  (i) has  filed all
reports  required to be filed by Section 13 or 15(d) of the Securities  Exchange
Act of 1934 during the preceding 12 months (or for such shorter  period that the
registrant was required to file such reports); and (ii) has been subject to such
filing requirements for the past 90 days.  Yes /X/  No / /

Indicate by check mark which financial statement item the registrant has elected
                                   to follow.

                  Item 17 / /                       Item 18 /X/
<PAGE>
In this document, World Heart Corporation is referred to as the "Corporation" or
"WorldHeart",  the ventricular assist device,  HeartSaverVAD(TM) being developed
by WorldHeart is referred to as  "HeartSaver"  and its left  ventricular  assist
system, Novacor(R)LVAS is referred to as "Novacor LVAS".

The Noon Buying Rate for cable transfers in Canadian dollars offered by the Bank
of  Canada,  on April 30,  2001,  was Cdn  $1.00 = US  $.6512.  The  Corporation
publishes its audited financial  statements in Canadian dollars.  In this Annual
Report,  references  to "dollars" or "$" or "Cdn $" are to Canadian  dollars and
references  to "US  dollars"  or "US $" are to  United  States  dollars.  Unless
otherwise  stated,  all  translations  of Canadian  dollars  into United  States
dollars  in this  Annual  Report  have  been  made at the rate of Cdn $1.00 = US
$.6669.






                                       2
<PAGE>
Cautionary Statement with Respect to Forward-Looking Statements

Statements  made in this  Annual  Report  with  respect to  WorldHeart's  plans,
strategies and beliefs and other  statements  that are not historical  facts are
forward-looking  statements within the meaning of U.S. federal  securities laws.
The  forward-looking  statements contain information that is generally stated to
be anticipated, expected or projected by the Corporation, and involves known and
unknown risks, uncertainties and other factors that may cause the actual results
and  performance of the  Corporation to be materially  different from any future
results  and   performance   expressed   or  implied  by  such   forward-looking
information.  Potential risks and uncertainties include, without limitation, the
uncertainties  inherent in the development of a new product for use in the human
body,  the  Corporation's   need  for  significant   additional   funding,   the
Corporation's need for acceptance from third-party payers,  extensive Government
regulation of the Corporation's  products, and rapid developments in technology,
including developments by competitors.






                                       3
<PAGE>
                             WORLD HEART CORPORATION

                               INDEX TO FORM 20-F

20-F Part and Item No.                                                  Page No.

PART I

Item 1.   Identity of Directors, Senior Management and Advisers.............. 5
Item 2.   Offer Statistics and Expected Timetable............................ 5
Item 3.   Key Information.................................................... 5
Item 4.   Information on the Company.........................................15
Item 5.   Operating and Financial Review and Prospects.......................30
Item 6.   Directors, Senior Management and Employees.........................38
Item 7.   Major Shareholders and Related Party Transactions..................49
Item 8.   Financial Information..............................................50
Item 9.   The Offer and Listing..............................................52
Item 10.  Additional Information.............................................53
Item 11.  Quantitative and Qualitative Disclosures about Market Risk.........61
Item 12.  Description of Securities Other than Equity Securities.............63


PART II

Item 13.  Defaults, Dividend Arrearages, and Delinquencies....................63
Item 14.  Material Modifications to the Rights of Security Holders
            and Use of Proceeds...............................................63
Item 15.  Reserved............................................................64
Item 16.  Reserved............................................................64


PART III

Item 17.  Financial Statements................................................64
Item 18.  Financial Statements................................................64
Item 19.  Exhibits............................................................65






                                       4
<PAGE>
PART I

Item 1. Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information

A. Selected Financial Data

The selected  financial  data as at December 31, 1996 through 2000,  and for the
twelve months then ended,  except for December 1996 which is for the nine months
then  ended,  set forth below in  Canadian  dollars is derived  from the audited
consolidated  financial  statements  of the  Corporation,  including  the  notes
thereto,  included  elsewhere in this Annual Report.  Certain financial data are
also  presented in United States dollar  amounts for the year ended December 31,
2000 using an exchange rate of Cdn $1.00 = US $.6669 solely for the  convenience
of the reader. Such translations should not be construed as representations that
the Canadian dollar amounts represent,  or have been or could be converted into,
United States dollars at any other rate.  The selected  financial data should be
read  in  conjunction  with  the  audited  consolidated   financial  statements,
including notes thereto.






                                       5
<PAGE>
Canadian GAAP Consolidated Statements of Loss Data:

<TABLE>
<CAPTION>
                                                                    Twelve months  Twelve months   Twelve months    Nine months
                                                                        ended          ended           ended           ended
                                       Twelve months ended             December       December        December        December
                                        December 31, 2000              31, 1999       31, 1998        31, 1997        31, 1996
                              ---------------------------------------------------------------------------------------------------
                                     Cdn              US               Cdn             Cdn             Cdn             Cdn
<S>                                 <C>              <C>              <C>             <C>             <C>            <C>
Revenue                              $4,674,485       $3,117,362                -               -               -              -
                              ===================================================================================================

Loss from operations                $35,242,887      $23,503,092      $18,671,650      $4,215,663      $9.790,780     $2,651,832
                              ===================================================================================================

Loss before income taxes            $35,397,347      $23,606,100      $17,442,741      $3,665,269      $9,436,846     $2,582,230
                              ===================================================================================================

Net loss                            $29,854,387      $19,909,561      $17,442,741      $3,665,269      $9,436,846     $2,582,230
                              ===================================================================================================

Basic and diluted net loss
per common share                          $2.01            $1.34            $1.30           $0.33           $0.93          $0.35
                              ===================================================================================================

Weighted average number of
common shares outstanding            14,878,625       14,878,625       13,463,943      11,078,948      10,150,000      7,331,418
                              ===================================================================================================
</TABLE>






                                       6
<PAGE>
U.S. GAAP Consolidated Statements of Loss Data:

<TABLE>
<CAPTION>
                                                                                                                         Period from
                                                          Twelve months   Twelve months   Twelve months    Nine months    April 1,
                                                              ended           ended           ended           ended       1996 to
                              Twelve months ended            December        December        December        December     December
                               December 31, 2000             31, 1999        31, 1998        31, 1997        31, 1996     31, 2000
                                 Cdn            US             Cdn             Cdn             Cdn             Cdn           Cdn
                                 ---            ---            ---             ---             ---             ---           ---
<S>                          <C>            <C>            <C>              <C>             <C>           <C>           <C>
Net loss in accordance with
U.S. GAAP                    $38,885,092    $25,932,039    $17,442,741      $3,665,269      $9,436,846    $51,245,380   $120,675,328

Accretion of
preferred Shares               3,080,000      2,054,018              -               -               -              -      2,054,018
                             -------------------------------------------------------------------------------------------------------
Net loss applicable
to common shares             $41,965,092     27,986,057    $17,442,741      $3,665,269      $9,436,846    $51,245,380   $123,755,328
                             =======================================================================================================

Basic and diluted net
loss per common share              $2.82          $1.88          $1.30           $0.33           $0.93         $6.83
                             =======================================================================================

Weighted average
number of common
shares                        14,878,625     14,878,625     13,463,943      11,078,948      10,150,000     7,505,479
                             =======================================================================================
</TABLE>





                                       7
<PAGE>
Canadian GAAP Consolidated Balance Sheet Data:

<TABLE>
<CAPTION>
                                                                    December 31,    December 31,   December 31,   December 31,
                                           December 31, 2000            1999            1998           1997           1996
                                    ---------------------------------------------------------------------------------------------
                                          Cdn            US              Cdn            Cdn             Cdn            Cdn
<S>                                   <C>              <C>            <C>             <C>            <C>            <C>
Cash and cash equivalents             $ 23,624,549     $15,754,951    $10,969,399     $ 5,561,941    $ 4,699,915    $ 6,662,553

Short-term investments                $ 22,696,677     $15,136,163    $13,680,708     $ 8,571,098              -    $ 8,123,595

Working capital                       $ 51,027,060     $34,029,383    $23,601,991     $13,489,597    $ 4,026,062    $14,606,270

Goodwill and other intangible         $ 49,941,394     $33,305,364    $   170,000     $   178,000    $   186,000    $   194,000

Total assets                          $116,455,883     $77,663,143    $27,019,716     $16,482,589    $ 7,390,902    $15,574,255

Long-term debt                        $    226,316     $   150,927    $   377,247     $   517,444    $   652,870              -

Preferred shares                      $ 55,211,759     $36,820,112              -               -              -              -

Capital stock                         $ 73,752,739     $49,184,888    $57,738,796     $30,347,768   $ 17,467,337    $17,467,337

Additional paid-in capital            $ 36,951,336     $24,642,438              -               -              -              -

Shareholders' equity (net assets)     $ 47,722,602     $31,825,677    $24,611,710     $14,663,423    $ 5,448,261    $14,885,107

Number of common shares outstanding     15,117,427      15,117,427     14,150,539      12,243,000     10,150,000     10,150,000

Dividend per share                               -               -              -               -              -              -
</TABLE>

Selected U.S. GAAP Balance Sheet Data:

The following  balance sheet items,  as presented  under U.S. GAAP,  differ from
Canadian GAAP:






                                       8
<PAGE>
<TABLE>
<CAPTION>

                                                                        December 31,    December 31,    December 31,   December 31,
                                         December 31, 2000                  1999            1998            1997           1996
                                 --------------------------------------------------------------------------------------------------
                                        Cdn              US                 Cdn             Cdn            Cdn             Cdn
<S>                                    <C>              <C>             <C>             <C>             <C>            <C>
Goodwill and other intangibles         $ 42,188,399     $28,134,977     $    170,000    $   178,000     $   186,000    $   194,000

Total assets                           $108,171,853     $72,138,612     $ 27,019,716    $16,482,589     $ 7,390,902    $15,574,255

Preferred shares                       $ 92,671,602     $61,801,668                -              -               -              -

Capital stock                          $122,415,889     $81,637,805     $106,401,946    $79,010,918     $66,130,488    $66,130,488

Additional paid-in capital                        -               -                -              -               -              -

Shareholders' equity (net assets)      $  1,740,561     $ 1,160,761     $ 24,611,710    $14,663,423     $ 5,448,261    $14,885,107
</TABLE>


Exchange Rates:

The Noon Buying Rate for Canadian  dollars,  offered by the Bank of Canada (Noon
Buying Rate) as of April 30, 2001 was Cdn $1.00 = US $.6512.

The  following  tables set forth,  for each period  indicated,  the high and low
exchange rates for one Canadian dollar  expressed in United States dollars,  and
for the annual  periods,  the average of such exchange  rates on the last day of
each month during such period and the rates for each such period end, based upon
the Noon Buying Rate:

 Year ended           High               Low           Average        Period End
December 31,

    1996            0.7515            0.7215            0.7334            0.7301

    1997            0.7489            0.6948            0.7223            0.6997

    1998            0.7105            0.6343            0.6743            0.6534

    1999            0.6929            0.6537            0.6730            0.6929

    2000            0.6973            0.6413            0.6733            0.6666







                                       9
<PAGE>
Month                                    High                    Low

April 2001                             0.6512                 0.6333

March 2001                             0.6502                 0.6340

February 2001                          0.6695                 0.6497

January 2001                           0.6690                 0.6596

December 2000                          0.6666                 0.6469

November 2000                          0.6551                 0.6413


B) Capitalization and Indebtedness

Not applicable.

C) Reasons for the Offer and Use of Proceeds

Not applicable.

D) Risk Factors

No Significant Revenues Earned Since Incorporation

The  Corporation has not generated  significant  revenues and does not expect to
generate any  significant  revenues  until such time,  if ever,  as  development
efforts  relating  to, and  clinical  trials  of,  HeartSaver  are  successfully
completed and  regulatory  approvals for its commercial  sale are obtained.  The
Corporation does not contemplate  commercial  production of the HeartSaver until
at least the year 2002. Moreover,  no assurance can be given that any regulatory
approvals  will ever be obtained or, even if obtained,  that such approvals will
lead to the successful commercialization of HeartSaver.

No Positive Gross Margin on Sales of Novacor LVAS

On June 30, 2000 the  Corporation,  through  World Heart Inc.,  its wholly owned
subsidiary, acquired Edwards Novacor LLC (Novacor) from Edwards Lifesciences LLC
(Edwards).  As a result,  the Corporation is now  manufacturing and distributing
Novacor LVAS. The  Corporation  has not generated a positive gross margin on the
sales of the Novacor  LVAS  product.  Although  the  Corporation  anticipates  a
decrease in the  manufacturing  costs of the product,  there can be no guarantee
that the revenues  generated from Novacor LVAS sales will be significant  enough
to produce a gross margin.






                                       10
<PAGE>
Significant Capital Requirements and Need for Significant Additional Financing

The Corporation  anticipates that its working capital will be sufficient to meet
its present  operating and capital  requirements for at least the next year, but
that it will need substantial  additional funds to expand operations thereafter.
The  Corporation  has  no  current  arrangements  with  respect  to  sources  of
additional  financing,  and there can be no assurance that additional  financing
will be available to the Corporation  when needed,  on  commercially  reasonable
terms.  The inability to obtain  additional  financing  when needed would have a
material adverse effect on the Corporation.

Regulatory Approvals May Not Be Obtained for HeartSaver

The sale and  advertising  of medical  devices in Canada is governed by the Food
and Drugs Act (Canada),  which is administered by Health Canada. The Corporation
plans to apply to Health Canada for its approval of HeartSaver  after completion
of in vitro and in vivo trials in order to obtain Health  Canada's  approval for
utilization  of the  device in Canada.  There can be no  assurance  that  Health
Canada will approve the utilization of HeartSaver, whether in a timely manner or
at all.

The research and development,  manufacturing,  marketing and distribution in the
United  States of products such as the  Corporation's  proposed  HeartSaver  are
governed by the United States Food and Drug  Administration  (FDA). There can be
no assurance that Health Canada, the FDA or any other regulatory  authority will
act favourably or quickly in its review of the Corporation's  Premarket Approval
and other applications, if and when made, and significant difficulties and costs
may be  encountered  by the  Corporation in its efforts to obtain such approvals
that could delay or preclude the Corporation from selling  HeartSaver in Canada,
the United States and elsewhere. Failure to receive, or delays in receiving such
approvals,  including the need for extensive  clinical trials or additional data
as a  prerequisite  to approval,  limitations on the intended use of HeartSaver,
the  restriction,  suspension or  revocation  of any  approvals  obtained or any
failure to comply with approvals  obtained could have a material  adverse effect
on the Corporation's business, financial condition and results of operations.

The  manufacture  of medical  devices is subject  to  compliance  with  Canadian
federal  environmental  and health and safety  regulations  and those of various
provincial and local agencies.  Although the  Corporation  believes that both it
and the  Cardiovascular  Devices  Division  (CVD) of the Ottawa Heart  Institute
Research  Corporation  (OHIRC) are in compliance with these laws and regulations
in all material  respects,  there can be no assurance that the Corporation  will
not be required to incur significant costs to comply with  environmental laws or
regulations in the future.

Dependence on a Limited Number of Products

The  Corporation's  future  financial  performance will depend on the successful
sales and  marketing  of  Novacor  LVAS and the  development,  introduction  and
customer acceptance of the Corporation's proposed HeartSaver, which is currently
under development. To date, all of






                                       11
<PAGE>
the  Corporation's  revenues have resulted from sales of Novacor LVAS.  Existing
pre-clinical data relating to HeartSaver is limited, and no applications for any
clinical trials or regulatory  approvals have been made. Prior to any commercial
use, the technologies  relating to HeartSaver  currently under  development will
require pre-clinical and extensive clinical testing,  and regulatory  approvals.
New product  development  is highly  uncertain and  unanticipated  developments,
clinical and regulatory delays, adverse or unexpected side-effects or inadequate
therapeutic efficacy could delay or prevent the successful  commercialization of
the Corporation's proposed HeartSaver. There can be no assurance that either CVD
or the Corporation will not experience  difficulties that could delay or prevent
the  commercialization of HeartSaver.  Any significant delays in, or termination
of, clinical trials of the Corporation's products under development would have a
material adverse effect on the Corporation's  business,  financial condition and
results of operations.

Uncertainty of Market Acceptance

HeartSaver and Novacor LVAS represent new ventricular  assist  technologies that
must  compete  with  other  pulsatile  assist  products  as well  as with  other
therapies for heart  failure such as  medication,  transplants,  cardiomyoplasty
and, perhaps, in the future, non-pulsatile flow (continuous flow) pumps. Failure
of the  Corporation's  products to achieve  significant  market acceptance would
have  a  material  adverse  effect  on  the  Corporation's  business,  financial
condition and results of operations.

Competition; Technological Obsolescence

In addition to competing  with other less invasive  therapies for heart failure,
including  drugs and  pacing,  the  Corporation's  products  will  compete  with
ventricular assist technology being developed and sold by a number of companies.
Competition from device companies and medical device  subsidiaries of healthcare
and pharmaceutical companies is intense and expected to increase.

Many of the  Corporation's  competitors have  substantially  greater  financial,
technical,   manufacturing,   distribution  and  marketing  resources  than  the
Corporation. In addition, some of these potential competitors have significantly
greater  experience than the Corporation in obtaining  regulatory  approvals for
medical  devices.  There can be no assurance that third parties will not succeed
in developing  or marketing  technologies  and products that are more  effective
than those  developed  or marketed by the  Corporation  or that would render the
Corporation's  technology and products  non-competitive or obsolete, or that the
Corporation will be able to keep pace with technological developments.

Limitations on Third-Party Reimbursement

Individual  patients  will  seldom  be able to pay  directly  for the  costs  of
implanting the Corporation's devices and systems.  Successful  commercialization
of the products will depend in large part upon the availability of reimbursement
for the treatment and medical costs






                                       12
<PAGE>
associated  with  the  product  from  third-party  payers  including   Medicare,
Medicaid,   and  private  health   insurers  and  managed  care   organizations.
Consequently,  the  Corporation  expects  that its  products  will  typically be
purchased by healthcare providers,  clinics,  hospitals and other users and will
bill  various  third-party  payers,  such as  Government  programs  and  private
insurance plans, for the healthcare services provided to their patients.

Coverage  and the  level of  payment  provided  by  United  States  and  foreign
third-party payers vary according to a number of factors,  including the medical
procedure,  third-party payer, location, outcome and cost. In the United States,
many private  payers  follow the  recommendations  of the Health Care  Financing
Administration,  which  establishes  guidelines for the  government  coverage of
procedures,  services  and  medical  equipment  and the  payment  of  healthcare
providers treating patients.

There can be no assurance  with respect to any markets in which the  Corporation
seeks to distribute  its products that  third-party  coverage and  reimbursement
will be adequate,  that current levels of reimbursement will not be decreased in
the future or that future legislation,  regulation or reimbursement  policies of
third-party  payers  will not  otherwise  adversely  affect  the  demand for the
Corporation's products or its ability to sell its product on a profitable basis,
particularly  if the  installed  cost of the  Corporation's  systems and devices
should  become  more  expensive  than  competing  products  or  procedures.  The
unavailability  of third-party payer coverage or the inadequacy of reimbursement
could have a material adverse effect on the  Corporation's  business,  financial
condition and results of operations.

Potential Product Liability

The  Corporation's  business  will  expose it to an inherent  risk of  potential
product  liability  claims related to the  manufacturing,  marketing and sale of
HeartSaver  and  Novacor  LVAS by  device  recipients  in whom the  devices  are
implanted or their families. Claims of this nature, if successful,  could result
in substantial  damage awards to the  claimants,  which may exceed the limits of
any applicable  insurance  coverage held by the Corporation.  A successful claim
brought  against  the  Corporation  in excess of, or outside  of, its  insurance
coverage  could have a material  adverse effect on the  Corporation's  business,
financial  condition and results of operations.  Claims against the Corporation,
regardless of their merit or potential outcome, may also have a material adverse
effect on the  Corporation's  ability  to obtain  physician  endorsement  of its
products or expand its business.

Risks Associated with Manufacturing Operations;  Risks Resulting From Dependence
on Third-Party Manufacturers

The manufacture of the Corporation's products is a complex operation involving a
number of  separate  processes  and  components.  Certain  of the  manufacturing
processes  involved  are   labour-intensive   and  achieving   significant  cost
reductions will depend in particular upon reducing the time required to complete
these processes.  The conduct of manufacturing operations is subject to numerous
risks,   including   reliance  on   third-party   manufacturers,   unanticipated
technological   problems  and  delays.  There  can  be  no  assurance  that  the






                                       13
<PAGE>
Corporation, or any entity manufacturing products or components on behalf of the
Corporation, will be able to comply with applicable manufacturing regulations or
satisfy  regulatory  inspections  in  connection  with  the  manufacture  of the
Corporation's  products.  Failure or delay by the Corporation or any third-party
manufacturer of the Corporation's  products or product components to comply with
applicable  regulations  or to  satisfy  regulatory  inspections  could  have  a
material adverse effect on the Corporation's business and operations.

Dependence on Key Personnel

The success of the Corporation is largely dependent upon the personal efforts of
its Chairman and Chief Scientific  Officer,  Dr. Tofy Mussivand (who is also the
Director of and  Principal  Investigator  at CVD) and on its President and Chief
Executive Officer, Mr. Roderick M. Bryden. Such success is also dependent on its
Senior  Vice  President,   Research  and  Development,  Mr.  Jal  Jassawalla  in
connection  with  the  transition  from  prototype  system  to  commercial-scale
manufacturing.  In addition, because of the specialized scientific nature of the
Corporation's  business,  the Corporation is dependent on its ability to attract
and retain qualified scientific, technical and key management personnel.

Volatility of Stock Price

The Corporation is a development-stage company in the biotechnology industry and
as such the price of the common  shares has been,  and is likely to  continue to
be, highly  volatile.  Future  announcements  concerning the  Corporation or its
competitors,  quarterly  variations in operating  results,  introduction  of new
products  or changes in  product  pricing  policies  by the  Corporation  or its
competitors,   acquisition   or  loss  of   significant   customers,   partners,
distributors  and  suppliers,   changes  in  earnings   estimates  by  analysts,
regulatory  developments,  or  fluctuations  in the  economy or  general  market
conditions,  among other  factors,  could  cause the market  price of the common
shares to fluctuate  substantially.  There can be no  assurance  that the market
price of the common  shares will not decline  below its current price or that it
will  not  experience   significant   fluctuations  in  the  future,   including
fluctuations  that  are  unrelated  to  the  Corporation's   performance.   Such
fluctuations in the market price of the  Corporation's  common shares may affect
its visibility and credibility in the market.

Reliance on Edwards Lifesciences LLC (Edwards)

The  Corporation  has entered into a distribution  agreement  (the  Distribution
Agreement) with Edwards whereby Edwards will be the sole distributor,  except in
the United  States,  of the  Corporation's  heart  assist and heart  replacement
products for a period of five years  commencing July 1, 2000.  Distribution  and
sales of the  Corporation's  products  through Edwards  accounted for 42% of the
Corporation's  total revenue in fiscal 2000.  The  Corporation  has also entered
into a supply  agreement with Edwards  whereby Edwards will be the sole supplier
of certain  components  to the heart assist  products of the  Corporation  for a
five-year  period.  The  Corporation  cannot predict the extent to which Edwards
will be  successful  in marketing and selling the  Corporation's  products.  The
existence of the Corporation's





                                       14
<PAGE>
relationship  with Edwards may limit or preclude the possibility of establishing
relationships with competitors of Edwards.

Risks Associated with Acquisitions

The  Corporation  from  time  to  time  evaluates   potential   acquisitions  of
complementary   businesses,   products  and  technologies.   Such  acquisitions,
including the  acquisition of Novacor from Edwards,  which was completed on June
30, 2000,  could subject the  Corporation  to numerous  risks,  including  risks
associated  with the  integration  into the  Corporation  of new  employees  and
technology.  Moreover,  the  negotiation  and  completion  of such  transactions
involve the diversion of Corporation resources. In addition,  acquisitions could
result in  immediate  and  substantial  dilution of the  Corporation's  existing
shareholders,  large  one-time  write-offs  or the creation of goodwill or other
intangible assets that could result in significant  amortization  expenses.  The
failure to successfully evaluate, negotiate, effect and integrate an acquisition
transaction  could  have  a  materially  adverse  effect  on  the  Corporation's
business, operating results and financial condition.

Item 4. Information on the Company

A. History and Development of the Company

WorldHeart  was organized in April 1996 to develop a global scale medical device
business focused initially on HeartSaver.  CVD initially  developed  HeartSaver.
HeartSaver  is designed to be an  affordable,  fully  implantable  heart  assist
device to provide  long-term support of pulsatile blood flow to people suffering
from  heart  failure  and to permit  the  recipient  to  return  to near  normal
activities.  Commencement of clinical trials in humans is planned for the fourth
quarter  of 2001,  subject to Health  Canada  approval.  Subject  to  regulatory
approval, commercial production of HeartSaver is planned for 2002.

On June 30, 2000,  the  Corporation,  through World Heart Inc., its wholly owned
subsidiary,  acquired  Novacor  from  Edwards  for a  total  purchase  price  of
approximately $62.5 million.  As a result of this acquisition,  WorldHeart began
commercial operations with the sale of Novacor LVAS. Development of Novacor LVAS
commenced  in 1969 with the  objective  of  developing  a long-term  circulatory
support  device and with the focus on an implantable  electrically  driven pump.
Novacor  received its  pre-market  approval from the FDA in the United States in
September 1998 to be used as a bridge to  transplantation  in cardiac transplant
candidates  at risk of  imminent  death  from  non-reversible  left  ventricular
failure. Novacor LVAS has been implanted in more than 1,200 patients worldwide.

The Corporation was incorporated by Articles of Incorporation  under the laws of
the Province of Ontario, Canada, on April 1, 1996. The legal and commercial name
of the Corporation is World Heart Corporation.  The Corporation's head office is
located at 1 Laser Street,  Ottawa,  Ontario,  Canada, K2E 7V1 and its telephone
number is (613) 226-4278. The Corporation has





                                       15
<PAGE>
registered  HeartSaverVAD(TM) as a trademark in Canada, and has made application
to  register  it in the  United  States  and in  several  other  countries.  The
Corporation has one wholly owned subsidiary, World Heart Inc.

B. Business Overview

WorldHeart's  business is focused on the  development  of HeartSaver and Novacor
LVAS to provide an effective treatment for end-stage heart failure.  Ventricular
assist  devices  (VADs)  are  mechanical  assist  devices  that  supplement  the
circulatory  function of the heart by rerouting  blood flow through a mechanical
pump.  There have been more than  10,000 VADs used  clinically  over the past 10
years.

The Novacor LVAS  represents  the current  generation  of pulsatile  ventricular
assist  devices,  with  HeartSaver as the next  generation of fully  implantable
pulsatile VADs.

Current Treatment Methods for End-Stage Heart Failure

The search for an effective  treatment for  end-stage  heart failure is ongoing.
Therapies such as medication and transplantation  have significant  limitations,
and alternative emerging technologies, such as xenografts,  cardiomyoplasty, the
Batista  operation,  genetic  tissue  engineering,   multiple  site  pacing  and
implantable  artificial hearts (total  artificial hearts and ventricular  assist
devices, pulsatile and non-pulsatile), are being investigated. The following are
treatment methods currently being employed for heart failure:

o  Medication.  Pharmaceuticals  are the first  line of  defense  against  heart
failure;  however, in spite of many advances, drug therapies continue to be able
to provide only very limited relief.  Drug therapies do not treat the underlying
disorder  and,  thus,  can only  slow the  disease's  progression.  Moreover,  a
significant  number of heart failure patients may be resistant to treatment with
drug therapies and often such therapies have side-effects,  some of which can be
quite serious for certain patients.

o Heart Transplantation.  Heart transplantation is currently the intervention of
choice for some patients with end-stage heart failure.  Patients receiving heart
transplants now have about a 60% to 70% five-year  survival rate.  However,  the
availability  of donor  organs  as well as other  major  limitations,  described
below, have limited the number of transplants worldwide to about 4,000 per year.
In the  United  States,  the  number of heart  transplants  in 1996 and 1997 was
reported  as only  2,342  and  2,290,  respectively,  despite  the fact that the
American Heart  Association  estimates that each year at least 40,000  Americans
under age 65 would benefit from heart  transplants.  Another negative feature of
transplants  is the  need  for  immunosuppression  medication,  which  can  make
patients  vulnerable  to other  diseases  and may have  other  side-effects.  In
addition,   heart  transplantation   procedures  cannot  be  used  in  emergency
situations  because of the time required to obtain a suitable  donor organ.  The
quality of donor hearts is not always optimal and, once implanted, little can be
done about the quality of the graft. The  transplanted  natural heart can itself
develop  complications.  Finally, the costs of heart transplants are reported to
be up to US $250,000 for the first year.






                                       16
<PAGE>
o  Artificial  Hearts.  Both  total  artificial  hearts and VADs (each a form of
mechanical  circulatory device) have been used clinically and demonstrated to be
viable treatments for end-stage heart failure.  These devices have already saved
thousands  of lives  during  temporary  use while the  recipients  await a heart
transplant, and recently as a bridge to recovery therapy or as an alternative to
transplantation.  However,  the  artificial  hearts  currently on the market are
designed  for  implantation  in the abdomen or  placement  outside the body with
connections  to the heart,  both requiring  perforation of the diaphragm  and/or
skin. They require the patient to be tethered with tubes and wires.

Advantages of VADs

VADs that are  either  externally  placed  or  abdominally  implanted  have been
demonstrated as being effective in supporting blood circulation in patients with
a  failing  heart.  Approximately  10,000  patients  have been  supported  while
awaiting  transplant,  with several being  supported for more than two years, by
pulsatile  VADs that are in the market,  including  Novacor  LVAS.  Two patients
implanted with the Novacor LVAS have been supported for more than four years.

The following  advantages of VADs over other treatments  generally apply to VADs
that are  currently  approved  and in use.  The  Corporation  expects that these
advantages will also apply to HeartSaver.

Unlimited  Supply.  As a  manufactured  device,  VADs are  available as and when
needed,  including on an  emergency  basis,  to treat  end-stage  heart  failure
patients.

Reduced Hospitalization.  Unlike transplant patients, VAD patients go to surgery
without waiting for a donor organ and are expected to leave the hospital after a
relatively short recovery period, thus reducing health care costs.

Improved Patient Health.  After VAD implantation,  blood circulation is improved
throughout the body and most patients experience improved levels of health. This
has been shown in a number of clinical studies,  including those for the Novacor
LVAS.

Reduction in Medication  Use.  Unlike  transplants,  VADs do not cause rejection
responses  and,  as a result,  VAD  patients do not need the  administration  of
immunosuppressant  drugs, which is required by transplant  patients for the rest
of their  lives.  Patients  are  accordingly  not subject to the risks and costs
associated  with long-term  administration  of these  medications.  Unlike other
treatment methods for heart failure,  continuing  medication may not be required
or substantially less medication may be required,  thereby potentially  limiting
the side-effects that may be associated with these medications.

Natural Heart Recovery.  Unlike total artificial  heart systems,  VADs leave the
natural  heart  intact  and  assist it when it is unable to  provide  sufficient
cardiac  function to maintain  life.  This  approach  provides the  advantage of
leaving in place the biological  control  mechanisms of the natural heart.  VADs
have, in some cases,  permitted  recovery of natural heart function to the point
where the device was eventually removed.






                                       17
<PAGE>
Novacor LVAS

Novacor LVAS is an  electromechanically  driven pump,  about the size of a human
heart,  which  is  implanted  within  the  abdominal  wall.  The  LVAS  provides
circulatory  support by taking over most of the workload of the left  ventricle,
the heart's main pumping chamber. Blood enters the pump though an inflow conduit
connected to the left ventricle and is ejected  through an outflow  conduit into
the body's arterial system.

The system is controlled by an electronic  controller and powered by primary and
reserve battery packs,  worn on a belt around the waist or carried in a shoulder
bag, or by a small bedside monitor. The controller is connected to the implanted
pump by a percutaneous  lead (a small tube  containing  control and power wires)
through the recipient's skin.

The system is  completely  self-regulating,  responding  instantaneously  to the
recipient's  changing  heartbeat and circulatory  demands.  The Novacor LVAS was
designed  primarily for  long-term  use, and was the only one of four devices to
successfully  complete  stringent  testing  to  standards  set by  the  National
Institutes  of  Health  (NIH)  for  an  implantable  LVAS,   exceeding  the  NIH
reliability criteria.

The Novacor LVAS is  commercially  available as a bridge to  transplantation  in
Europe,  the United  States and Canada.  In Europe,  it is also  available as an
alternative to  transplantation  and to support patients who may have an ability
to recover use of their natural heart.

More than 1,200 patients have received the Novacor device, primarily as a bridge
to  transplantation.  The experience in long-term  support continues to grow. To
date,  almost 20 % of Novacor LVAS  recipients  have been supported for at least
six months.  Eighty-eight have been supported for more than one year, 20 of whom
have lived with the device for more than two years.  The longest time of support
was more than four years.

A clinical  trial is underway in the United States to evaluate  long-term use of
the device as an alternative to medical therapy. The multi-center INTrEPID trial
(Investigation of  Non-Transplant-Eligible  Patients who are Inotrope Dependent)
compares  survival  rates and quality of life between  end-stage  heart  failure
patients who receive the Novacor LVAS and those  supported by the best available
pharmacological therapies.

The first INTrEPID recipient has surpassed one year of support.

HeartSaver


General

The goal of the Corporation in its development of HeartSaver is to produce, at a
cost that is competitive with the costs of alternative treatments, a VAD that is
suitable for  continuous  use outside of the hospital  setting and that provides
recipients with an enhanced  quality of life by allowing freedom of movement and
minimal limitations to their normal activities.






                                       18
<PAGE>
Details of the components of HeartSaver are as follows:

HeartSaver System Pump

The blood chamber of HeartSaver is an electrically  powered blood pump, the main
components of which are: a volume displacement  chamber, an energy converter,  a
hydraulic  valve and an internal  controller  integrated  into a single  unified
device. In addition,  the unit has electrical feed throughs for connection to an
internal  battery and to an internal  energy transfer and telemetry coil used in
connection with the transcutaneous energy transfer (TET) system and biotelemetry
data transfer  (Biotelemetry)  systems  described below.  The HeartSaver's  pump
occupies  approximately 530 millilitres  (about the size of a large human hand),
and is designed for  implantation  in the chest  cavity  adjacent to the natural
heart  where it will be  connected  to the  natural  heart and aorta by conduits
(cannulae) and anchored to the rib cage.

With  HeartSaver,  the blood flows from the natural  heart's left ventricle into
the device's blood chamber.  The pumping action is accomplished in HeartSaver by
a  combination  of an energy  converter  and a passive  fill  valve  alternately
filling  (with a  hydraulic  fluid) and then  emptying  the volume  displacement
chamber.  This pumping action  actuates the blood chamber  diaphragm  which,  in
turn,  pushes  the blood out of the device to the rest of the body  through  the
aorta. One-way valves located in the conduits control the direction of the blood
flow. The hydraulic  fluid housed in the device's  volume  displacement  chamber
also serves as a lubricant for, and assists with the dispersal of heat generated
by, the energy  converter  and the internal  electronics.  HeartSaver's  pump is
capable of automatically adjusting as the patient's heart rate changes.

The TET System

HeartSaver is remotely  powered  without wires or cables  connected to its power
source,  by a TET system involving  electromagnetic  induction  between two wire
coils,  one of which is  implanted  beneath the skin and tissue and the other of
which is placed  externally  on the skin.  The  patented  TET  system is used to
transfer  electrical energy from an external source through the patient's intact
skin and tissue in order to charge the implanted  internal backup battery and to
directly power the implanted HeartSaver.

The Biotelemetry System

In addition to being remotely powered, HeartSaver can also be remotely monitored
and controlled by a Biotelemetry data transfer system.  The Biotelemetry  system
transfers  data  bi-directionally  through intact skin and tissue using infrared
transmitter/receiver  modules embedded in the TET system's energy transfer coils
and associated electronic modules on the internal and external controllers.  The
Biotelemetry system does not require wires to puncture the patient's  protective
skin  and  tissue  and can  transmit  and  receive  information  to and from the
implanted HeartSaver,  to and from healthcare  professionals at another location
using standard phone lines or satellite  communication  systems.  Utilizing this
capability,  it will be possible for the healthcare  professional  to monitor or
control the implanted HeartSaver without the need for the patient to stay in, or
travel to, a hospital.  This  technology  was tested in 1999,  with  information
successfully transmitted from a simulated patient in Ottawa, Canada to a monitor
in Japan.






                                       19
<PAGE>
Advantages of HeartSaver Over Other VADs

In addition  to  offering  advantages  shared  with other  VADs,  HeartSaver  is
expected to offer several distinct advantages over other VADs used for end-stage
heart failure, which the Corporation believes are specific to HeartSaver.

Totally Implantable in the Chest Cavity. HeartSaver is specifically designed and
anatomically configured to be fully implantable, on a chronic (long-term) basis,
in the chest  cavity next to the natural  heart and in contact  with the lung to
ensure   atmospheric   pressure   equalization  and  heat   dissipation.   Chest
implantation  also  eliminates  the need to perforate the  patient's  diaphragm,
which minimizes the length of connections or conduits between the device and the
heart and  aorta,  thereby  reducing  (1) the  potential  risk of kinking in the
connections  (lowering  the  risk  of  blood  clotting),  (2)  hydraulic  losses
(reducing  power  requirements),  and  (3)  blood/material  surface  interaction
(reducing the risk of infection and clotting).

No Connections Through Skin and Tissue. The TET and Biotelemetry systems provide
communication,  control and power supply  without  perforation of the protective
skin and tissue.  Currently  marketed VADs require  abdominal  implantation  and
openings  in the skin to access  atmospheric  pressure,  for  communication  and
control, and connections to electrical or pneumatic power sources, each of which
can increase the risk of infection and affect the  patient's  quality of life by
restricting movement or activities.

Reduced Size and Weight; Anatomically Compatible Configuration.  HeartSaver is a
highly  integrated and compact design with a volume of approximately  530 ml. In
addition,  it is uniquely and anatomically  configured to be compatible with the
configuration  of the  chest  cavity  in order to  facilitate  the  implantation
procedure  and can be  anchored to the rib cage,  avoiding  the  adjacent  organ
compression and migration experienced with abdominally implanted VADs.

Quality of Life. When patients leave the hospital with an implanted  HeartSaver,
it is expected  that they will have an improved  quality of life that will allow
them to be mobile,  to exercise and to perform  near-normal  work and other life
activities. HeartSaver's TET and external batteries provide up to eight hours of
power  without  charging  and the  internal  battery  allows for over 60 minutes
without the use of the TET or any connection to any external power source.

Cost Savings.  Implantation  of HeartSaver as a chronic  therapy and the limited
costs of care and ongoing  operation  of the system are expected to provide cost
savings over other  treatment  methods,  particularly  those dependent upon drug
therapies, including transplant.

Overview of Clinical Trials

With the  acquisition  of Novacor,  the  Corporation  also  gained  access to an
established  Clinical  Affairs  Department that has  substantial  experience and
success in conducting  formal clinical trials  resulting in data collection that
meets the needs of the various regulatory agencies that grant approval to market
in the major markets of the world.  This  capability will be leveraged to direct
the  HeartSaver  clinical  trial and it is  expected  that  this will  result in
reduced time in designing and successfully executing the trial.






                                       20
<PAGE>
Novacor LVAS

Novacor LVAS was the first ventricular assist device to provide up to four years
of continuous  circulatory support. In use since 1984, it is the only electrical
system with more than 16 years of clinical  experience,  and the only technology
to successfully  complete a NIH sponsored two-year pre-clinical device readiness
testing program.

To date, Novacor LVAS has supported:

     o 243 recipients for more than 6 months
     o 88 recipients for more than 1 year
     o 20 recipients for more than 2 years
     o 6 recipients for more than 3 years
     o 2 recipients for more than 4 years

Novacor LVAS has  supported  more than 1,200 people around the world for as long
as 4.2 years,  providing many  recipients with an active  out-of-hospital  life.
Based on these and other successes, the device is the subject of a U.S. clinical
trial evaluating it as destination therapy.

In the United  States,  Novacor  LVAS is available  to  clinicians  for use as a
bridge to  transplantation.  In Europe and elsewhere in the world, the device is
used as a bridge to  transplantation,  an alternative to  transplantation  and a
bridge to recovery.

Currently,  Novacor LVAS is  undergoing a U.S.  multi-center  clinical  trial to
determine if continuous  support with the device reduces  mortality and improves
quality of life in patients with severe  end-stage  cardiac  failure who are not
candidates for  transplantation.  This trial is called "INTrEPID".  In a growing
number of worldwide  centers,  WorldHeart  technology  is helping to advance the
clinical viability and economic feasibility of LVAS therapy.

The trial design overview is as follows:

     o A non-randomized, two-arm, controlled clinical trial;
     o Currently a feasibility trial of 20 subjects at 20 centers;
     o Target  enrollment  is 110  subjects  at 20 sites (55  Novacor  LVAS,  55
       Control);
     o Primary study endpoint: all cause mortality at 6 months; and
     o Secondary   study   endpoints:   cardiac   mortality   at  6  months  and
       health-related quality of life.






                                       21
<PAGE>
HeartSaver

HeartSaver  is now in  formal  pre-clinical  trials  and is  targeted  to  enter
clinical  evaluation in the second half of 2001.  HeartSaver is intended to meet
the clinical requirement for a fully implantable device.

In 1997, an agreement was concluded with The Cleveland  Clinic  Foundation  (the
Foundation) under which the Foundation is collaborating  with the researchers at
the Corporation and CVD and on the pre-clinical  trial preparations and program.
U.S. News & World Report has ranked the Foundation's Heart Center as the best in
cardiology and cardiac surgery programs in the United States. Upon initiation of
formal  clinical  trials,  each  enrolled  site  will  receive  training  on the
implantation and operation of HeartSaver. In parallel with this activity, senior
medical  practitioners  in  the  field  of  cardiovascular   medicine,  such  as
cardiologists  and cardiac  surgeons,  have been and will be  familiarized  with
HeartSaver  to ensure its wide  acceptance  within the medical  community in the
treatment of end-stage heart failure.

Marketing, Training and Distribution Strategy

The  Corporation's  principal  markets are  currently  North America and Europe.
Revenues for each geographic market for 2000 are as follows:

                                                                   Revenue
                                                              ------------------

Canada                                                        $        93,963
United States                                                       2,712,946
Netherlands                                                         1,867,576
                                                              ------------------
                                                              $     4,674,485
                                                              ==================

During the year ended December 31, 2000, revenue included  $1,961,539  resulting
from sales to Edwards. There were no revenues in prior years.

With the  acquisition  of Novacor in  mid-2000,  WorldHeart  immediately  gained
access to most of the key medical centers involved in cardiac transplantation in
North  America,  Europe,  Japan and Asia.  Novacor  LVAS has been  implanted  in
patients in 89 centers in these countries. Outside the United States, Novacor is
represented by Edwards, which has an extensive network of direct sales people in
addition to distributors in smaller markets and distribution  capabilities close
to the major international markets.

Additionally,  the Oakland, California and Europe-based operations of the former
Novacor business have experienced  clinical personnel who support active implant
centers and are well connected with the leading  clinicians.  It is WorldHeart's
intent to leverage this  experience,  knowledge  and the positive  relationships
that have been established over the years.






                                       22
<PAGE>
WorldHeart  believes  that the first step in marketing  HeartSaver is to collect
and  summarize  data  recorded  during the clinical  trials and have  clinicians
present these results at medical and  scientific  meetings and publish  articles
with supporting data in the appropriate medical journals.  This awareness raises
the  interest  of  potential  users and  provides  independent  verification  of
scientific claims and patient outcomes when implanted with HeartSaver.

On  more  than  100  occasions  to  date,  CVD has  published  papers  and  made
presentations  internationally  on  HeartSaver  and  related  technologies.  The
Corporation and CVD continue to maintain an active schedule of attending medical
and scientific  meetings,  where presentations are made and papers presented for
peer  review.   WorldHeart   will  continue  to  build  on  the  reputation  and
international  stature  established by CVD through linkages to several reputable
clinical  centers that have  expressed  interest in  participating  in the first
clinical trials of HeartSaver.

The  Corporation  currently has a distribution  agreement with Edwards,  a major
provider of medical  devices  including  the premier  tissue  heart valve in the
industry.  Edwards'  sales  personnel  call on all major medical  centers in the
world  and  currently  distribute  and  support  Novacor  LVAS  manufactured  by
WorldHeart.

Commercialization

The Corporation  intends to apply in late 2001 for Health  Canada's  approval to
commence  human clinical  trials and,  assuming such trials are  successful,  to
apply in 2002 for Health  Canada  approval to market  HeartSaver.  Health Canada
requirements  for clinical  trials are expected to include  demonstration,  in a
trial group of Class IV heart failure patients, of HeartSaver's effectiveness in
extending  the life of  recipients,  compared  to a control  group that does not
receive HeartSaver,  and returning patients to near-normal activities and living
conditions.  The number of patients enrolled in the trial, and the length of the
trial may vary depending on the outcomes of the initial implants.  Health Canada
has  discretionary  authority to permit  clinical  trials in Canada and to grant
approval to market in.

Upon  initiation and early  favourable  results of the Canadian trial, a similar
trial will be initiated  in key centers  throughout  Europe.  This trial will be
designed to provide  data that can be used to apply for  regulatory  approval in
the European Economic Community, a prerequisite to commercializing the system in
these important markets.

Assuming clinical trials in Canada and Europe are satisfactory and all necessary
regulatory approvals are obtained,  commercial sales in Canada, Europe and other
countries are targeted for early 2003. Application for an Investigational Device
Exemption  (IDE) from the FDA is targeted for the end of 2002 assuming  clinical
trials in Canada and Europe are satisfactory. The FDA will require an additional
clinical trial before approval to market is granted.  The Corporation intends to
seek Health Canada and European  approval  before FDA  approval,  as it believes
that this  approach is the most timely and  cost-effective  method of ultimately
obtaining FDA approval for the following reasons:

     o The  Corporation,  CVD and Health  Canada are located in Ottawa,  Canada.
       Over  the past  number  of  years,  Dr.  Mussivand,  Chairman  and  Chief
       Scientific Officer of the





                                       23
<PAGE>
       Corporation,  has had extensive discussions with Health Canada concerning
       the approval of HeartSaver. He is regularly consulted by Health Canada as
       an expert in medical devices  generally and has assisted Health Canada in
       drafting rules concerning approval of medical devices.

     o The Health Canada  approval  process may involve a shorter time frame and
       lower cost than the FDA approval process.

     o Once  commercialization  occurs in Canada and Europe,  the expected  cash
       flow  resulting  from  sales  of  HeartSaver  should  offset  some of the
       anticipated costs of the FDA approval process.

The  Corporation  anticipates  that  the  foregoing  approach  will  provide  an
opportunity  to develop a commercial  market track record and cash flow during a
part of the  period  in  which  U.S.  clinical  trials  are  taking  place.  The
Corporation  believes that such  commercial  activity  outside the United States
will not impair and may, in fact,  enhance the timing of its  application to the
FDA for  approval  to market in the  United  States.  The  Corporation  does not
believe  that  approval to market in the United  States  would be obtained  more
quickly, even if the U.S. regulatory process were to commence immediately.

Sources and Availability of Raw Materials

To date, the Corporation  has not encountered any major  difficulty in obtaining
quality raw  materials  or quality  subassemblies  of raw  materials.  It is not
anticipated that the prices of raw materials will be subject to volatility.

Intellectual Property

To date, two patents have been granted for HeartSaver in the United States and a
European  patent has been granted  covering  United  Kingdom,  France,  Germany,
Italy,  Switzerland and Liechtenstein.  Patents for HeartSaver have been applied
for in Canada and in Japan.  The TET technology  incorporated  in HeartSaver has
been patented in the United States, Canada and the United Kingdom.

Sixteen  U.S.  patents  have been  granted for Novacor  LVAS and its  associated
subsystems.  A subset of these  patents  have also been filed and granted in the
major European countries, in Canada and in Japan.

The  Corporation  has  registered   HeartSaverVAD(TM)   and   WorldHeart(TM)  as
trademarks in Canada,  and has applied to register them in the United States and
in several other countries.

Both the  Corporation and CVD generally  enter into  confidentiality  or license
agreements with its employees,  consultants and vendors,  and generally controls
access to and distribution of information related to its technology or products,
documentation and other proprietary information.  Despite these precautions,  it
may be  possible  for a third  party  to copy or  otherwise  obtain  and use the
Corporation's  products  or  technology  without  authorization,  or to  develop






                                       24
<PAGE>
similar  technology  independently.  In addition,  effective patent,  copyright,
trademark and trade secret  protection  may be unavailable or limited in certain
countries,  including the United States.  Despite the  Corporation's  efforts to
protect its proprietary rights, unauthorized parties may attempt to copy aspects
of the  Corporation's  products  or to  obtain  and  use  information  that  the
Corporation   regards  as  proprietary.   Policing   unauthorized   use  of  the
Corporation's  products is difficult.  There can be no assurance  that the steps
taken by the Corporation will prevent misappropriation of its technology or that
such agreements will be enforceable. In addition, litigation may be necessary in
the future to enforce the Corporation's intellectual property rights, to protect
patents  licensed to or owned by the corporation,  to protect the  Corporation's
trade secrets,  to determine the validity and scope of the proprietary rights of
others,  or to  defend  against  claims  of  infringement  or  invalidity.  Such
litigation  could result in  substantial  costs and  diversion of resources  and
could have a material adverse effect on the  Corporation's  business,  operating
results  and  financial  condition.  For  more  details,  please  see  Item  8 -
"Financial Information - Legal Proceedings."

Product Liability Insurance

The  Corporation   maintains  product  liability  insurance  in  the  amount  of
US$10,000,000. Upon the commencement of commercial production of HeartSaver, the
Corporation will seek to increase such product liability insurance if necessary.
The Corporation  intends to extend the scope of its product liability  insurance
during  2001 to cover  clinical  trial  use,  when  Health  Canada  approval  is
obtained.

Competition

Overview

In addition to competing  with other less invasive  therapies for heart failure,
the Corporation's  HeartSaver will compete with VADs being developed and sold by
a number of existing and emerging  companies.  Competition  from medical  device
companies and medical device subsidiaries of healthcare companies is intense and
may  increase.  Many of the  Corporation's  competitors  may have  substantially
greater  financial,   technical,   manufacturing,   distribution  and  marketing
resources than the Corporation. In addition, some of these potential competitors
may have  significantly  greater  experience  than the  Corporation in obtaining
regulatory approvals for medical devices.

Early this year, Thoratec  Laboratories  Corporation  (Thoratec) acquired Thermo
Cardiosystems  Inc.  (TCI),  one of the leading  suppliers  of left  ventricular
assist  devices,  resulting  in a company  with a broad line of  cardiac  assist
devices.  The combined  entity assumed the Thoratec name,  Thoratec has two left
ventricular  assist  device  models  of its  HeartMate(R)  LVAS  that  have been
approved in the United States for commercial  sale for the  bridge-to-transplant
indication.  One is pneumatically  driven (the IP LVAS), and one is electrically
driven  (the VE LVAS).  A third LVAS,  HeartMate(R)  II is  undergoing  clinical
trials in the United  States for  alternative  to  transplant  and  chronic  use
indications.  The  HeartMate(R)VE  and  Novacor  LVAS  have  been  approved  for
commercial  sale for  bridge-to-transplant  indications in the United States and






                                       25
<PAGE>
without exception as to indication in Europe. Each of these VADs is implanted in
the  abdomen and has power leads  and/or  venting  tubes,  which  perforate  the
patient's skin and tissue.

Other companies,  such as Abiomed,  Inc.  (Abiomed),  Arrow  International  Inc.
(Arrow), and MicroMed Technology,  Inc. (MicroMed),  have developed VAD products
that have received various regulatory approvals. However, to date, the only VADs
that have been approved in the United  States for  commercial  sale are,  unlike
HeartSaver,  not totally implantable in the chest or remotely powered, monitored
and  controlled,   and  are  primarily  for  acute   (short-term)   use  or  for
bridge-to-transplant   applications.   Thoratec's   HeartMate(R)   VE  LVAS  and
WorldHeart's  Novacor LVAS have commenced  clinical  trials in the United States
relating  to  use  of  the  VAD  product  as an  alternative  to  medication  or
transplantation.

Abiomed and Thoratec both have VADs that are not implanted in the body, designed
for temporary use. Their  pumping/power  console is external and attached to the
natural  heart via  connecting  tubes  running  through the  patient's  skin and
tissue.  Both  are  approved  by the  FDA for  in-hospital  use  only.  Thoratec
currently has an application  pending with the FDA for a portable console driver
that would enable recipients to leave the hospital.

The  MicroMed  device,  commonly  referred to as the  "DeBakey  pump",  provides
non-pulsatile  left ventricular assist via a small rotary pump that is implanted
near the heart and is powered via wires that perforate the skin,  connected to a
rechargeable battery pack.

HeartSaver  has been designed for total chronic  implant in the chest cavity and
is expected to offer  several  competitive  advantages  including  smaller  size
(volume  and  weight),   anatomical   configuration   and   versatility,   total
implantability (i.e., ability to be remotely powered, monitored and controlled),
ability to enhance patient quality of life, and competitive pricing.

Future Competition

While the Corporation believes that HeartSaver will offer distinct technical and
aesthetic advantages over competing VAD products, there can be no assurance that
others will not produce a product  comparable  or  superior to  HeartSaver.  For
instance, competitors have been successful in developing energy transfer systems
that have the  similar  performance  to the TET system and the  Corporation  may
consider sub-licensing CVD's patented TET system. While the Corporation believes
that HeartSaver  patients' well being will be significantly  enhanced by the TET
component  over the longer term, it is unlikely to  significantly  differentiate
HeartSaver from competitors'  products.  Moreover,  any product developed by the
Corporation  that gains  regulatory  approval  will have to  compete  for market
acceptance and market share. An important  factor in such competition may be the
timing of market introduction of competitive products. Accordingly, the relative
speed with which the Corporation can develop  HeartSaver,  commence and complete
its clinical testing, obtain regulatory approvals and commence  commercial-scale
manufacturing are expected to be important competitive factors.

Pulsatile Versus Non-Pulsatile VADs

Currently, most heart assist devices (including HeartSaver) intended for chronic
use are pulsatile,  mimicking the natural heart's pumping motion. Non-pulsatile,
or continuous  blood flow VADs,  are under  development  and have been tested in
animals  and in human  trials  as a






                                       26
<PAGE>
bridge to  transplant or recovery and for chronic use;  however,  at the present
time,  the scientific  community has varying  opinions as to whether or not they
will be viable for chronic  long-term  implantation  in humans.  Continuous flow
VADs, as long-term  circulatory devices, are an attractive concept. Such devices
would be small, less complex and valveless, have lower energy needs, probably be
less  costly and  overall  could be more  reliable  pumps than  pulsatile  VADs.
However,  the natural heart is pulsatile and  pulsatility may be a physiological
requirement for long-term  health.  There is lack of long-term  clinical data on
non-pulsatile  pump  reliability,  and human  physiological,  immunological  and
haematological responses.  Consequently,  the Corporation believes non-pulsatile
VADs are not yet and may never be acceptable for long-term use. The  Corporation
has opted to pursue  pulsatile  VADs that have proven  successful  in  extending
life.

Government Regulation

Overview

Most  countries,  including  the  United  States,  Canada and  countries  in the
European Union, require regulatory approval prior to the commercial distribution
of many medical devices. In particular,  implanted medical devices generally are
subject to rigorous  clinical  testing as a condition of approval by the FDA and
by similar authorities in Canada, in Europe and in other countries. The approval
process for HeartSaver,  an implantable  medical  device,  will be expensive and
time consuming.

There are no detailed,  universally acceptable  specifications and/or guidelines
currently  available for artificial  hearts.  Dr.  Mussivand,  the Corporation's
Chairman and Chief Scientific Officer, has had extensive discussions with Health
Canada concerning the approval of HeartSaver.  The Corporation  believes that it
is well  positioned to  understand,  and achieve  compliance  with,  the various
regulatory process requirements.

Canadian Regulation

The sale and  advertising of medical  devices in Canada are governed by the Food
and Drugs Act (Canada) pursuant to the Medical Devices Regulations, administered
by the Medical  Devices Bureau of Health  Canada.  The current  Medical  Devices
Regulations  are undergoing  revisions and it may align the Canadian  regulatory
process with those of Canada's  international trading partners.  The Corporation
believes that international harmonization of the regulatory process will be more
likely to accelerate than slow the approval process as it relates to HeartSaver.

HeartSaver  will be  classified  as a Class IV medical  device under the Medical
Regulations,  requiring  the  Corporation  to apply for  authorization  from the
Medical Devices Bureau of Health Canada (MDB) to conduct investigational testing
on human subjects in Canada. At the conclusion of the human clinical trials, the
Corporation  will apply for a medical device license that will allow for general
marketing  of the  device.  The  Corporation  intends  to apply late in 2001 for
approval of Health Canada to commence human clinical  trials and,  assuming such
trials are  successful,  to apply in 2002 for Health Canada  approval to market.
The  Corporation  expects  that its  regulatory  approval  for the  marketing of
HeartSaver  in Canada  will be  received  prior to  approval by the FDA of a PMA
application in the United States.






                                       27
<PAGE>
United States Regulation

In the United  States,  the FDA  regulates  the  manufacture,  distribution  and
promotion of medical devices pursuant to the Federal Food, Drug and Cosmetic Act
(FDC  Act)  and  the  regulations  promulgated  thereunder.  HeartSaver  will be
regulated as a medical device. To obtain FDA approval to market a medical device
such as HeartSaver,  the FDA requires, among other information,  proof of safety
and efficacy  obtained as a result of human clinical trials,  usually  performed
under an Investigational Device Exemption (IDE). An IDE application must contain
pre-clinical test data (performance and durability,  bench and in vivo testing),
information on  manufacturing  processes and procedures,  and proposed  clinical
protocols.  When the FDA approves the  application,  human  clinical  trials may
begin in the United States.  Clinical trials in the United States generally take
years to complete.  The results  obtained  from these and any other  trials,  if
satisfactory,  are  accumulated  and,  together  with other  information  on the
device, submitted to the FDA in support of a PMA application.  A PMA application
must be approved by the FDA before  commercial  distribution of a device such as
HeartSaver is permitted in the United States.

A PMA application  must be supported by extensive data,  including  pre-clinical
and human clinical data, to prove the safety and efficacy of the device. By law,
the FDA has 180 days to review a PMA application. While the FDA has responded to
PMA applications within the allotted time period,  reviews more often occur over
a significantly  protracted period,  usually between 12 to 36 months.  This is a
lengthy  and  expensive  process  and  there can be no  assurance  that such FDA
approval will be obtained on a timely basis, if at all.

A PMA application, if granted, generally includes significant limitations on the
indicated  uses for which a product  may be  marketed.  FDA  enforcement  policy
strictly  prohibits the  promotion of approved  medical  devices for  unapproved
uses.  To  significantly  modify  the  product  or  the  product's  labeling  or
manufacturing,  the  Corporation  would be  required  to  obtain  an  additional
approval  from the FDA. In addition,  product  approvals  can be  withdrawn  for
failure to comply with  regulatory  requirements or the occurrence of unforeseen
problems following initial marketing.

HeartSaver  is  now  in  the  pre-clinical  trial  stage  in  Canada.   Assuming
pre-clinical trials in Canada are satisfactory,  the Corporation is targeting to
file an  application  for an IDE with the FDA before the end of 2002. If the IDE
is obtained,  and the resulting  clinical data is satisfactory,  the Corporation
intends to apply for a PMA.

In addition,  any medical device  distributed by the Corporation will be subject
to pervasive and continuing regulation by the FDA. Products must be manufactured
in registered  establishments  and must be  manufactured  in accordance with the
Quality  System   Regulation   (QSR)  (formerly  known  as  Good   Manufacturing
Practices).  Labeling and promotional  activities are subject to scrutiny by the
FDA and, in certain  instances,  by the  Federal  Trade  Commission.  Failure to
comply with these  requirements  could result in enforcement  action,  including
seizure, injunction,  prosecution, civil penalties, recall and suspension of FDA
approval.






                                       28
<PAGE>
Regulatory Requirements in Other Countries

It is also the  Corporation's  intention  to market  HeartSaver  in European and
other  countries.  The  Corporation  will  therefore  be  required  to meet  the
applicable media devices standards in each such country.  Although harmonization
has been under negotiation for some time among various  countries,  the approval
process  varies  from  country to country and  approval in one country  does not
necessarily result in approval in another.

The Corporation intends to apply for various certifications under the applicable
International  Standards  Organization (ISO), a worldwide federation of national
bodies,  founded  in  Geneva,  Switzerland  in  1946.  ISO has  over  92  member
countries,  including the United States and Canada. ISO standards are integrated
requirements  which, when implemented,  form the foundation and framework for an
effective  quality  management  system.   These  standards  were  developed  and
published by the ISO. ISO certification is widely regarded as essential to enter
Western European markets. All companies are required to obtain ISO certification
and the "CE" mark in order to market new  medical  devices in Europe.  ISO 13485
certification  is the most  stringent  standard  in the ISO  series  and  covers
design,  production,  installation  and servicing of products.  The  Corporation
intends  to  apply  for ISO  13485  certification  in  2001.  In  addition,  the
Corporation  will  be  required  to  receive  a  "CE"  mark  certification,   an
international symbol of quality and compliance, with applicable European medical
device directives.

Other Regulatory Requirements

The Corporation and CVD are also subject to various Canadian federal, provincial
and  local  laws  and  regulations  relating  to such  matters  as safe  working
conditions,  laboratory and  manufacturing  practices and the use,  handling and
disposal of hazardous or  potentially  hazardous  substances  used in connection
with the Corporation's  and CVD's research and development  work.  Specifically,
the  manufacture  of  biomaterials  will be subject to compliance  with Canadian
federal  environmental  regulations  and those of various  provincial  and local
agencies.  Although  the  Corporation  believes  that  both  it and  CVD  are in
compliance with these laws and regulations in all material  respects,  there can
be no assurance that the Corporation  will not be required to incur  significant
cost to comply with environmental laws or regulations in the future.






                                       29
<PAGE>
C. Organizational Structure

The Company has one wholly owned  subsidiary,  World Heart Inc.,  a  corporation
duly incorporated under the laws of the State of Delaware.  The preferred shares
are owned by Edwards.  The  preferred  shares carry no voting  rights except for
consent on certain  extraordinary  corporate events and are not convertible into
any other security.

D. Property, Plants and Equipment

Description of Property

As of December  31,  2000,  WorldHeart  occupied  three  locations.  The Ottawa,
Ontario location is comprised of 22,755 square feet of manufacturing  and office
space with a lease that is being renewed on an annual basis on terms  consistent
with prior years. There is a satellite office in Ottawa with approximately 4,000
square  feet and a lease that  expires in April 2003.  The third  location is in
Oakland,  California with two buildings and approximately  40,000 square feet of
manufacturing and office space. Both leases expire on April 30, 2002.

Under a research  agreement  between OHIRC and WorldHeart,  dated July 10, 1996,
OHIRC continues to provide  facilities and clinical support for the operation of
CVD.  The  research  facilities  continue  to occupy a  significant  part of the
90,000-square-foot  research wing of OHIRC's cardiovascular  healthcare facility
located in Ottawa, Ontario.

The Corporation is currently has excess capacity for manufacturing purposes. The
Corporation is not aware of any environmental issues.

Item 5. Operating and Financial Review and Prospects

Overview

WorldHeart  is  a  global  medical  device  company  currently  focused  on  the
development  and  commercialization  of  pulsatile  ventricular  assist  devices
through  operations in Oakland,  California,  USA and Ottawa,  Ontario,  Canada.
WorldHeart is currently focused on two products,  Novacor(R) LVAS (Novacor LVAS)
and HeartSaverVAD(TM) (HeartSaver).

The  HeartSaver is being  developed from licensed  artificial  heart and related
technologies  developed by CVD. On July 11, 1996,  with an effective  date as at
April 1, 1996, the Corporation  entered into a research agreement with CVD under
which the  Corporation  agreed to fund a substantial  portion of CVD's remaining
research efforts relating to the HeartSaver artificial heart technology, and all
of the costs related to the commercialization of the technology.

On June 30,  2000,  the  Corporation,  through  World Heart Inc., a wholly owned
subsidiary of World Heart Corporation,  acquired the business,  including assets
and liabilities of Edwards






                                       30
<PAGE>
Novacor  LLC  (Novacor)  from  Edwards  Lifesciences  LLC  (Edwards).  The total
purchase  price  of the  acquisition  was  approximately  $62.5  million,  which
included $58.9 million of Series A cumulative  participating preferred shares of
World Heart Inc. The  acquisition  was accounted  for using the purchase  method
with World Heart Inc.'s operating results included in the consolidated financial
statements from June 30, 2000.

As a result of the acquisition, WorldHeart is now manufacturing and distributing
the Novacor LVAS. The  Corporation  sells this product  internationally  through
Edwards,  with the  exception of the United States where the  Corporation  sells
directly.  With the  acquisition of Novacor from Edwards,  WorldHeart  commenced
initial commercial operations following four years as a research and development
company.

Significant  progress at WorldHeart  includes the  preparation  for long-term in
vitro and in vivo trials of HeartSaver, further implants of the Novacor LVAS and
the successful integration of the Novacor and WorldHeart operations.

In addition,  the  Corporation  made  considerable  advancement in its financing
activities to ensure that the  Corporation has adequate  financial  resources to
pursue its research and  commercial  development  activities  at the  forecasted
pace. In March 2000, the  Corporation  raised over $15 million as a result of an
equity  issue  and in June  2000,  in  connection  with the  acquisition  of the
business of Novacor,  the Corporation  issued  convertible  preferred  shares to
Edwards for US $20 million.

Results of Operations

All financial  information  is prepared in accordance  with  generally  accepted
accounting principles (GAAP) in Canada and is stated in Canadian dollars.

Consolidated revenues and costs of goods sold

<TABLE>
<CAPTION>
                                                 Year ended                        Year ended         Year ended
                                               December 31,         As a %       December 31,       December 31,
                                                       2000     of revenue               1999               1998
                                       --------------------------------------------------------------------------

<S>                                     <C>                       <C>            <C>                <C>
Revenue                                 $       4,674,485                                   -                  -
                                       ---------------------                    ---------------------------------

Cost of goods sold
       Direct materials and labour             (2,443,610)             52%                  -                  -
       Overhead and other                      (4,825,735)            103%                  -                  -
                                       --------------------------------------------------------------------------
                                               (7,269,345)            155%
                                       --------------------------------------------------------------------------

Gross margin                            $      (2,594,860)                                  -                  -
                                       =====================                    =================================
</TABLE>






                                       31
<PAGE>
Revenues  for the  fiscal  year  ended  December  31,  2000  reflect  commercial
activities  relating to Novacor LVAS for the six-month  period from July 1, 2000
to December 31, 2000. As mentioned  above,  there were no commercial  activities
prior to the June 30, 2000  acquisition  of Novacor.  Management  anticipates an
increase in sales  levels in 2001,  resulting  from ongoing  initiatives  and an
increased number of implants.

The direct  materials and labour  attributable  to the sales in 2000 result in a
contribution  margin of 48%. The  overhead and other costs  relating to sales of
Novacor  LVAS  effectively  brings  the  total  cost  of  goods  sold to 155% of
revenues, resulting in a negative gross margin. However, the overhead charged to
the cost of sales in 2000 reflects the  operational  basis in effect at the time
of the  acquisition.  With the  completion of the  integration  of operations in
Ottawa and Oakland,  an increased  focus on research and development is expected
to reduce the indirect overhead allocation with a consequent  improvement in the
gross margin.

The  Corporation  reports  commercial  activities  and  research  activities  as
operating  segments.  There  have been no  revenues  or costs of goods sold as a
result  of  research  activities  since  inception  in the  Corporation.  Of the
commercial  activities,  approximately  58% of revenues  were  generated  in the
United States with the balance in Europe and Canada.

Consolidated expenses and other items

<TABLE>
<CAPTION>
                                                          Year ended            Year ended          Year ended
                                                        December 31,          December 31,        December 31,
                                                                2000                  1999                1998
                                              -----------------------------------------------------------------

<S>                                                   <C>                   <C>                  <C>
Selling, general and administrative                   $  (6,760,277)        $  (5,629,074)       $ (3,203,625)
Research and development                                (18,395,885)          (13,034,576)         (1,004,038)
Amortization of intangibles                              (7,491,865)               (8,000)             (8,000)
Investment income                                          2,380,983             1,169,961             550,394

Interest expense and foreign exchange                    (2,535,443)                58,948                   -

Recovery of future income taxes                            5,542,960                     -                   -

                                              -----------------------------------------------------------------
Net loss                                                (29,854,387)          (17,442,741)         (3,665,269)
                                              -----------------------------------------------------------------
</TABLE>

Selling, general and administrative

Selling,  general and  administrative  expenses  consist  primarily of personnel
costs,  professional fees,  communications,  promotional  activities,  occupancy
costs and other miscellaneous costs associated with meeting multi-jurisdictional
regulatory requirements.






                                       32
<PAGE>
The   increase  in  expenses  in  2000  from  1999  is  related   primarily   to
administrative  activities in supporting the Novacor LVAS  including  marketing,
finance, and human resource activities.

The  general  and  administrative  expenses in 1999 were higher than prior years
primarily due to the inclusion of significant  expenses  relating to the Abiomed
litigation. This litigation was a result of a complaint filed against Abiomed by
WorldHeart  in  January  1998.  The  complaint  was based on  alleged  breach of
contract,  misappropriation  of trade  secrets,  conversion of trade secrets and
patent  infringement  relating to the  Corporation's  patented  TET  technology.
Abiomed filed a motion to include a counterclaim  alleging that the  Corporation
misappropriated  its trade secrets.  Prior to the trial, the Corporation dropped
its claim  against  Abiomed for patent  infringement.  On February 4, 2000,  the
trial of this suit concluded with the jury finding in favour of Abiomed.

The Corporation continues to emphasize marketing and promotional activity as the
development of HeartSaver  continues and as emphasis is placed on increasing the
number of implants of Novacor LVAS devices.

Research and development

Research and  development  expenses  increased  by 41% from 1999. A  significant
portion of this  increase is a result of the research  activities  undertaken by
World Heart Inc. to further the  development  of  HeartSaver.  In addition,  the
Corporation  continued  its in  vivo  tests  of  HeartSaver  and  increased  the
production of systems for the final series of  pre-clinical  trials  expected in
the first half of 2001.

The  increase  in  research  and  development  expenses  in 1999 from 1998 was a
reflection of the development status of HeartSaver.  During the year, production
of HeartSaver  prototypes was transferred  from CVD to direct  operations of the
Corporation.  Commencing at that time,  total research and development  expenses
include amounts relating to the development of prototypes.

With  respect  to the  HeartSaver,  it is  anticipated  that  the  Ottawa  Heart
Institute,  CVD,  will direct the conduct of formal  pre-clinical  and  clinical
trials under  contract with  WorldHeart.  In addition,  CVD will  participate in
research and  development  for WorldHeart in developing  the next  generation of
HeartSaver  and other  products.  Research  relating  to the  Novacor  LVAS will
encompass  technical  refinements  reflecting clinical  experience,  accelerated
enrollment  in the current  Novacor LVAS United  States  clinical  trial,  named
INTrEPID,  an  alternative  to medical  therapy,  and the initiation of a United
States clinical  trial,  named NICE, to evaluate for use in the United States an
inflow cannula that is currently used in Novacor LVAS in Europe.

Amortization of intangibles

As a result of the  acquisition  of Novacor  from  Edwards for a total  purchase
price of  approximately  $62.5 million,  the consolidated  financial  statements
reflect a significant increase in intangible assets. The resulting  amortization
for the six-month period from the acquisition of Novacor to the year-end totaled
$7.5 million and is a non-cash item.  The  intangible  assets are amortized on a
straight-line  basis and will continue to result in significant annual expenses.
Goodwill  is  amortized  over  its  estimated  useful  life  of 3  years.  Other
intangible assets,






                                       33
<PAGE>
consisting of purchased  technology,  patents,  trademarks and other  identified
rights,  are amortized over their legal or estimated useful lives,  whichever is
shorter, which range from 3 to 5 years.

Investment Income

Investment income primarily represents interest earned by the Corporation on its
cash equivalents and short-term investments.

Investment  income in 2000  increased  104% over 1999 due to the  receipt of net
proceeds of over $15 million from an equity issue in March 2000 and the proceeds
from the issuance of convertible  preferred shares for US $20 million to Edwards
in June 2000.

Investment  income in 1999  increased  113% over 1998 due to an equity  issue in
March 1999 that increased cash funds by approximately $26.5 million.

Other expenses

Other expenses include gains and losses on foreign exchange and interest expense
on the convertible preferred shares.

The preferred  shares are being accounted for in accordance with their substance
and  are  presented  in the  financial  statements  as  their  debt  and  equity
components  measured at their  respective fair values at the time of issue.  The
debt  components  have been  calculated  as the  present  value of the  interest
payments discounted at 12%, approximating the interest rate that would have been
applicable to non-convertible debt at the time the preferred shares were issued.
Interest expense is determined on the debt components as the amount necessary to
increase  the debt  component  to its face amount at  maturity.  Total  interest
expense  was  approximately  $3  million  for  the  six-month  period  from  the
acquisition of Novacor to year-end.

Recovery of future income taxes

The  Corporation  has  recognized  a $5.5  million  tax  recovery  on the losses
incurred in the United States. This loss is calculated at 41.05% of the net loss
of World Heart Inc.

Capital Expenditures

<TABLE>
<CAPTION>
                                         Year ended                   Year ended                Year ended
                                       December 31,                 December 31,              December 31,
                                               2000                         1999                      1998

<S>                             <C>                          <C>                        <C>
Capital expenditures                       $902,398                     $246,620                  $123,445
                                --------------------         --------------------       -------------------
</TABLE>






                                       34
<PAGE>
Capital   expenditures   increased  in  2000  reflecting  the  progress  of  the
Corporation  toward full  commercialization.  Expenditures  during the year were
primarily for office equipment, computer and systems equipment and manufacturing
equipment.

No significant or unusual  capital  expenditures  were made during 1999 or 1998.
Capital  expenditures  during  1999,  for the most part,  related  to  leasehold
improvements and the acquisition of computer equipment for new employees.

At December 31, 2000,  WorldHeart occupied three locations.  The Ottawa location
comprises 22,755 square feet of manufacturing and office space with a lease that
is being renewed on an annual basis on terms consistent with prior years.  There
is a satellite office in Ottawa with approximately 4,000 square feet and a lease
that expires in April 2003.  The third location is in Oakland with two buildings
and approximately  40,000 square feet of manufacturing  and office space.  These
leases expire on April 30, 2002.

Employees

The Corporation is committed to employing  qualified  personnel with appropriate
expertise in its  research  and  development  and its  business  operations.  At
December 31, 2000, the Corporation employed 205 full-time staff and consultants.

In addition to these staff  members,  there are  approximately  70 clinical  and
professional  staff and volunteers,  affiliated with the Ottawa Heart Institute,
involved in delivering the HeartSaver project.

Market Risk

The following summarizes the Corporation's  investment  instruments entered into
for other than trading purposes at December 31, 2000.

<TABLE>
<CAPTION>
                                               Total                  Maturity Dates
<S>                                        <C>             <C>
Cash equivalents
Short-term asset backed notes              $18,566,191     January 5, 2001 to March 1, 2001
Corporate securities                         2,511,981     January 11, 2001

Short-term investments
Short-term asset backed notes              $11,796,841     January 10, 2001 to March 5, 2001
Corporate securities                        10,899,836     January 16, 2001 to February 6, 2001
</TABLE>

Market risk is mitigated by close adherence to an established investment policy,
which has been approved by the Board of Directors.  The policy sets conservative
criteria  with  respect to  liquidity  and  counter-party  diversification.  The
Corporation  is not  significantly  exposed  to






                                       35
<PAGE>
capital  risk as the  portfolio  consists of high quality  instruments  that are
short  term in nature  and are well  diversified.  There  exists  modest  income
exposure  to a decline in interest  rates.  This is not  significant  due to the
short terms to maturity of the instruments held.

Liquidity and Capital Resources

Since  inception,  the Corporation  has financed its operations  largely through
public and  private  issues of its  common  shares.  New equity  funding in 2000
resulted in issuing 850,000 common shares for net proceeds of $15 million and as
part of the Novacor  acquisition,  the Corporation issued convertible  preferred
shares for US $20 million.  The preferred  shares are  convertible  at US $14.55
into 1,374,570 common shares,  plus additional common shares for the accumulated
but unpaid dividends to the date of conversion.  Also during 2000, 12,282 shares
were issued for  $116,147  upon the exercise of stock  options  issued under the
Employee Stock Option Plan (ESOP).  Additionally,  common shares were issued for
$765,054 to  underwriters  of previous  equity issues who exercised a portion of
their compensation warrants.

At December 31, 2000, the Corporation had working capital of $51 million (1999 -
$23.6  million).  The  Corporation  had cash,  cash  equivalents  and short-term
investments  of $46.5  million  (1999 - $25 million) of which  $226,316  (1999 -
$377,247) have been pledged as collateral for the capital lease arrangement. The
increase in these  amounts is  attributable  to the equity  issues of common and
preferred shares during the year. The Corporation has budgeted approximately $36
million in cash expenditures for 2001.

Additional  financing  will  be  required  prior  to full  commercialization  of
HeartSaver.  The Corporation has no current  arrangement with respect to sources
of additional financing, and there can be no assurance that additional financing
will be available to the Corporation  when needed,  on  commercially  reasonable
terms,  or at all. In addition,  any  incremental  equity  financing may involve
substantial dilution to the Corporation's then existing shareholders.

Other Factors

WorldHeart's   business  and  future  depends  on  the  commercial   success  of
HeartSaver.   This  success  is  expected  to  be  assisted  by  the  successful
performance  of Novacor  LVAS.  Both devices  provide  pulsatile  blood flow and
HeartSaver is designed to be fully  implantable  in the chest cavity.  Pulsatile
VADs, using pumps that are either externally  placed, or abdominally  implanted,
have been  demonstrated  to be effective in supporting the blood  circulation of
patients  with  failing  hearts.  Although  Novacor  LVAS has been  successfully
implanted in more than 1,200 patients, there can be no assurance that HeartSaver
will also prove safe and effective  until  successful  clinical trials have been
completed.

Pulsatile VADs

WorldHeart has several  competitors with  commercially  approved  pulsatile VADs
having pumps that are externally located or abdominally  implanted.  The devices
developed by the






                                       36
<PAGE>
Corporation's competitors are now primarily used as bridges to transplant.  Some
of the  Corporation's  existing known  competitors  have  significantly  greater
financial,  production and marketing resources than the Corporation.  WorldHeart
believes  HeartSaver  is the  only  pulsatile  device  that is  currently  at an
advanced stage of development and that is fully implantable in the chest cavity.

Non-pulsatile VADs

Research and  development  is  proceeding in several  centers for  non-pulsatile
continuous flow assist devices. Some of these devices are currently being tested
in humans. It has not been determined whether these  non-pulsatile  devices will
be acceptable for long-term  use. If proven safe and  effective,  and subject to
regulatory  approval,  non-pulsatile  assist devices  approved for long-term use
could have an adverse effect on the market for WorldHeart's devices.

Clinical Trials for HeartSaver

It is management's  plan to conduct  pre-clinical and initiate Canadian clinical
trials of HeartSaver in 2001.  There can be no assurance  that the  pre-clinical
trials will be successful or that regulatory  approval will be received in order
to commence clinical trials during 2001 for HeartSaver.

Commercial Sales of Novacor LVAS

As noted above, sales of Novacor LVAS contribute approximately 48% of revenue to
overheads and other indirect costs of producing the Novacor product. However, at
current volumes total costs of production  exceed total revenues.  To the extent
that the Corporation  falls short of meeting sales  forecast,  there could be an
adverse effect on the overhead  absorption  from sales and on the  Corporation's
net cash consumption.

Outlook

The  Corporation  expects to incur further losses from operations at least until
2003 as it progresses  into the clinical  phase of its research and  development
programs.  In addition,  increased  marketing  and  manufacturing  expenses will
result as WorldHeart  transitions itself from a research and development company
to a commercially viable medical device manufacturing  company.  These increases
will be  potentially  offset by  increased  interest  income as well as  revenue
generated  from  Novacor  LVAS sales and initial  sales of  HeartSaver  after it
receives regulatory approval in individual countries.

Accounting Policies

Significant  differences  between  GAAP in  Canada  and the  United  States  are
presented in Note 19 to the consolidated financial statements.







                                       37
<PAGE>
Item 6. Directors, Senior Management and Employees

A) Directors and Senior Management

The  following  table sets forth the name and  municipality  of  residence,  the
position held with the Corporation and the principal business activities outside
the Corporation of each director and each member of senior management:

<TABLE>
<CAPTION>
  Name and Municipality of Residence         Director Since           Position with the Corporation (other than
                                                                         director) and Principal Occupation
<S>                                       <C>                      <C>
Dr. Donald S. Beanlands (1)(2)            October 29, 1996         Physician, Deputy Director General of Ottawa
Ottawa, Ontario                                                    Heart Institute since 1989, and
                                                                   President of OHIRC since October 1996.

Roderick M. Bryden (1)(3)                 April 1, 1996            President and Chief Executive Officer of the
Ottawa, Ontario                                                    Corporation from January 2000,

                                                                   Chairman of SC Stormont Corporation, a
                                                                   financial advisory company, since 1991,
                                                                   Chairman and Governor and majority
                                                                   owner of the National Hockey League's
                                                                   Ottawa Senators,

                                                                   Chairman of Palladium Corporation,
                                                                   which owns the Corel Center, a multi-
                                                                   purpose sports and entertainment facility
                                                                   in Ottawa, Ontario, and

                                                                   Board member of E-Cruiter.com Inc.,
                                                                   The Ottawa Partnership, Rebel.com and
                                                                   Gallium Software.
</TABLE>





                                       38
<PAGE>
<TABLE>
<CAPTION>
  Name and Municipality of Residence         Director Since           Position with the Corporation (other than
                                                                         director) and Principal Occupation
<S>                                       <C>                      <C>
Robert (Bob) Griffin                      Not applicable           Vice President, Manufacturing of the
Toronto, Ontario                                                   Corporation since November 2000,

                                                                   Vice President, Manufacturing for
                                                                   Visible Genetics Inc., a bio-technology
                                                                   company, from 1998 to November 2000,
                                                                   and

                                                                   Private management consultant from
                                                                   1996 to 1998.

Douglas Hillier                           Not applicable           Senior Vice President, Marketing of the
San Francisco, California                                          Corporation since July 2000, and

                                                                   President of Novacor Division of Baxter
                                                                   Healthcare from April 1999 to June
                                                                   2000.

Jal Jassawalla                            Not applicable           Senior Vice President, Research and
Orinda, California                                                 Development of the Corporation since
                                                                   June 2000,

                                                                   Founded Novacor Medical Corporation,
                                                                   and

                                                                   Vice President of Research and
                                                                   Development, at Baxter Healthcare
                                                                   Corporation's Novacor Division from 1988
                                                                   to June 2000.

Daniela Kennedy                           Not applicable           Vice President, Corporate Services of
Ottawa, Ontario                                                    the Corporation since 1998,

                                                                   Vice President Management Services
                                                                   from 1992 to 1996 and,

                                                                   Vice President Corporate Information
                                                                   Systems from 1996 to 1998 for SHL
                                                                   Systemhouse.
</TABLE>







                                       39
<PAGE>
<TABLE>
<CAPTION>
  Name and Municipality of Residence         Director Since           Position with the Corporation (other than
                                                                         director) and Principal Occupation
<S>                                       <C>                      <C>
Dr. Richard L. Lesher (2)                 October 29, 1996         Director of e-Lynxx Corporation, a print
Chambersburg, Pennsylvania                                         procurement expert,

                                                                   Director of International Marketing Inc.,
                                                                   producer of an automotive after market
                                                                   product,

                                                                   Director of G & L Realty Corp., a REIT,
                                                                   trading on the NYSE, and

                                                                   Director of AIT Corporation, an
                                                                   information technology company.

Ian W. Malone                             April 1, 1996            Vice President, Finance and Chief
Ottawa, Ontario                                                    Financial Officer of the Corporation
                                                                   since April 1, 1996,

                                                                   Secretary of the Corporation from April
                                                                   1, 1996 to January 11, 1999 and since
                                                                   February 22, 2000,

                                                                   Senior Vice President of SC Stormont
                                                                   Corporation, since 1992.

Michael Mussallem(3)(4)                   July 25, 2000            Chairman of the Board and Chief Executive
Newport Beach, California                                          Officer of Edwards Lifesciences Corporation
                                                                   (Edwards Lifesciences) since 2000 and President
                                                                   of Edwards Lifesciences LLC.

                                                                   Group Vice President of CardioVascular
                                                                   Business of Baxter International Inc.
                                                                   (Baxter) from 1994 to 2000,

                                                                   Group Vice President of
                                                                   Biopharmaceutical Business of Baxter
                                                                   from 1998 to 2000, and

                                                                   Chairman of Baxter's Asia Pacific Board
                                                                   from 1996 to 1998.
</TABLE>






                                       40
<PAGE>
<TABLE>
<CAPTION>
  Name and Municipality of Residence         Director Since           Position with the Corporation (other than
                                                                         director) and Principal Occupation
<S>                                       <C>                      <C>
Dr. Tofy Mussivand (1)                    May 23, 1996             Chairman and Chief Scientific Officer of the
Navan, Ontario                                                     Corporation since January 2000,
                                                                   Director of Cardiovascular Devices
                                                                   Division of OHIRC, and

                                                                   Principal Investigator of the
                                                                   HeartSaverVAD(TM) and related
                                                                   technologies for OHIRC, since 1991.

C. Ian Ross (2)                           February 22, 2000        Chairman, Working Ventures Canadian
Collingwood, Ontario                                               Fund Inc. since April 1999,

                                                                   Senior Director, Administration, Richard
                                                                   Ivey School of Business, University of
                                                                   Western Ontario since July 1999,

                                                                   Managing Partner, Killdeer
                                                                   Management, since October 1990,

                                                                   Director of Comcare Health Services
                                                                   since February 1999, and

                                                                   Director of Praeda Management Systems
                                                                   Inc. since February 1999.

Linda Reed Strauss                        Not applicable           Vice President, Quality and Regulatory Affairs
Oakland, California                                                since June 2000, and

                                                                   Vice President, at Baxter Healthcare
                                                                   Corporation's Novacor Division from 1988
                                                                   to June 2000.
</TABLE>
(1)  Pursuant to an agreement among the  Corporation,  OHIRC, Mr. Bryden and Dr.
     Mussivand  and  Dr.  Michael  C.  J.  Cowpland,   as   shareholders,   such
     shareholders  have  agreed to  exercise  their  voting  rights to elect two
     nominees of OHIRC as directors of the  Corporation.  Dr.  Beanlands and Dr.
     Mussivand are OHIRC's current nominees.  Pursuant to this agreement,  these
     shareholders  have also agreed to exercise their voting rights to elect Mr.
     Bryden and Mr.  Mussallem  as  directors  of the  Corporation,  and, if Dr.
     Mussivand is not one of the OHIRC's  nominees,  to elect Dr. Mussivand as a
     director of the Corporation.

(2)  Member of the Audit Committee and the Compensation Committee.

(3)  Pursuant  to  an  agreement  among  the   Corporation,   Edwards,   Edwards
     Lifesciences  (U.S.)  Inc.,  Mr.  Bryden,  Dr.  Mussivand  and  OHIRC,  the
     Corporation is required to





                                       41
<PAGE>
     have  not more  than  eight  directors,  of whom  one  shall  be the  Chief
     Executive Officer of Edwards.

(4)  Member of the Compensation Committee.


B. Compensation

The  following  table  sets  forth  the  summary   information   concerning  the
compensation  paid or earned during the years ended December 31, 2000,  1999 and
1998 for each director and each member of senior management of the Corporation.

<TABLE>
<CAPTION>
                                                    Annual compensation                   Long term
                                                                                          compensation
                                                                                          Common shares
           Name             Year           Salary        Bonus     Other annual           under options       All other
                                                                   compensation           granted (#)     compensation

<S>                         <C>        <C>           <C>          <C>                 <C>                <C>
Dr. Donald Beanlands        2000                -            -           $6,500                    -                -

                            1999                -            -                -             7,000(1)                -
----------------------------------------------------------------------------------------------------------------------
Roderick M. Bryden(2)       2000         $250,000      $80,000          $40,430                1,672      $187,748(3)

                            1999         $250,000      $50,000          $39,253            36,341(4)         $224,324
----------------------------------------------------------------------------------------------------------------------
Robert (Bob) Griffin(5)     2000          $13,500            -                -               30,196                -
----------------------------------------------------------------------------------------------------------------------
Douglas Hillier(6)          2000       US$150,000    US$20,000                -               20,000     US$21,750(7)
----------------------------------------------------------------------------------------------------------------------
Jal Jassawalla(8)           2000        US$96,000    US$35,000                -               54,000                -
----------------------------------------------------------------------------------------------------------------------
Daniela Kennedy             2000         $114,500      $24,000                -                1,672                -

                            1999         $112,200      $15,000                -            17,847(9)                -
----------------------------------------------------------------------------------------------------------------------
Dr. Richard Lesher          2000                -            -           $6,500                    -                -

                            1999                -            -                -             8,000(1)                -
----------------------------------------------------------------------------------------------------------------------
Ian W. Malone               2000         $163,700      $50,000          $21,467                1,672                -

                            1999         $160,500      $37,500          $20,433           19,071(10)                -
----------------------------------------------------------------------------------------------------------------------
Michael Mussallem           2000                -            -                -           10,500(11)                -
----------------------------------------------------------------------------------------------------------------------
Dr. Tofy Mussivand(12)      2000         $250,000      $80,000          $40,430                1,672      $27,727(13)

                            1999         $250,000      $50,000          $39,253           36,341(14)          $27,727
----------------------------------------------------------------------------------------------------------------------
C. Ian Ross(15)             2000                -            -           $7,250               11,500                -
----------------------------------------------------------------------------------------------------------------------
Linda Reed Strauss(16)      2000      US$64,700    US$12,750                -               10,800                -
----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)   Dr.  Beanlands and Dr. Lesher  received 4,000 options on December  21,1999
      for services being provided in 2000.

(2)   Mr. Bryden's services have been provided to the Corporation since April 1,
      1996, by SC Stormont Corporation,  a corporation controlled by Mr. Bryden.
      Mr.  Bryden is also entitled to receive  options under the Employee  Stock
      Option Plan and is eligible for performance bonuses during the term of the
      Service Agreement between the Corporation and SC Stormont Corporation.

(3)   During 2000, the Corporation paid insurance  premiums of $171,548 relating
      to $10 million of life insurance coverage and premiums of $16,200 relating
      to $10 million of personal  accident  insurance,  of which  certain  named
      family members of Mr. Bryden are the beneficiaries.

(4)   Of the options granted to Mr. Bryden in 1999, 20,000 of these options were
      for services being provided in 2000. In 2001,  4,000 of these options were
      cancelled.

(5)   Mr. Griffin became an officer of the Corporation on November 1, 2000.

(6)   Mr. Hillier become an officer of the Corporation on July 1, 2000.

(7)   During  2000,  the  Corporation   paid  US  $21,750   relating  to  living
      accommodations for Mr. Hillier.

(8)   Mr. Jassawalla became an officer of the Corporation on June 30, 2000.

(9)   Of the options  granted to Ms.  Kennedy in 2000,  10,000 of these  options
      were for services being provided in 2000. In 2001,  2,000 of these options
      were cancelled.

(10)  Of the  options  granted to Mr.  Malone in 1999,  the vesting of 10,000 of
      these options was for services being provided in 2000.

(11)  Options granted to Mr.  Mussallem in 2000 were  subsequently  cancelled in
      2001, at the request of Edwards.

(12)  Dr. Mussivand's  services have been provided to the Corporation since June
      1, 1996, by T. Mussivand Professional Services Corporation,  a corporation
      controlled  by Dr.  Mussivand.  Dr.  Mussivand is also entitled to receive
      options under the ESOP and is eligible for performance  bonuses during the
      term of the Service  Agreement  between the  Corporation  and T. Mussivand
      Professional Services Corporation.

(13)  During 2000, the Corporation  paid insurance  premiums of $27,727 relating
      to $3 million of life  insurance  coverage,  of which certain named family
      members of Dr. Mussivand are the beneficiaries.






                                       43
<PAGE>
(14)  Of the options granted to Dr.  Mussivand in 1999,  20,000 of these options
      were for services being provided in 2000. In 2001,  4,000 of these options
      were cancelled.

(15)  Mr. Ross became a director of the Corporation on February 22, 2000.

(16)  Ms. Strauss became a member of the senior management of the Corporation on
      June 30, 2000.

The  Corporation  does not  provide  pension,  retirement  or any other  similar
benefit for directors or officers.

C. Board Practices

The  Articles  of  Incorporation  of the  Corporation  provide  for a  Board  of
Directors  of not less than one and not more than ten  directors,  to be elected
annually.  All  directors  hold  office  until the next  annual  meeting  of the
shareholders  or until their  successor is elected or appointed,  unless earlier
vacated.

Under laws of the  Province  of  Ontario,  a majority  of the  directors  of the
Corporation  must  be  resident  Canadians.  A  resident  Canadian  is  defined,
generally,  to be an  individual  who  is:  (i) a  Canadian  citizen  ordinarily
resident in Canada;  (ii) a Canadian  citizen not ordinarily  resident in Canada
who is a member of a prescribed class of persons;  or (iii) a permanent resident
within the meaning of the Immigration Act (Canada),  and ordinarily  resident in
Canada.  Six of the seven  current  directors  of the  Corporation  are resident
Canadians.

Roderick M. Bryden and Ian W. Malone are engaged full time in the affairs of the
Corporation and have each held their indicated  offices since April 1, 1996. Dr.
Tofy Mussivand is also engaged full time in the affairs of the  Corporation  and
has held his indicated offices since June 1, 1996.

The Compensation  Committee  reviews and makes  recommendations  to the Board of
Directors  with respect to  compensation  for employees of the  Corporation  and
remuneration  of directors of the  Corporation  and  administers  the ESOP.  The
Compensation Committee is composed of the following individuals: Richard Lesher,
Michael Mussallem, C. Ian Ross and Donald Beanlands.

The Audit  Committee  is composed  of Richard  Lesher,  C. Ian Ross,  and Donald
Beanlands. The Audit Committee reviews and makes recommendations to the Board of
Directors with respect to the financial affairs of the Corporation.

D. Employees

At  December  31,  2000,  the  Corporation  employed  205  full-time  staff  and
consultants.  Of these employees, 107 were employed in Ottawa and the balance in
Oakland.  Approximately  75%  of  the  employees  are  involved  with  research,
development and manufacturing.






                                       44
<PAGE>
In addition to these staff  members,  there are  approximately  70 clinical  and
professional  staff and volunteers  affiliated  with the Ottawa Heart  Institute
involved in the HeartSaver project.

The Corporation currently maintains compensation, benefits, equity participation
and work  environment  policies  intended to assist in attracting  and retaining
qualified personnel.

The  Corporation  believes  that the success of its business  will depend,  to a
significant  extent, on its ability to attract and retain such personnel.  There
is a  well-developed  high  technology  industry  in the  region  in  which  the
Corporation  conducts  its  business  and in which CVD conducts its research and
development. The Corporation has access to a highly skilled labour pool.

None of the  Corporation's  employees  are  subject to a  collective  bargaining
agreement  nor  has  the  Corporation   experienced  any  work  stoppages.   The
Corporation believes that its relations with its employees are good.

E. Share Ownership

The  following  table  sets  forth  the  summary  information  concerning  share
ownership and options to purchase  common shares of the  Corporation  held as of
April 30, 2001 for the directors and senior management of the Corporation.

<TABLE>
<CAPTION>
                                     Common shares                             Options
                             -----------------------------    --------------------------------------
            Name             Number held   Percentage held    Grants  Exercise price Expiration date
----------------------------------------------------------------------------------------------------
<S>                          <C>           <C>               <C>         <C>         <C>
Dr. Donald S. Beanlands          n/a             < 1%          1,500       $6.80     March 2002 - December 2002
                                                               2,000      $12.00     March 2003 - December 2003
                                                               1,000      $16.70     June 2003 - December 2003
                                                               5,172      $12.65     December 2003 - December 2008
                                                               8,000      $10.65     March 2005 - December 2005
                                                                 347      $10.65     January 2006 - January 2008
                                                              ------
                                                              18,019
                                                              ======

Roderick M. Bryden            2,889,731         19.10%        26,500       $6.80     December 2001 - February 2007
                                                                 811       $9.25     July 2003 - July 2007
                                                              13,125      $12.00     January 2004 - January 2008
                                                              18,964      $12.65     December 2004 - December 2008
                                                               1,672      $17.00     January 2006
                                                              25,000      $10.65     January 2006 - January 2008
                                                                 500      $10.65     February 2003
                                                              ------
                                                              86,572
                                                              ======

Robert Griffin                   n/a             < 1%            196      $11.65     November 2005 - November 2009
</TABLE>





                                       45
<PAGE>
<TABLE>
<CAPTION>
                                     Common shares                             Options
                             -----------------------------    --------------------------------------
            Name             Number held   Percentage held    Grants  Exercise price Expiration date
----------------------------------------------------------------------------------------------------
<S>                          <C>           <C>               <C>         <C>         <C>

                                                              30,000      $10.50     November 2005 - November 2007
                                                               5,000      $10.65     January 2006 - January 2008
                                                              ------
                                                              35,196
                                                              ======

Douglas Hillier                  n/a             < 1%         10,000      $17.00     December 31, 2005
                                                              10,000      $17.00     December 31, 2006
                                                              ------
                                                              20,000
                                                              ======

Jal Jassawalla                   n/a             < 1%         54,000      $17.00     June 2005 - June 2007
                                                              34,000     US $7.10    January 2006 - January 2008
                                                              ------
                                                              88,000
                                                              ======

Daniela Kennedy                  n/a             < 1%         15,000       $6.80     December 2002 - February 2006
                                                               1,592       $9.25     July 2003 - July 2007
                                                               6,403      $12.00     January 2004 - January 2008
                                                               9,357      $12.65     December 2004 - December 2008
                                                               1,672      $17.00     January 2006
                                                              15,000      $10.65     January 2006 - January 2008
                                                                 500      $10.65     February 2003
                                                              ------
                                                              49,524
                                                              ======

Dr. Richard L. Lesher            n/a             < 1%          9,000       $6.80     December 2001 - December 2005
                                                               4,000      $12.00     March 2003 - December 2003
                                                               4,000      $12.65     March 2004 - December 2004
                                                               8,000      $10.65     March 2005 - December 2005
                                                              ------
                                                              25,000
                                                              ======

Ian W. Malone                    n/a             < 1%         18,500       $6.80     December 2001 - February 2007
                                                               2,432       $9.25     July 2003 - July 2007
                                                               7,006      $12.00     January 2004 - January 2008
                                                              11,941      $12.65     December 2004 - December 2008
                                                               1,672      $17.00     January 2006
                                                              20,000      $10.65     January 2006 - January 2008
                                                                 500      $10.65     February 2003
                                                              ------
                                                              62,051
                                                              ======

Michael Mussallem                n/a             < 1%              -      n/a        n/a
</TABLE>






                                       46
<PAGE>
<TABLE>
<CAPTION>
                                     Common shares                             Options
                             -----------------------------    --------------------------------------
            Name             Number held   Percentage held    Grants  Exercise price Expiration date
----------------------------------------------------------------------------------------------------

<S>                          <C>           <C>               <C>         <C>         <C>
Dr. Tofy Mussivand             631,000          4.20%           30,000     $6.80     December 2001 - February 2007
                                                                 3,243     $9.25     July 2003 - July 2007
                                                                13,125    $12.00     January 2004 - January 2008
                                                                18,964    $12.65     December 2004 - December 2008
                                                                 1,672    $17.00     January 2006
                                                                25,000    $10.65     January 2006 - January 2008
                                                                 1,000    $10.65     February 2003
                                                                ------
                                                                93,004
                                                                ======

C. Ian Ross                      n/a             < 1%           11,500    $20.50     March 2004 - February 2009
                                                                 8,000    $10.65     March 2005 - December 2005
                                                                ------
                                                                19,500
                                                                ======

Linda Reed Strauss               n/a             < 1%           10,800    $17.00     June 2005 - June 2007
                                                                 5,200   US $7.10    January 2006 - January 2008
                                                                ------
                                                                16,000
                                                                ======
</TABLE>






                                       47
<PAGE>
Options to Purchase Securities from Registrant

The Corporation adopted an ESOP on December 6, 1996 and amended and restated the
ESOP on March 6, 1997,  on October 27, 1997, on October 27, 1998 on February 23,
1999, and again on May 15, 2000. The ESOP is intended to encourage  ownership in
the  Corporation's  common shares by full time  employees,  senior  officers and
directors  of the  Corporation.  The ESOP is  administered  by the  Compensation
Committee of the Board of Directors of the  Corporation.  The maximum  number of
common  shares  that may be  reserved  and set aside  under  options to eligible
persons pursuant to the ESOP is 1,450,000 common shares.  Currently, the maximum
number of common  shares at any time  available  for issuance  under the ESOP or
pursuant to other outstanding options to any one person may not exceed 2% of the
common  shares then  issued and  outstanding.  Pursuant to the ESOP,  the option
exercise price for all options is determined by the Compensation Committee based
on fair  market  value at the date of  grant.  The  options  will  vest in equal
amounts over varying terms,  ranging from three to five-year  periods,  from the
date of grant and must be exercised  within a four-year period from each date of
vesting.

(a)  The following  table sets forth  information  as to all options to purchase
     common shares of the Corporation,  which are outstanding as of December 31,
     2000:

<TABLE>
<CAPTION>
  Year of Grant          # of Options           Weighted Average           Expiry Dates
                       Outstanding as at        Exercise Price
                       December 31, 2000
<S>   <C>            <C>                      <C>                           <C>
      1996                   37,800                  $ 6.80                 Dec. 2001 - Dec. 2005

      1997                   36,500                  $ 6.80                 Oct. 2002 - Dec. 2006

      1998                  133,178                  $ 8.63                 Jan. 2003 - Oct. 2007

      1999                  247,856                  $12.63                 Mar. 2003 - Dec. 2008

      2000                  364,772                  $17.19                 Feb. 2003 - Dec. 2009
                     -----------------        ---------------

      Total                 820,106                  $13.18
                     =================        ===============
</TABLE>






                                       48
<PAGE>
Item 7. Major Shareholders and Related Party by Transactions

A. Major Shareholders

The  following  tables  set  forth,  as at April  30,  2001,  to the best of the
Corporation's  knowledge,  information  with  respect to any person  that is the
beneficial  owner of more than 5% of the voting  securities and the total amount
of voting securities owned by the directors and officers as a group.

<TABLE>
<CAPTION>
    Title of class         Identity of person or group          Amount owned             Percentage of class
------------------------ -------------------------------- -------------------------- -----------------------------
<S>                      <C>                                      <C>                          <C>
Common shares            Roderick M. Bryden                       2,889,731                     19.1%

Common shares            Ottawa Heart Institute                   1,370,000                      9.1%
                         Research Corp.

Common shares            Directors and officers as a              3,662,731                     24.2%
                         group
</TABLE>

During 2000, Dr. Michael C.J. Cowpland  disposed of a significant  number of his
shares.  Currently,  Dr.  Cowpland  owns  less  than  5% of  the  shares  of the
Corporation from 8.6% in 1999. There have been no other  significant  changes in
the  percentage  ownership held by any major  shareholder  during the past three
years.

All shareholders have the same voting rights.

As at April 23, 2001,  2000 there were 4,250,383  (28.18%)  shares held by those
with addresses in the host country, United States. The balance of the shares are
held in Canada.

To the best of the  Corporation's  knowledge,  it is not directly or  indirectly
owned or controlled by any other  corporation  or by the Canadian  Government or
any foreign Government.

The Corporation does not know of any arrangements, the operation of which may at
a subsequent date result in a change in its control.






                                       49
<PAGE>
B. Related Party Transactions

CVD is  considered  a related  party by virtue of the fact that the Chairman and
Chief Scientific Officer of the Corporation is also the Director of CVD.

The  following  related  party  amounts are included in amounts  receivable  and
accounts payable and accrued liabilities:

<TABLE>
<CAPTION>
                                                  2000                   1999                  1998
                                             -----------------------------------------------------------
<S>                                       <C>                    <C>                   <C>
Due from CVD                                 $  188,276             $  175,454           $  164,107
                                          ================       ================      =================

Due to CVD                                   $  443,089             $  218,510           $  491,770
                                          ================       ================      =================
</TABLE>

During the year ended December 31, 2000, the Corporation paid $1,000,000 (1999 -
$7,600,000,  1998 - $400,000) for research and development fees to CVD under the
Research  Agreement  entered into by the two  organizations.  In  addition,  the
Corporation paid $150,000 (1999 - $150,000,  1998 - $225,000) to CVD relating to
the research chair under the Research Agreement.

Also during the year 2000, the  Corporation  incurred salary expense of $670,271
(1999 -  $2,509,055,  1998 -  $3,294,295)  relating to employees  that have been
seconded by the  Corporation to CVD.  These funds were  reimbursed by CVD to the
Corporation.

C. Interests of Experts and Counsel

Not applicable.

Item 8. Financial Information

A. Consolidated Statements and Other Financial Information

Included in Item 18 are the audited  consolidated  financial  statements for the
fiscal year ended  December 31, 2000.  These include the  Corporation's  balance
sheets  as  at  December  31,  2000  and  1999,  and  the  statements  of  loss,
shareholders'  equity and cash flows for the years ended December 31, 2000, 1999
and 1998 accompanied by the Auditors' Report thereon.

The Corporation was audited using Canadian and U.S.  generally accepted auditing
standards (GAAS).






                                       50
<PAGE>
The Corporation had export sales of approximately $1.8 million, 40% of total
revenues to Europe. In addition, 58% of sales were to the United States.

Legal Proceedings

The Corporation  filed a complaint against Abiomed in the Federal District Court
for the District of Delaware on January 20,  1998.  The  complaint  was based on
alleged breach of contract,  misappropriation  of trade  secrets,  conversion of
trade secrets and patent infringement relating to the Corporation's patented TET
technology.  Abiomed filed a motion to include a counterclaim  alleging that the
Corporation   misappropriated  its  trade  secrets.  Prior  to  the  trial,  the
Corporation  dropped  its claim  against  Abiomed  for patent  infringement.  On
February  4, 2000,  the trial of this suit  concluded  with the jury  finding in
favour of Abiomed.  The Corporation  does not plan to take any further action at
this time.

The effect of the decision is to determine that Abiomed's  transcutaneous energy
transfer system does not incorporate or rely upon trade secrets belonging to the
Corporation. The decision does not affect the Corporation's ownership of its TET
technology.

Dividend Distribution

The Corporation has not distributed any dividends since its inception.

B. Significant Changes

No  significant  changes  have  occurred  since the date of annual  consolidated
financial statements included in this document.









                                       51
<PAGE>
Item 9. The Offer and Listing

A.  Offer and Listing Details

A. 4 Price History of the Stock

The  following  are the high and low sales  prices of the  common  shares on the
Nasdaq SmallCap Market and Nasdaq National Market,  as furnished by Nasdaq,  and
on the Canadian  Dealing  Network (CDN) and the Toronto Stock  Exchange (TSE) as
provided by the TSE since 1996:

<TABLE>
<CAPTION>
                                           NASDAQ                         CDN / TSE
                                   High              Low             High            Low
------------------------------ ---------------- ---------------- --------------- ---------------
<S>                            <C>              <C>              <C>             <C>
By year:
1996 (Dec. 13 - 31)                 US $5.25         US $4.75           $7.00           $6.40
1997                                US $5.97         US $2.88           $8.40           $4.25
1998                                US $9.63         US $3.50          $14.90           $5.20
1999                               US $16.31         US $7.50          $26.00          $12.00
2000                               US $16.88         US $5.50          $23.25           $8.00

By quarter:
First quarter 1999                 US $16.31         US $7.50          $26.00          $12.00
Second quarter 1999                US $14.25         US $9.75          $21.30          $14.30
Third quarter 1999                 US $12.75         US $8.13          $19.00          $12.25
Fourth quarter 1999                US $10.69         US $8.00          $15.75          $11.75
First quarter 2000                 US $16.88         US $9.13          $23.25          $13.70
Second quarter 2000                US $13.69         US $9.75          $20.25          $13.25
Third quarter 2000                 US $11.00         US $9.00          $16.75          $13.80
Fourth quarter 2000                 US $9.65         US $5.50          $15.45           $8.00

By month:
April 2001                          US $5.97         US $4.87           $9.35           $7.45
March 2001                          US $6.81         US $3.81          $10.50           $6.00
February 2001                       US $8.00         US $5.81          $12.00           $8.75
</TABLE>






                                       52
<PAGE>
<TABLE>
<CAPTION>
                                           NASDAQ                         CDN / TSE
                                   High              Low             High            Low
------------------------------ ---------------- ---------------- --------------- ---------------
<S>                            <C>              <C>              <C>             <C>
January 2001                        US $9.00         US $6.13          $13.60           $9.20
December 2000                       US $7.00         US$ 5.50          $10.50           $8.00
November 2000                       US $8.13         US $6.13          $12.75           $9.25
</TABLE>


B.  Plan of Distribution

Not applicable.

C.  Markets

The Corporation's  shares trade on the Nasdaq National Market (WHRT) and the TSE
(WHT).

D.  Selling Shareholders

Not applicable.

E.  Dilution

Not applicable.

F.  Expenses of the Issue

Not applicable.

Item 10. Additional Information

A. Share Capital

Not applicable.

B. Memorandum and Articles of Association

Incorporated  by  reference.  See  Form F-1  Registration  Statement  under  the
Securities Act of 1933, as filed with the Securities and Exchange  Commission on
October 8, 1996.






                                       53
<PAGE>
C. Material Contracts

The Corporation  has entered into a distribution  agreement with Edwards whereby
Edwards will be the sole  distributor,  except for in the United States,  of the
Corporation's  heart assist and heart replacement  products for a period of five
years  commencing  July 1,  2000.  As a result  of the  Distribution  Agreement,
WorldHeart is committed to paying a minimum of US $2 million annually to Edwards
in guaranteed  gross margin on sales.  The  Corporation  has also entered into a
supply  agreement  with Edwards  whereby  Edwards  will be the sole  supplier of
certain  components  to the heart assist and heart  replacement  products of the
Corporation for a period of five years.

The  Corporation has not entered into any other material  contracts,  other than
contracts  entered  into in the  normal  course of  business,  for the two years
immediately preceding this document.

D. Exchange Controls

There is no law or  Governmental  decree or regulation in Canada that  restricts
the  export or import of  capital,  or  affects  the  remittance  of  dividends,
interest or other payments to a non-resident holder of common shares, other than
withholding tax requirements (see Taxation below).

There  is  no  limitation  imposed  by  Canadian  law  or  by  the  Articles  of
Incorporation  of WorldHeart on the right of  non-resident  or foreign owners to
hold or vote the common shares,  other than as provided in the Investment Canada
Act  (Canada)  (the  Investment   Act).  The  Investment  Act  requires  certain
"non-Canadian" individuals, Governments, corporations or other entities who wish
to acquire a  "Canadian  business"  (as defined in the  Investment  Act) to file
either  a  notification  or an  application  for  review  with the  Director  of
Investments,  Department of Industry,  Government of Canada.  The Investment Act
requires  that  certain  acquisitions  of control of a  Canadian  business  by a
"non-Canadian"  must  be  reviewed  and  approved  in  advance  by the  Minister
responsible  for the  Investment Act on the basis that the Minister is satisfied
that the  acquisition  is likely to be beneficial to Canada.  The Investment Act
provides  detailed  rules for the  determination  of  whether  control  has been
acquired and,  pursuant to those rules,  the acquisition of one-third or more of
the voting shares of a corporation may, in some circumstances,  be considered as
constituting an acquisition of control.

E. Taxation

General

The following is a summary of certain  Canadian  federal income and U.S. federal
income  tax  matters  that may be  relevant  with  respect  to the  acquisition,
ownership and disposition of common shares.






                                       54
<PAGE>
Canadian Federal Income Tax Considerations

The  following  summary  describes  the principal  Canadian  federal  income tax
consequences  of the  acquisition,  ownership and  disposition  of common shares
generally  applicable  to holders of common  shares of the  Corporation  (Common
Shares) who are residents of the United  States (U.S.  Holders) for the purposes
of the Canada-United  States Income Tax Convention (1980) (the Convention),  who
are not  residents of Canada for the purposes of the Income Tax Act (Canada) the
(Tax Act), who hold their Common Shares as capital  property,  who deal at arm's
length with the  Corporation  for the purposes of the Tax Act and who do not use
or hold and are not deemed to use or hold such Common Shares in connection  with
a business  carried on in Canada.  Common Shares will generally be considered to
be capital  property to a U.S.  Holder  unless they are held as inventory in the
course of carrying on a business or were acquired in a transaction considered to
be an adventure  in the nature of trade.  This summary is based upon the current
provisions of the Tax Act, the regulations thereunder, all specific proposals to
amend the Tax Act and regulations  thereunder publicly announced by or on behalf
of the  Minister of Finance  prior to the date hereof  (the  Proposals)  and the
provisions  of the  Convention  as in effect on the date hereof.  Other than the
Proposals,  this summary does not take into account or anticipate any changes in
law,  whether by legislative or judicial  action,  nor does it take into account
tax laws of any province or territory of Canada or of any  jurisdiction  outside
Canada. There can be no assurance that the Proposals will be enacted as proposed
or at all.

This  summary is of a general  nature only and is not intended to be, nor should
it be  construed  to be,  legal or tax  advice to any  particular  U.S.  Holder.
Accordingly,  U.S. Holders should consult with their own tax advisors for advice
with respect to their own particular circumstances.






                                       55
<PAGE>
Dispositions

A U.S.  Holder will not be subject to tax in Canada on any capital gain realized
on a disposition  of Common  Shares,  provided that the shares do not constitute
"taxable  Canadian  property"  of the U.S.  Holder.  The Common  Shares will not
generally  constitute  taxable Canadian property of a U.S. Holder unless, at any
time within the 60-month period immediately preceding the disposition,  the U.S.
Holder,  persons  with whom the U.S.  Holder did not deal at arm's length or the
U.S. Holder  together with all such persons owned,  had an interest in or option
in respect  of,  25% or more of the issued  shares of any series or class of the
capital stock of the Corporation.

Dividends

Dividends paid or credited or deemed to be paid or credited to a U.S.  Holder in
respect of the Common Shares will  generally be subject to Canadian  withholding
tax on the gross  amount of the  dividends.  Under the  Convention,  the rate of
Canadian  withholding tax which would apply on dividends paid by the Corporation
to a U.S.  Holder is (i) 5% with  respect to  dividends  paid if the  beneficial
owner of the dividends is a company, which owns at least 10% of the voting stock
of the Corporation and (ii) 15% in all other cases.

A purchase of Common Shares of a U.S. Holder by the Corporation (other than by a
purchase in the open market in the manner in which shares are normally purchased
by a member of the  public)  will give  rise to a deemed  dividend  to such U.S.
Holder equal to the amount paid by the  Corporation on the purchase in excess of
the paid-up  capital of such shares,  determined in accordance with the Tax Act.
Any such dividend  deemed to have been received by a U.S. Holder will be subject
to  non-resident  withholding  tax as  described  above.  The amount of any such
deemed  dividend  will  reduce,  for  Canadian  tax  purposes,  the  proceeds of
disposition to a U.S.  Holder of Common Shares for the purposes of computing the
amount  of such  U.S.  Holder's  capital  gain  arising  on the  disposition  as
described above.

United States Federal Income Tax Considerations

The following  summary of United States federal income taxes  describes  certain
United States federal income tax  consequences of the ownership of common shares
relating to such securities as in existence on the date hereof,  but it does not
purport to  address  all of the tax  considerations  that may be  relevant  with
respect to the  acquisition,  ownership and  disposition of common shares.  This
summary  addresses only the United States federal income tax  considerations  of
holders that will hold common  shares as capital  assets.  This summary does not
address tax considerations  applicable to holders that may be subject to special
tax rules,  such as financial  institutions,  insurance  companies,  real estate
investment trusts,  regulated investment companies,  grantor trusts,  dealers or
traders in securities or currencies,  tax-exempt entities, persons that received
common shares as compensation for the performance of services, persons that will
hold common shares as part of a "hedging" or  "conversion"  transaction  or as a
position in a "straddle" for United States federal income tax purposes,  persons
that have a "functional currency" other than the United States dollar or holders
that own (or are  deemed to own) 10% or more (by  voting  power or value) of the
stock of the  Corporation.  Moreover,  this  summary  does not  address the U.S.
federal  estate  and  gift  or  alternative  minimum  tax  consequences  of  the
acquisition,






                                       56
<PAGE>
ownership  and  disposition  of  common  shares.  This  summary  is based on the
Internal  Revenue Code of 1986, as amended (the Code),  United  States  Treasury
Regulations and judicial and  administrative  interpretations  thereof,  in each
case as in effect and  available on the date of this Annual  Report.  All of the
foregoing  are subject to change,  which  change could apply  retroactively  and
could affect the tax consequences described below.

For purposes of this summary,  a "United States Holder" is a beneficial owner of
common shares that,  for United States  federal  income tax purposes,  is: (i) a
citizen or resident of the United  States,  (ii) a  partnership  or  corporation
created  or  organized  in or under the laws of the  United  States or any state
thereof  (including  the  District of  Columbia),  (iii) an estate the income of
which is subject to United  States  federal  income  taxation  regardless of its
source or (iv) a trust if such  trust  validly  elects to be treated as a United
States  person for United States  federal  income tax purposes or if (x) a court
within  the  United  States is able to  exercise  primary  supervision  over its
administration  and (y) one or more United States  persons have the authority to
control all of the  substantial  decisions of such trust.  A "Non-United  States
Holder" is a beneficial  owner (or, in the case of a  partnership,  a holder) of
common shares that is not a United States Holder.

Each  prospective  purchaser  should consult its own tax advisor with respect to
the  United  States  federal,  state,  local and  foreign  tax  consequences  of
acquiring, owning or disposing of common shares.

Distributions

Subject to the  discussion  below  under  "Passive  Foreign  Investment  Company
Considerations", the gross amount of any distribution by the Corporation of cash
or  property  (other  than  certain  distributions,  if any,  of  common  shares
distributed  pro rata to all  shareholders of the  Corporation)  with respect to
common shares, before reduction for any Canadian taxes withheld there from, will
be  includible  in income by a United  States  Holder as dividend  income to the
extent such  distributions  are paid out of the current or accumulated  earnings
and profits of the Corporation as determined  under United States federal income
tax principles.  Such dividends will not be eligible for the dividends  received
deduction  generally allowed to corporate United States Holders.  Subject to the
discussion below under "Passive Foreign Investment Company  Considerations",  to
the  extent,  if any,  that the amount of any  distribution  by the  Corporation
exceeds  the  Corporation's  current  and  accumulated  earnings  and profits as
determined under United States federal income tax principles, it will be treated
first as a tax-free return of the United States  Holder's  adjusted tax basis in
the common  shares and  thereafter  as capital gain.  The  Corporation  does not
maintain  calculations  of its earnings and profits under United States  federal
income tax principles.

Any such dividend paid in Canadian  dollars will be included in the gross income
of a United  States  Holder in an amount equal to the United States dollar value
of the Canadian dollar on the date of receipt. The amount of any distribution of
property  other than cash will be the fair market value of such  property on the
date of distribution.

Dividends  received by a United States Holder with respect to common shares will
be treated as foreign source income,  which may be relevant in calculating  such
holder's  foreign  tax credit






                                       57
<PAGE>
limitation. Subject to certain conditions and limitations, Canadian tax withheld
on dividends  may be deducted from taxable  income or credited  against a United
States  Holder's  United States federal income tax liability.  The limitation on
foreign  taxes  eligible  for credit is  calculated  separately  with respect to
specific  classes of income.  For this  purpose,  dividends  distributed  by the
Corporation  generally  will  constitute  "passive  income,"  or, in the case of
certain United States Holders, "financial services income."

Subject to the discussion  below under "Backup  Withholding  Tax and Information
Reporting  Requirements," a Non-United  States Holder of common shares generally
will not be  subject  to United  States  federal  income or  withholding  tax on
dividends received on common shares, unless such income is effectively connected
with the conduct by such Non-United  States Holder of a trade or business in the
United States.

Sale or Exchange of Common Shares

Subject to the  discussion  below  under  "Passive  Foreign  Investment  Company
Considerations", a United States Holder generally will recognize gain or loss on
the sale or exchange of common shares equal to the difference between the amount
realized on such sale or exchange and the United  States  Holder's  adjusted tax
basis in the common  shares.  Such gain or loss will be capital gain or loss. In
the case of a non-corporate  United States Holder,  the maximum  marginal United
States  federal  income tax rate  applicable to such gain will be lower than the
maximum  marginal  United States federal income tax rate  applicable to ordinary
income if such United  States  Holder's  holding  period for such common  shares
exceeds one year and will be further reduced if such holding period exceeds five
years. Gain or loss, if any, recognized by a United States Holder generally will
be treated as United States source income or loss for United States  foreign tax
credit purposes. The deductibility of capital losses is subject to limitations.

The initial  tax basis of common  shares to a United  States  Holder will be the
U.S. dollar value of the Canadian dollar  denominated  purchase price determined
on the date of  purchase.  If the  common  shares  are  treated  as traded on an
"established  securities  market," a cash basis United  States Holder (or, if it
elects,  an accrual basis United States  Holder) will determine the dollar value
of the cost of such  common  shares by  translating  the amount paid at the spot
rate of exchange on the settlement date of the purchase.  The conversion of U.S.
dollars to Canadian  dollars and the  immediate use of that currency to purchase
common  shares  generally  will not result in taxable  gain or loss for a United
States Holder.

With  respect to the sale or  exchange  of common  shares,  the amount  realized
generally will be the U.S.  dollar value of the payment  received  determined on
(i) the date of receipt of  payment  in the case of a cash basis  United  States
Holder and (ii) the date of  disposition  in the case of an accrual basis United
States  Holder.  If the common  shares are treated as traded on an  "established
securities  market," a cash basis  taxpayer (or, if it elects,  an accrual basis
taxpayer)  will  determine  the U.S.  dollar  value of the  amount  realized  by
translating  the amount  received at the spot rate of exchange on the settlement
date of the sale.

Subject to the discussion  below under "Backup  Withholding  Tax and Information
Reporting  Requirements," a Non-United  States Holder of common shares generally
will not be subject to United States federal  income or  withholding  tax on any
gain realized on the sale or exchange of






                                       58
<PAGE>
such  common  shares  unless  (i) such gain is  effectively  connected  with the
conduct by such  Non-United  States  Holder of a trade or business in the United
States  or (ii) in the case of any gain  realized  by an  individual  Non-United
States Holder,  such holder is present in the United States for 183 days or more
in the taxable year of such sale or exchange and certain  other  conditions  are
met.

Passive Foreign Investment Company Considerations.

A  Non-United  States  corporation  will be  classified  as a  "passive  foreign
investment company" (a PFIC) for U.S. federal income tax purposes in any taxable
year in which, after applying certain look-through rules, either (i) at least 75
percent of its gross  income is "passive  income" or (ii) at least 50 percent of
the gross value of its assets is  attributable  to assets that produce  "passive
income" or are held for the  production of passive  income.  Passive  income for
this purpose generally includes dividends,  interest, royalties, rents and gains
from commodities and securities transactions.

The Corporation believes that it was a PFIC for the calendar year 2000. Based on
certain  estimates  of its gross  income and gross  assets and the nature of its
business,  the Corporation believes that it will not be classified as a PFIC for
its current taxable year. If the  Corporation is classified as a PFIC,  unless a
United States Holder makes one of the elections  described  below, a special tax
regime  will  apply to (a) any  "excess  distribution"  made by the  Corporation
(generally,  the United States Holder's  ratable share of  distributions  in any
year that are greater than 125% of the average annual  distribution  received by
such United  States  Holder in the three  preceding  years or the United  States
Holder's  holding  period,  if shorter) and (b) any gain realized on the sale or
other  disposition  of an interest in the  Corporation.  Under this regime,  any
excess  distribution  and realized  gain will be treated as ordinary  income and
will be  subject  to tax as if (a) the  excess  distribution  or gain  had  been
realized ratably over the United States Holder's holding period,  (b) the amount
deemed  realized had been subject to tax in each year of that holding  period at
the  highest  applicable  tax  rate,  and  (c)  the  interest  charge  generally
applicable to  underpayments of tax had been imposed on the taxes deemed to have
been payable in those years.

The  remainder of this section  applies if the  Corporation  is  classified as a
PFIC.

A United States Holder may elect,  provided  that the  Corporation  provides the
United States Holder with certain information,  to have the Corporation treated,
with respect to that holder, as a "qualified  electing fund," in which case such
United States Holder must include annually in gross income its pro rata share of
the  Corporation's  annual  ordinary  earnings and annual net  realized  capital
gains, whether or not such amounts are actually distributed to the United States
Holder.  These  amounts are included by a United  States  Holder for its taxable
year in or with which the  Corporation's  taxable year ends.  If the election is
made, amounts previously included as income generally will be distributed by the
Corporation  free of tax to a United  States  Holder,  and,  to the  extent  not
distributed,  would increase the tax basis of a United States Holder's  interest
in the  Corporation.  The  Corporation  intends to provide to U.S.  Holders  who
desire to make such  election the financial  information  necessary to make such
election.






                                       59
<PAGE>
As an alternative  election,  United States  Holders may elect a  mark-to-market
treatment with respect to their common  shares,  provided that the common shares
constitute  "marketable  stock." An electing  United  States  Holder  would,  in
general,  include as ordinary income in each taxable year an amount equal to the
increase,  if any, in value of its common shares for that year  (measured at the
close of the  United  States  Holder's  taxable  year)  and  would be  allowed a
deduction for any decrease in the value of its common shares for that year,  but
only to the  extent  of  previously  included  mark-to-market  income.  The term
"marketable  stock"  includes  stock of a PFIC that is  "regularly  traded" on a
"qualified exchange or other market." Generally,  a "qualified exchange or other
market" means (i) a national  securities  exchange which is registered  with the
Securities  and Exchange  Commission or the national  market system  established
pursuant to Section 11A of the Securities Exchange Act of 1934 or (ii) a foreign
securities exchange that is regulated or supervised by a governmental  authority
of  the  country  in  which  the  market  is  located  and  has  the   following
characteristics:  (x)  the  exchange  has  trading  volume,  listing,  financial
disclosure,   and  other   requirements   designed  to  prevent  fraudulent  and
manipulative  acts and  practices,  to remove  impediments  to and  perfect  the
mechanism of a free and open market, and to protect  investors,  and the laws of
the  country  in which the  exchange  is located  and the rules of the  exchange
ensure that such  requirements are actually  enforced;  and (y) the rules of the
exchange ensure active trading of listed stocks.  A class of stock is "regularly
traded" on a qualified  exchange or other  market for any  calendar  year during
which such class of stock is traded (other than in de minimis)  quantities on at
least 15 days during each calendar  quarter.  The Corporation  believes that the
common shares will constitute  marketable stock for this purpose and that United
States  Holders  will be eligible  to elect the  mark-to-market  treatment  with
respect to their common shares.

If the  Corporation  is  treated as a PFIC,  a United  States  Holder  must file
Internal  Revenue  Service  Form 8621 for each  taxable year in which it owns an
interest in the Corporation.

Backup Withholding Tax and Information Reporting Requirements

United States backup  withholding  tax and  information  reporting  requirements
generally apply to certain payments to certain  non-corporate  holders of stock.
Information  reporting  generally will apply to payments of dividends on, and to
proceeds  from the sale or  redemption  of, common shares made within the United
States to a holder of common shares (other than an "exempt recipient," including
a  corporation,  a payee that is not a United  States  person  that  provides an
appropriate  certification and certain other persons).  A payor will be required
to withhold 31% of any payments of dividends  on, or the proceeds  from the sale
or redemption of, common shares within the United States to a holder (other than
an "exempt  recipient")  if such holder  fails to furnish  its correct  taxpayer
identification  number  or  otherwise  fails to comply  with,  or  establish  an
exemption from, such backup withholding tax requirements.

In the case of such payments  made within the United States to a foreign  simple
trust, a foreign grantor trust or a foreign  partnership (other than payments to
a foreign simple trust, a foreign  grantor trust or a foreign  partnership  that
qualifies  as  a  "withholding   foreign   trust"  or  a  "withholding   foreign
partnership"  within the meaning of such United States Treasury  Regulations and
payments  to a  foreign  simple  trust,  a  foreign  grantor  trust or a foreign
partnership  that  are  effectively  connected  with the  conduct  of a trade or
business in the United States),  the  beneficiaries of the foreign simple trust,
the persons  treated as the owners of the





                                       60
<PAGE>
foreign  grantor trust or the partners of the foreign  partnership,  as the case
may be, will be required to provide the  certification  discussed above in order
to establish an exemption from backup withholding tax and information  reporting
requirements.  Moreover,  a payor  or  middleman  may  rely  on a  certification
provided  by a payee that is not a United  States  person  only if such payor or
middleman  does  not  have  actual  knowledge  or a  reason  to  know  that  any
information or certification stated in such certificate is incorrect.

THE ABOVE SUMMARY IS NOT INTENDED TO  CONSTITUTE A COMPLETE  ANALYSIS OF ALL TAX
CONSEQUENCES  RELATING  TO  ACQUISITION,  OWNERSHIP  AND  DISPOSITION  OF COMMON
SHARES.  PROSPECTIVE  PURCHASERS OF COMMON  SHARES SHOULD  CONSULT THEIR OWN TAX
ADVISORS CONCERNING THE TAX CONSEQUENCES OF THEIR PARTICULAR SITUATIONS.

F. Dividends and Paying Agents

Not applicable.

G. Statements by Experts

Not applicable.

H. Documents on Display

Previous  items in this document  refer to the Research  Agreement with CVD, the
License  Agreement with CVD, and employment  agreements with Roderick M. Bryden,
Ian  Malone  and Dr.  Tofy  Mussivand.  These  documents  can be viewed in their
entirety in the Form F-1  Registration  Statement  under the  Securities  Act of
1933, as filed with the Securities and Exchange Commission on October 8, 1996.

I. Subsidiary Information

Not applicable.

Item 11. Quantitative and Qualitative Disclosures about Market Risk

The Corporation's business and financial results are affected by fluctuations in
world financial  markets,  including currency exchange rates and interest rates.
The Corporation's  policies attempt to manage these risks to an acceptable level
based on  management's  judgment  of the  appropriate  trade-off  between  risk,
opportunity  and  costs.  The  Corporation  does  not  hold or  issue  financial
instruments for trading purposes.

Foreign Exchange Risk






                                       61
<PAGE>
The  Corporation  conducts  business in both Canadian and U.S.  currencies.  The
Corporation does not enter into foreign exchange contracts for trading purposes.
The management of foreign currency  exposures is based upon estimates of the net
asset or net liability  position of various  currencies,  and to the extent that
these estimates are over or understated  during periods of currency  volatility,
the Corporation could experience unanticipated currency gains or losses.

The  Corporation  has entered  into  foreign  exchange  forward  contracts  with
maturities  ranging from one to three months,  under its investment  policy. The
Corporation  does not  expect  gains or  losses  on  these  contracts  to have a
material impact on our financial results.

As at December 31, 2000, the Corporation had a foreign exchange forward contract
outstanding  to sell US $4.1 million at an exchange  rate of US $1.54 on January
10, 2001.  This financial  instrument was recorded at fair value at December 31,
2000 with the resultant gain of $165,712 recorded.

Interest Rate Risk

The Corporation's exposure to market risks for changes in interest rates, relate
primarily to cash equivalents and short-term investments held with four Canadian
financial   institutions  and  represent  the  Corporation's   only  significant
concentration  of  credit  risk.  The  Corporation  has  established  guidelines
relative to credit ratings,  diversification,  and terms to maturity designed to
mitigate  this  risk  and  provide  safety  and  liquidity.  Due to the  average
maturities and conservative nature of the investment portfolio,  a sudden change
in interest rates is not expected to have a material  effect on the value of the
portfolio.

Investments

The  following  table  presents the  hypothetical  changes in fair values in the
financial instruments held at December 31, 2000 that are sensitive to changes in
interest  rates.  These  instruments are not leveraged and are held for purposes
other than  trading.  The modeling  technique  used  measures the change in fair
values arising from selected potential changes in interest rates.



      Decrease in Valuation of Securities Given a Change in Interest Rates

<TABLE>
<CAPTION>
         Issuer                       2%                          5%                     Actual Value of
                                                                                     Investments at December
                                                                                             31, 2000
-----------------------------------------------------------------------------------------------------------------
<S>                               <C>                         <C>                           <C>
Asset backed notes held           $ (62,350)                  $ (155,874)                   $30,363,032
with institutions

Corporate securities              $ (87,952)                  $ (219,881)                   $13,411,817

</TABLE>






                                       62
<PAGE>
Capital Leases

The Corporation believes that the carrying value of the capital lease obligation
approximates fair value due to its floating, market rate of interest.

Credit Risk

In the normal course of business,  the Corporation  provides credit to customers
in the health care industry,  performs credit evaluations of these customers and
maintains an allowance for doubtful accounts  receivable based upon the expected
collectability of accounts  receivable.  The Corporation has a limited number of
customers.  As of December 31, 2000 approximately 49% of the accounts receivable
balance was due from Edwards.

Item 12. Description of Securities Other than Equity Securities

Not applicable.


PART II

Item 13. Defaults, Dividend Arrearages, and Delinquencies

Not applicable.

Item 14. Material  Modifications  to the Rights of  Security  Holders and Use of
         Proceeds

Not applicable.

Item 15. Reserved

Item 16. Reserved

Item 17. Financial Statements

Not applicable.

Item 18. Financial Statements

See Audited  Consolidated  Financial  Statements  and notes thereto beginning on
 page F-1, Incorporated herein by reference.






                                       63
<PAGE>
1. Financial Statement Schedule

The following financial statement schedule is filed as part of this report:

         Schedule II       Valuation and Qualifying Accounts

All  other  schedules  are  omitted  as they are not  required  or the  required
information is shown in the financial statements or notes thereto.






                                       64
<PAGE>
Item 19. Exhibits

<TABLE>
<CAPTION>
Item                                                       Reference
-----------------------------------------------------------------------------------------------------------------
<S>                                                        <C>
1 Articles of Incorporation

Articles of Incorporation                                  See Form F-1 Registration Statement Under
                                                           The Securities Act of 1933 dated October 8,
                                                           1996.

Form of Amendments to                                      See Amendment No. 2 to Form F-1
Articles of Incorporation                                  Registration Statement Under The Securities
                                                           Act of 1933 dated December 6, 1996.

By-laws of the Registrant                                  See Form F-1 Registration Statement Under
                                                           The Securities Act of 1933 dated October 8,
                                                           1996.

Amendment to the By-Laws of the Registrant                 See Amendment No. 2 to Form F-1
                                                           Registration Statement Under The Securities
                                                           Act of 1933 dated December 6, 1996.

2. Instruments and definition of rights

Form of specimen certificate for Common                    See Amendment No. 1 to Form F-1
Shares                                                     Registration Statement Under The Securities
                                                           Act of 1933 dated November 18, 1996.

Form of Underwriter's Warrant Agreement                    See Form F-1 Registration Statement Under
                                                           The Securities Act of 1933 dated October 8,
                                                           1996.  Form of Underwriter's Warrant
                                                           Agreement.

Form of Canadian Underwriter's Warrant Agreement           See Amendment No. 2 to Form F-1
                                                           Registration Statement Under The Securities
                                                           Act of 1933 dated December 6, 1996.

Exchange Agreement, dated as of May 24, 2000, by and       See Ex-4.1 hereof.
between Edwards Lifesciences LLC, a Delaware limited
liability company, and World Heart Corporation
</TABLE>





                                       65
<PAGE>
<TABLE>
<CAPTION>
Item                                                       Reference
-----------------------------------------------------------------------------------------------------------------
<S>                                                        <C>

Shareholders' Agreement, dated as of June 30, 2000,        See EX-4.2 hereof.
among World Heart Corporation, Edwards Lifesciences
LLC, a Delaware limited liability company (Edwards
LLC), Edwards Lifesciences (US) Inc., a Delaware
corporation and Roderick M. Bryden, Dr. Tofy Mussivand
and the Ottawa Heart Institute Research Corporation
(the Other Shareholders).

Convertible Preferred Share Agreement, dated as of May     See EX-4.3 hereof.
24, 2000, between World Heart Corporation and Edwards
Lifesciences LLC.

3 Voting trust agreements

Any voting trust agreements and any amendments             Not applicable.
to those agreements

4. Material contracts

Research Agreement, dated July 10, 1996, among the         See Form F-1 Registration Statement Under The
Corporation and The Cardiovascular Devices Division of     Securities Act of 1933 dated October 8, 1996.
the Ottawa Heart Institute

Unified System License Agreement, dated July 10, 1996,     See Form F-1 Registration Statement Under The
among the Corporation and The Cardiovascular Devices       Securities Act of 1933 dated October 8, 1996.
Division of the Ottawa Heart Institute

Biotelemetry License Agreement, dated July 10, 1996,       See Form F-1 Registration Statement Under The
among the Corporation and The Cardiovascular Devices       Securities Act of 1933 dated October 8, 1996.
Division of the Ottawa Heart Institute

TET License Agreement, dated July 10, 1996, among the      See Form F-1 Registration Statement Under The
Corporation and The Cardiovascular Devices Division of     Securities Act of 1933 dated October 8, 1996.
the Ottawa Heart Institute
</TABLE>






                                       66
<PAGE>
<TABLE>
<CAPTION>
Item                                                       Reference
-----------------------------------------------------------------------------------------------------------------
<S>                                                        <C>
Shareholders Agreement among the Corporation and The       See Form F-1 Registration Statement Under The
Cardiovascular Devices Division of the Ottawa Heart        Securities Act of 1933 dated October 8, 1996.
Institute

Service Agreement between T. Mussivand Professional        See Amendment No. 1 to Form F-1 Registration
Corporation and World Heart Corporation made as of         Statement Under The Securities Act of 1933 dated
September 26, 1996                                         November 18, 1996.

Service Agreement between S.C. Stormont Corporation and    See Amendment No. 1 to Form F-1 Registration
World Heart Corporation made as of September 26, 1996      Statement Under The Securities Act of 1933 dated
                                                           November 18, 1996.

Employment Agreement between Ian W. Malone and World       See Amendment No. 1 to Form F-1 Registration
Heart Corporation made as of April 1, 1996                 Statement Under The Securities Act of 1933 dated
                                                           November 18, 1996.

Distribution  Agreement made effective as of the day of    See EX-10.1 hereof.
June 30, 2000, by and between  World Heart  Corporation
and Edwards Lifesciences LLC

Transition  Services  Agreement  dated  as of June  30,    See EX-10.2 hereof.
2000,  among  Edwards   Lifesciences   LLC,   Valentine
Acquisition Corp., and World Heart Corporation

Supply Agreement dated as of June 30, 2000 between         See EX-10.3 hereof.
Edwards Lifesciences LLC, Valentine Acquisition Corp.
and Edward Novacor LLC

Trust Agreement dated as of June 30, 2000 among            See EX-10.4 hereof.
Edwards Lifesciences LLC, Edwards Lifesciences (U.S.)
Inc., World Heart Corporation and CIBC Mellon Trust
Company

Certificate of Designation of Series A Cumulative          See EX-10.5 hereof.
Participating Preferred Stock of Valentine Acquistion
Corp.

Transfer, Assignment and Assumption Agreement dated as     See EX-10.6 hereof.
of June 30, 2000 by and among Edwards Lifesciences LLC,
Edwards Lifesciences Corporation and Edward Novacor LLC

5. Material patents

Material foreign patents                                   Not requested.

6. Earnings per share calculation

EPS                                                        Calculation of earnings per share disclosed in
                                                           the attached audited financial statements.  See
                                                           audited financial statements attached.

7. Financial ratios

Calculation of financial ratios                            Not applicable.
</TABLE>






                                       67
<PAGE>
<TABLE>
<CAPTION>
Item                                                       Reference
-----------------------------------------------------------------------------------------------------------------
<S>                                                        <C>
8. Subsidiary information

Details relating to subsidiaries.                          World Heart Inc.

                                                           Incorporated in Delaware, United States

                                                           Operating as World Heart Inc.

9. Statement relating to 8.A.4                             Not applicable.

10. Other                                                  None.
</TABLE>






                                       68
<PAGE>
SIGNATURES

Pursuant to the  requirements  of Section 12 of the  Securities  Exchange Act of
1934, the registrant  hereby certifies that it meets all of the requirements for
filing on Form 20-F and that it has duly caused and authorized  the  undersigned
to sign this annual report on its behalf.

World Heart Corporation

Original signed by:


/s/ Roderick M. Bryden
---------------------------------------    Dated:  May 17, 2001
Roderick M. Bryden
President and Chief Executive Officer






                                       69
<PAGE>














         WORLD HEART CORPORATION

         Financial Statements
         December 31, 2000




<PAGE>



Index to Audited  Consolidated  Financial Statements for the Year Ended December
31, 2000

         o    Management's Statement of Responsibility.

         o    Independent  Auditors'  Report to the  Shareholders of World Heart
              Corporation.

         o    Consolidated Balance Sheets as at December 31, 2000 and 1999.

         o    Consolidated  Statements  of Loss for the Year ended  December 31,
              2000, 1999,and 1998.

         o    Consolidated Statements of Shareholders' Equity for the Year ended
              December 31, 2000, 1999, and 1998.

         o    Consolidated  Statements of Cash Flow for the Years ended December
              31, 2000, 1999 and 1998.

         o    Notes to the Audited Consolidated Financial Statements






                                      F-i
<PAGE>


Management's Statement of Responsibility

Management is  responsible  for the  preparation of the  consolidated  financial
statements  and all  other  information  in the  annual  report.  The  financial
statements  have been prepared in accordance  with Canadian  generally  accepted
accounting  principles  ("GAAP") and reflect  management's  best  estimates  and
judgments. The financial information presented elsewhere in the annual report is
consistent with the consolidated financial statements.

Management has developed and maintains a system of internal  controls to provide
reasonable  assurance  that all assets are  safeguarded  and to  facilitate  the
preparation of relevant,  reliable and timely financial information.  Consistent
with the concept of reasonable  assurance,  the Corporation  recognizes that the
relative cost of  maintaining  these  controls  should not exceed their expected
benefits.

The Audit Committee,  which is comprised of independent  directors,  reviews the
financial  statements,  considers the report of the external auditors,  assesses
the adequacy of the Corporation's internal controls, and recommends to the Board
of Directors the independent  auditors for appointment by the shareholders.  The
financial  statements  were reviewed by the Audit  Committee and approved by the
Board of Directors.

The  consolidated  financial  statements were audited by  PricewaterhouseCoopers
LLP, the external  auditors,  in accordance  with  generally  accepted  auditing
standards on behalf of the shareholders.

Original signed by:                             Original signed by:
Roderick M. Bryden                              Ian W. Malone
President                                       Chief Financial Officer


Auditors' Report to the Shareholders of World Heart Corporation

We have audited the consolidated balance sheets of World Heart Corporation as at
December  31,  2000  and  1999,  and  the   consolidated   statements  of  loss,
shareholders'  equity and cash flows for the years ended December 31, 2000, 1999
and 1998. These financial statements are the responsibility of the Corporation's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards
in both Canada and the United States.  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 consolidated  financial statements present fairly, in all
material respects,  the financial position of the Corporation as at December 31,
2000 and 1999 and the results of its operations and its cash flows for the years
ended  December 31, 2000,  1999 and 1998 in accordance  with Canadian  generally
accepted accounting principles.


/s/ PricewaterhouseCoopers LLP

Chartered Accountants                                      Ottawa, Canada
                                                           February 9, 2001






                                      F-ii
<PAGE>
<TABLE>
 WORLD HEART CORPORATION
 Consolidated Balance Sheets
 (Canadian Dollars)
                                                                               -----------------------------------------
                                                                                  December 31,            December 31,
                                                                                          2000                    1999
                                                                               -----------------------------------------
<S>                                                                               <C>                     <C>
 ASSETS

 Current assets
     Cash and cash equivalents                                                    $ 23,624,549            $ 10,969,399
     Short-term investments                                                         22,696,677              13,680,708
     Accounts receivable and other
        (net of allowance for doubtful accounts of $100,912, 1999 - $nil)            2,515,373                 522,253
     Prepaid expenses                                                                  690,122                 460,390
     Inventory                                                                       9,966,873                       -
                                                                               -----------------------------------------
                                                                                    59,493,594              25,632,750
 Cash pledged as collateral for capital lease                                          226,316                 377,247
 Deferred foreign exchange loss                                                        531,035                       -
 Capital assets                                                                      6,263,544                 839,719
 Goodwill and other intangible assets                                               49,941,394                 170,000
                                                                               -----------------------------------------
                                                                                 $ 116,455,883            $ 27,019,716
                                                                               =========================================

 LIABILITIES AND SHAREHOLDERS' EQUITY

 Current liabilities
     Accounts payable and accrued liabilities                                      $ 6,522,676             $ 1,339,759
     Accrued compensation                                                            1,792,925                 550,803
     Current portion of capital lease                                                  150,933                 140,197
                                                                               -----------------------------------------
                                                                                     8,466,534               2,030,759
 Future income taxes                                                                 4,828,672                       -
 Preferred shares                                                                   55,211,759                       -
 Capital lease obligation                                                              226,316                 377,247
                                                                               -----------------------------------------
                                                                                    68,733,281               2,408,006
                                                                               -----------------------------------------
 Contingencies and commitments

 Shareholders' equity
 Common stock
     Issued and outstanding - 15,117,427 common shares
        (1999 - 14,150,539 common shares)                                           73,752,739              57,738,796
 Additional paid-in capital                                                         36,951,336                       -
 Accumulated deficit                                                               (62,981,473)            (33,127,086)
                                                                               -----------------------------------------
                                                                                    47,722,602              24,611,710
                                                                               -----------------------------------------
                                                                                 $ 116,455,883            $ 27,019,716
                                                                               =========================================
 Signed on behalf of the Board of Directors
     Original signed by Roderick M. Bryden and Ian Malone

                        Director               Director

                  (The accompanying notes are an integral part of these consolidated financial statements.)
</TABLE>






                                      F-1
<PAGE>
<TABLE>
WORLD HEART CORPORATION
Consolidated Statements of Loss
(Canadian Dollars)
                                                             ------------------------------------------------------------
                                                               Year ended             Year ended              Year ended
                                                             December 31,           December 31,            December 31,
                                                                     2000                   1999                    1998
                                                             ------------------------------------------------------------

<S>                                                             <C>                    <C>                     <C>
Revenue                                                       $ 4,674,485          $           -            $          -
                                                             ------------------------------------------------------------

Cost of goods sold
    Direct materials and labour                                 2,443,610                      -                       -
    Overhead and other                                          4,825,735                      -                       -
                                                             ------------------------------------------------------------
                                                                7,269,345                      -                       -
                                                             ------------------------------------------------------------

Gross margin                                                   (2,594,860)                     -                       -
                                                             ------------------------------------------------------------

Expenses
    Selling, general and administrative                         6,760,277              5,629,074               3,203,625
    Research and development                                   18,395,885             13,034,576               1,004,038
    Amortization of intangibles                                 7,491,865                  8,000                   8,000
                                                             ------------------------------------------------------------
                                                               32,648,027             18,671,650               4,215,663
                                                             ------------------------------------------------------------

Loss before the undernoted                                    (35,242,887)           (18,671,650)             (4,215,663)

Other income (expenses)
    Foreign exchange gain                                         514,349                 58,948                       -
    Investment income                                           2,380,983              1,169,961                 550,394
    Interest expense                                           (3,049,792)                     -                       -
                                                             ------------------------------------------------------------

Loss before income taxes                                      (35,397,347)           (17,442,741)             (3,665,269)

Recovery of future income taxes                                 5,542,960                      -                       -
                                                             ------------------------------------------------------------

Net loss for the year                                       $ (29,854,387)         $ (17,442,741)           $ (3,665,269)
                                                             ============================================================

Weighted average number of common shares
    outstanding
                                                              14,878,625              13,463,943              11,078,948
                                                             ============================================================

Basic and diluted loss per common share                          $ (2.01)               $ (1.30)                $ (0.33)
                                                             ============================================================

 (The accompanying notes are an integral part of these consolidated financial statements.)
</TABLE>






                                      F-2
<PAGE>
<TABLE>
WORLD HEART CORPORATION
Consolidated Statements of Shareholders' Equity
(Canadian Dollars)
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                          Additional
                                                                   Common Shares            Paid-in     Accumulated    Shareholders'
                                                                 Number      Amount         Capital       Deficit         Equity
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>          <C>           <C>           <C>             <C>

Balance as at December 31, 1997                               10,150,000   $17,467,337   $      --     $(12,019,076)   $  5,448,261

Share issue
       Private placement of special warrants                   2,093,000    12,880,431          --             --        12,880,431
          converted into common shares

Net loss for the year ended December 31, 1998                       --            --            --       (3,665,269)     (3,665,269)
                                                              ----------------------------------------------------------------------

Balance as at December 31, 1998                               12,243,000    30,347,768          --      (15,684,345)     14,663,423

Share issues
       Public offering                                         1,780,548    26,548,107          --             --        26,548,107
       Common shares through exercise of options                   4,794        42,411          --             --            42,411
       Common shares through exercise of warrants                122,197       800,510          --             --           800,510

Net loss for the year ended December 31, 1999                       --            --            --      (17,442,741)    (17,442,741)
                                                              ----------------------------------------------------------------------

Balance as at December 31, 1999                               14,150,539    57,738,796          --      (33,127,086)     24,611,710

Value of conversion right attached to preferred shares              --            --      36,951,336           --        36,951,336
Share issues
       Public offering                                           850,000    15,132,742          --             --        15,132,742
       Common shares through exercise of options                  12,282       116,147          --             --           116,147
       Common shares through exercise of warrants                104,606       765,054          --             --           765,054

Net loss for the year ended December 31, 2000                       --            --            --      (29,854,387)    (29,854,387)
                                                              ----------------------------------------------------------------------

Balance as at December 31, 2000                               15,117,427   $73,752,739   $36,951,336   $(62,981,473)   $ 47,722,602
                                                              ======================================================================






                     (The accompanying notes are an integral part of these consolidated financial statements.)
</TABLE>






                                      F-3
<PAGE>
<TABLE>
WORLD HEART CORPORATION
Consolidated Statements of Cash Flow
(Canadian Dollars)
-----------------------------------------------------------------------------------------------------------------------------------

                                                                                    Year ended       Year ended         Year ended
                                                                                   December 31,      December 31,      December 31,
                                                                                       2000             1999               1998
                                                                               ----------------------------------------------------

CASH FLOWS FROM (USED IN)

<S>                                                                              <C>                <C>                <C>

Operating activities
          Net loss for the year                                                  $(29,854,387)      $(17,442,741)      $ (3,665,269)
          Items not involving cash -
             Amortization and depreciation                                          8,702,580            346,938            304,482
             Interest on preferred shares                                           3,049,792               --                 --
             Recovery of future income taxes                                       (5,542,960)              --                 --
          Change in operating components of working capital                         2,021,194            458,493           (103,836)
                                                                                ----------------------------------------------------
                                                                                  (21,623,781)       (16,637,310)        (3,464,623)
                                                                               -----------------------------------------------------

Investing activities
          Purchase of short-term investments                                      (90,093,497)       (28,301,236)        (8,571,098)
          Redemption of short-term investments                                     81,077,529         23,191,626               --
          Payment of expenses relating to the Novacor acquisition                  (1,684,689)              --                 --
          Purchase of capital assets                                                 (902,398)          (246,620)          (123,445)
          Reduction in collateral pledged for capital lease                           150,931            140,197            266,556
                                                                                ----------------------------------------------------
                                                                                  (11,452,124)        (5,216,033)        (8,427,987)
                                                                                ----------------------------------------------------
Financing activities
          Capital lease repayments                                                   (140,195)          (130,227)          (125,795)
          Issuance of common shares through public offering                        15,331,875         27,616,299               --
          Payment of expenses relating to the issue of common shares                 (199,133)        (1,068,192)              --
          Issuance of preferred shares                                             29,612,000               --                 --
          Issuance of common shares through exercise of options                       116,147             42,411               --
          Issuance of common shares through exercise of warrants                      765,054            800,510               --
          Net funds received from the issuance of special warrants                       --                 --           12,880,431
                                                                                ----------------------------------------------------

                                                                                   45,485,748         27,260,801         12,754,636
                                                                                ----------------------------------------------------
Effect of exchange rate changes on cash and cash                                      245,307               --                 --
          equivalents                                                           ----------------------------------------------------

Increase in cash and cash equivalents for the year                                 12,655,150          5,407,458            862,026

Cash and cash equivalents beginning of the year                                    10,969,399          5,561,941          4,699,915
                                                                                ----------------------------------------------------

Cash and cash equivalents end of the year                                        $ 23,624,549       $ 10,969,399       $  5,561,941
                                                                                ===================================================



                     (The accompanying notes are an integral part of these consolidated financial statements.)
</TABLE>






                                      F-4
<PAGE>


WORLD HEART CORPORATION
Notes to the Consolidated Financial Statements
December 31, 2000
--------------------------------------------------------------------------------



1.  Significant Accounting Policies

(a)  Basis of presentation

These  consolidated  financial  statements  have been  prepared by management in
accordance with accounting  principles  generally accepted in Canada (GAAP), and
include  all  assets,   liabilities,   revenues  and  expenses  of  World  Heart
Corporation  (Corporation or WorldHeart) and its wholly owned  subsidiary  World
Heart Inc.

These  principles  also  conform  in  all  material   respects  with  accounting
principles generally accepted in the United States (US GAAP) except as described
in Note 19.

(b)  Nature of operations

The Corporation  develops  artificial heart  technologies  through operations in
Oakland,  California and Ottawa, Canada.  WorldHeart is currently focused on two
products,  Novacor(R) LVAS (Novacor LVAS) and the HeartSaver  Ventriculer Assist
Device  (HeartSaver).  The  Corporation  is considered to be in the  development
stage and has not generated significant revenues from operations to date.

The  HeartSaver is being  developed from licensed  artificial  heart and related
technologies  developed  by the  Cardiovascular  Devices  Division  (CVD) of the
Ottawa Heart Institute  Research  Corporation.  On July 11, 1996, with effect at
April 1,  1996,  the  Corporation  entered  into a research  agreement  with CVD
(Research  Agreement)  under which the Corporation  agreed to fund a substantial
portion of CVD's remaining research efforts relating HeartSaver artificial heart
technology,  and  all of the  costs  related  to  the  commercialization  of the
technology.  In exchange,  the Corporation has acquired joint ownership with CVD
of any technology arising from CVD's research pursuant to the Research Agreement
after  May  15,  1996.  CVD  has  also  granted  the  Corporation  an  exclusive
twenty-five  year  license to market  the  product  and  certain  other  related
technologies for an initial license fee of $200,000 and royalties.

On June 30, 2000 the  Corporation  acquired  Edwards  Novacor LLC (Novacor) from
Edwards Lifesciences LLC (Edwards). As a result, WorldHeart is now manufacturing
and  distributing   the  Novacor  LVAS.  The  Corporation   sells  this  product
internationally, with the exception of the United States, through Edwards.

(c)  Use of estimates

The  preparation  of  financial  statements  in  conformity  with GAAP  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 dates of the financial  statements and the reported  amounts of revenues and
expenses  during the reporting  periods.  Actual results could differ from those
estimates.

(d) Cash equivalents and short-term investments

Cash  equivalents  are defined as highly liquid  investments  with maturities at
acquisition of three months or less. Short-term investments are those with terms
to  maturity  in  excess  of three  months  but less  than  one  year.  All cash
equivalents and short-term investments are classified as available for sale.
<PAGE>


WORLD HEART CORPORATION
Notes to the Consolidated Financial Statements
December 31, 2000
--------------------------------------------------------------------------------



(e)  Inventory

Inventory  of raw  materials  and work in  progress  is  valued  at the lower of
average cost and  replacement  cost.  Finished  goods are valued at the lower of
average cost and net realizable value.

(f)  Investment tax credits

Investment tax credits,  which are earned as a result of qualifying research and
development  expenditures,  are recognized  when the  expenditures  are made and
their  realization  is reasonably  assured,  and are applied to reduce costs and
expenses in the year.

(g)  Capital assets

Capital  assets  are  recorded  at  cost.   Depreciation  and  amortization  are
calculated using the following rates and bases:

     Furniture and fixtures                       20% declining balance
     Computer equipment and software              30% declining balance
     Manufacturing  and research  equipment       20% declining balance
     Leased  equipment                            Straight-line over the lease
                                                  term
     Leasehold improvements                       Straight-line over the lease
                                                  term

(h)  Goodwill and other intangible assets

Goodwill and intangible assets are amortized on a straight-line basis.  Goodwill
is amortized over its estimated useful life of 3 years. Other intangible assets,
consisting of purchased  technology,  patents,  trademarks and other  identified
rights,  are amortized over their legal or estimated useful lives,  whichever is
shorter, which generally ranges from 3 to 5 years.

The Corporation's policy is to review the carrying amounts of goodwill and other
intangible assets whenever events or changes in circumstances  indicate that the
carrying amount of an asset may not be recoverable. Such events or circumstances
might include a significant  decline in market share,  a significant  decline in
profits, rapid changes in technology,  significant litigation or other items. In
evaluating  the   recoverability  of  goodwill  and  other  intangible   assets,
management's  policy is to compare the carrying  amounts of such assets with the
undiscounted  estimated  future operating cash flows. In the event an impairment
exists,  an  impairment  charge would be  determined  by comparing  the carrying
amounts of the asset to the applicable undiscounted estimated future cash flows.
In addition,  the remaining  amortization period for the impaired asset would be
reassessed  and revised if necessary.  Management  does not believe the carrying
amounts of goodwill  and other  intangible  assets are  impaired at December 31,
2000.

(i)  Income taxes

Income taxes are  provided for using the  liability  method  whereby  future tax
assets and liabilities are recognized  using current tax rates on the difference
between the financial statement carrying amounts and the respective tax basis of
assets and liabilities.
<PAGE>


WORLD HEART CORPORATION
Notes to the Consolidated Financial Statements
December 31, 2000
--------------------------------------------------------------------------------



(j)  Common stock

Common  stock  is  recorded  as the net  proceeds  received  on  issuance  after
deducting all share issue costs.

(k)  Revenue recognition

Revenue from product sales is recognized when all of the following  criteria are
met: persuasive evidence of an agreement exists, the products have been shipped,
the price is fixed and  determinable and collection is reasonably  assured.  The
Corporation provides for returns based on prior experience.

(l) Stock-based compensation

No  compensation  expense is recognized  when capital stock or stock options are
issued to employees.  Any  consideration  paid by employees on exercise of stock
options or purchase of capital stock is credited to share capital.

(m)  Research and development costs

Research costs,  including  research  performed under contract by third parties,
are  expensed as  incurred.  Development  costs are also  generally  expensed as
incurred  unless  such  costs meet the  criteria  under  GAAP for  deferral  and
amortization.  To qualify for  deferral,  the costs must relate to a technically
feasible,  identifiable  product  that the  Corporation  intends to produce  and
market,  there  must  be a  clearly  defined  market  for  the  product  and the
Corporation  must have the resources,  or access to the resources,  necessary to
complete the development.  The Corporation has not deferred any such development
costs to date.

(n)  Foreign currency translation

Monetary assets and liabilities denominated in foreign currencies are translated
into Canadian  dollars at exchange  rates  prevailing at the balance sheet date,
except for  foreign  currency  denominated  monetary  items that have a fixed or
ascertainable  life extending  beyond the end of the following  fiscal year. For
such  items,  any  exchange  gain or loss is  deferred  and  amortized  over the
remaining  life  of the  monetary  item.  Non-monetary  items  and  any  related
amortization  of such items are  translated  at the rates of  exchange in effect
when the assets were  acquired or  obligations  occurred.  All other  income and
expense items are  translated at average  exchange rates  prevailing  during the
year. Exchange gains and losses are included in earnings.

Translation  of the financial  statements of integrated  foreign  operations are
translated in accordance with the policies noted above.
<PAGE>


WORLD HEART CORPORATION
Notes to the Consolidated Financial Statements
December 31, 2000
--------------------------------------------------------------------------------



2.  Acquisition


The  Corporation  acquired  Novacor from Edwards for a total  purchase  price of
approximately  $62.5  million,  consisting of $58.9 million  Series A cumulative
participating  preferred  shares  (Series A shares) of World  Heart  Inc.,  plus
expenses  related  to the  transaction  of $3.6  million.  The  acquisition  was
accounted  for using the purchase  method and,  therefore,  Novacor's  operating
results have been included in the  consolidated  financial  statements  from the
date of acquisition.

The allocation of the purchase  price is based on an  independent  valuation and
was allocated among the identifiable tangible and intangible assets based on the
fair market value of those assets as follows:

      Consideration given                           $   62,485,000
                                                 ---------------------

      Fair value of identifiable net
       assets acquired:
      Net tangible assets                               15,519,000
      Purchased technology                              17,043,000
      Other intangible assets                           18,255,000
      Future income taxes                              (10,273,000)
                                                 ---------------------

                                                        40,544,000
                                                 ---------------------

                Goodwill                             $  21,941,000
                                                 ---------------------



Purchased  technology  was valued using a risk adjusted  cash flow model,  under
which future cash flows were  discounted  taking into account  risks  related to
existing and future  markets and an  assessment  of the life  expectancy  of the
technology.  Other intangible  assets consist of Novacor's work force,  customer
base,  patents  and  trademarks.  The  excess  of the  purchase  price  over the
identifiable assets was allocated to goodwill.

The following table presents pro-forma financial information for the years ended
December 31, 2000 and 1999 as though the acquisition of Novacor had occurred at
the beginning of the year ended December 31, 1999.

                                                                     Year ended
                                                 Year Ended         December 31,
                                              December 31, 2000        1999
                                              ----------------------------------
                                                          (Unaudited)

Total revenue                                   $  9,938,000       $ 15,222,000
Loss before income taxes                          58,490,000         64,396,000
Net loss for the year                             58,490,000         54,123,000

Basic and diluted loss per share                $      (3.93)      $      (4.02)
<PAGE>


WORLD HEART CORPORATION
Notes to the Consolidated Financial Statements
December 31, 2000
--------------------------------------------------------------------------------



3.  Cash and Cash Equivalents and Short-Term Investments

The Corporation's cash equivalents and short-term  investments consist of highly
liquid,  highly  rated  financial   instruments.   These  cash  equivalents  and
short-term  investments are held with four Canadian  financial  institutions and
represent the Corporation's  only significant  concentration of credit risk. The
Corporation   has   established   guidelines   relative   to   credit   ratings,
diversification,  and  terms to  maturity  designed  to  mitigate  this risk and
provide safety and liquidity:

<TABLE>

                                                                          2000                                    1999
                                                          -----------------------------------      ---------------------------------
                                                            Cash and               Short-            Cash and              Short-
                                                               Cash                 Term                Cash                Term
                                                            Equivalents          Investments         Equivalents         Investments
                                                          -----------------------------------      ---------------------------------

<S>                                                         <C>                 <C>                 <C>                 <C>
Cash                                                      $  2,772,693          $      --           $   845,922         $       --

Asset backed notes held
  with financial institutions                               18,566,191           11,796,841          10,500,724            4,192,961
Corporate securities                                         2,511,981           10,899,836                  --            9,487,747
                                                          -----------------------------------      ---------------------------------

                                                            23,850,865           22,696,677          11,346,646           13,680,708

Cash pledged as collateral
  for capital lease                                           (226,316)                --              (377,247)                 --
                                                          -----------------------------------      ---------------------------------

                                                          $ 23,624,549          $22,696,677         $10,969,399         $ 13,680,708
                                                          ===================================      =================================
</TABLE>

4.  Inventory

                                                  2000                 1999
                                               ---------------------------------
Raw materials                                  $4,614,224           $       --
Work in progress                                2,742,580                   --
Finished goods                                  2,610,069                   --
                                               ---------------------------------

                                               $9,966,873           $       --
                                               =================================
<PAGE>


WORLD HEART CORPORATION
Notes to the Consolidated Financial Statements
December 31, 2000
--------------------------------------------------------------------------------



5.       Capital Assets
                                                            2000
                                             -----------------------------------
                                                          Accumulated   Net Book
                                                Cost     Amortization    Value
                                             -----------------------------------


Furniture and fixtures                      $  706,579   $  173,633   $  532,946
Computer equipment and software              1,329,781      286,404    1,043,377
Manufacturing and research equipment         5,500,269    1,135,153    4,365,116
Leasehold improvements                         735,685      413,580      322,105
                                             -----------------------------------
                                           $ 8,272,314   $2,008,770   $6,263,544
                                             ===================================


                                                            1999
                                             -----------------------------------
                                                          Accumulated   Net Book
                                                Cost     Amortization    Value
                                             -----------------------------------

Furniture and fixtures                       $ 270,295    $ 106,702   $ 163,593
Computer equipment and software                198,239       82,058      116,181
Manufacturing and research equipment           802,544      337,481     465,063
Leasehold improvements                         343,438      248,556      94,882
                                           -------------------------------------
                                           $ 1,614,516    $ 774,797   $  839,719
                                           =====================================



6.     Goodwill and Other Intangible Assets
<TABLE>
<CAPTION>

                                                                    2000                             1999
                                       ---------------  -------------------------------------  ----------
                                                             Accumulated       Net Book          Net Book
                                                 Cost        Amortization        Value              Value
                                       ---------------  -------------------------------------  ----------
     <S>                                <C>               <C>              <C>                 <C>
     Purchased technology               $ 17,043,321      $ 2,617,932      $ 14,425,389        $       -
     Other intangible assets              18,454,585        3,050,925        15,403,664          170,000
     Goodwill                             21,941,116        1,828,776        20,112,340                -
                                       ---------------  -------------------------------------  ----------

                                        $ 57,439,022      $ 7,497,628      $ 49,941,394        $ 170,000
                                       ===============  =====================================  ==========
</TABLE>

The cost of other  intangible  assets at  December  31,  1999 was  $200,000  and
accumulated amortization was $30,000.



<PAGE>


WORLD HEART CORPORATION
Notes to the Consolidated Financial Statements
December 31, 2000
--------------------------------------------------------------------------------




7.     Preferred Shares

(a)    Authorized

Authorized preferred stock of the Corporation consists of an unlimited number of
shares issuable in series.

(b)    Issued

On June 30, 2000 the Corporation issued redeemable, convertible preferred shares
for US$20  million that are  convertible  at the holder's  option after June 30,
2006 into  1,374,570  common  shares,  plus  additional  common  shares  for the
accumulated but unpaid  dividends to the date of conversion,  without payment of
additional consideration.  These preferred shares are non-voting except that the
holder can elect one director of the Corporation.  These shares are callable for
cash  at  the  face  amount  plus   accumulated  but  unpaid  dividends  at  the
Corporation's  option at any time up to June 30,  2007,  at which  time they are
mandatorily  redeemable  for the face amount of US$20  million plus  accumulated
dividends. Dividends accumulate at 5% per year for the first three years and 10%
per year for years four through seven.

Also  on  June  30,  2000,  World  Heart  Inc.  issued  redeemable,   cumulative
participating  Series A preferred  shares in connection  with the  Corporation's
acquisition  of  Novacor.  These  Series  A  shares  are  non-voting.  Dividends
accumulate  at 4% per year on the  subscription  price of US$58  million for the
first three years and  accumulate at 7% per year  thereafter  until  maturity on
June 30, 2015 at which time they are mandatorily  redeemable for the face amount
of US$58  million plus  accumulated  dividends.  The Series A  shareholders  are
entitled to receive 25% of any dividends declared to the common  shareholders of
World Heart Inc. The shares are redeemable at the Corporation's  option for cash
plus  accumulated  but unpaid  dividends  at any time after three  years.  For a
one-year period commencing June 30, 2002, the owners of the Series A shares will
have the right to put the Series A shares to the  Corporation  in  exchange  for
4,981,128 of the Corporation's  common shares.  This conversion right is subject
to dilution  protection  should the Corporation  issue shares or options at less
than fair market value.

The convertible preferred shares and the Series A shares (together the Preferred
Shares) are accounted for in accordance  with their  substance and are presented
in the  financial  statements as their debt and equity  components,  measured at
their respective fair values at the time of issue. The debt components have been
calculated at the present value of the required dividend payments  discounted at
12%,  being the  estimated  interest  rate that  would have been  applicable  to
non-convertible  debt at the time the  Preferred  Shares were  issued.  Interest
expense is determined on the debt components as the amount necessary to increase
the debt components to their face amount at maturity.

The Preferred  Shares carry a preference upon  liquidation of the Corporation in
an amount equal to the par value plus  accumulated but unpaid  dividends,  after
which the  Preferred  Shares share  ratably with the common  shares.  The equity
component is shown as additional paid-in capital.


<PAGE>


WORLD HEART CORPORATION
Notes to the Consolidated Financial Statements
December 31, 2000
--------------------------------------------------------------------------------





8.     Common Stock

(a)    Authorized

Authorized  common stock of the Corporation  consists of an unlimited  number of
shares.

(b)     Issued

On June 3, 1998 the Corporation  issued  2,093,000  special  warrants  through a
private placement for net proceeds of $12,880,431 after deducting issue costs of
$1,351,969.  On July 23,  1998,  these  special  warrants  were  converted  into
2,093,000 common shares for no additional consideration.

In May 1999, the Corporation  issued 1,780,548 common shares for net proceeds of
$26,548,107, after deducting issue costs of $2,830,935.

On March 17, 2000, the Corporation issued 850,000 common shares for net proceeds
of $15,132,742, after deducting issue costs of $199,133.

9.      Employee Stock Option Plan

The Corporation has an employee stock option plan (ESOP).  The maximum number of
shares that may be  reserved  and set aside  under  options to eligible  persons
pursuant to the ESOP may not exceed 1,450,000 common shares.  The maximum number
of common shares at any time  available for issuance under the ESOP, or pursuant
to other outstanding  options, to any one person may not exceed 2% of the common
shares  then issued and  outstanding.  The ESOP is  administered  by a committee
appointed by the Board of Directors.  The option  exercise price for all options
issued  under the ESOP is based on the fair  market  value on the date of grant.
The options  generally vest in equal portions over either a five-year  period or
three-year period and must be exercised within a four-year period from each date
of vesting.

During 2000, the Corporation  granted to executives options outside the ESOP for
40,000  common  shares.  The options vest ratably over one year from the date of
grant or over a three year period.


<PAGE>


WORLD HEART CORPORATION
Notes to the Consolidated Financial Statements
December 31, 2000
--------------------------------------------------------------------------------





Information  with respect to stock option activity for 2000, 1999 and 1998 is as
follows:



                                           Number of         Weighted average
                                            shares           exercise price
                                          ----------         ----------------

Outstanding at December 31, 1997           225,500             $ 6.80
Granted                                    192,614               8.63
Cancelled                                 (161,729)              6.96
                                          --------

Outstanding at December 31, 1998           256,385               8.08
Granted                                    326,281              12.63
Exercised                                   (4,794)              8.85
Cancelled                                  (34,900)             11.02
                                          --------

Outstanding at December 31, 1999           542,972              10.62
Granted                                    593,193              17.19
Exercised                                  (12,282)              9.46
Cancelled                                 (303,777)             15.84
                                          --------

Outstanding at December 31, 2000           820,106              13.18
                                          ========



Information with respect to stock options outstanding at December 31, 2000 is as
follows:

     Range of                  Number        Weighted average   Weighted average
  exercise price            outstanding      exercise price      life in years
-----------------           -----------      ----------------   ----------------


$           6.80            129,500              $6.80               3.5
            9.25             77,259               9.25               4.5
   9.80 to 12.50            110,584              11.68               4.6
  12.60 to 15.00            166,417              12.86                 5
  15.05 to 17.90            318,137              17.01               6.4
  18.30 to 21.83             18,209              20.52               5.9
                        -----------
                            820,106              13.18               5.2
                        ===========

The outstanding  options expire between  December 17, 2001 and December 8, 2009.
At December  31,  2000,  184,683  (1999 - 89,103,  1998 - 44,400)  options  were
exercisable at an exercise price range of $6.80 to $20.60 and a weighted average
exercise price of $9.68.


<PAGE>


WORLD HEART CORPORATION
Notes to the Consolidated Financial Statements
December 31, 2000
--------------------------------------------------------------------------------





10.      Outstanding Warrants

As additional  consideration  to the underwriters of the initial public offering
of the Corporation's  shares, the Corporation  granted the Canadian  Underwriter
non-assignable  options  entitling the Canadian  Underwriter to acquire up to an
aggregate of 75,000 common shares at an exercise  price of $7.48.  These options
became  exercisable on December 9, 1997 and expire on December 9, 2001.  None of
these options have been exercised as at December 31, 2000.

The  Corporation  granted the US Underwriter  warrants to purchase up to 200,000
common  shares at an exercise  price of US$8.25 per share  during the  four-year
period  commencing  December 17, 1997.  During 1999 and 2000, the US Underwriter
exercised 40,729 and 10,000 warrants,  respectively,  in cashless  exercises for
15,177  and  2,326  shares.  As at  December  31,  2000,  149,271  warrants  are
outstanding.

As  consideration  for  allowing a private  placement of special  warrants,  the
Corporation  granted options  entitling the US Underwriter of the initial public
offering to acquire up to 35,000 common  shares at an exercise  price of US$8.25
per share.  These options are exercisable  immediately and expire on December 9,
2001. In addition the Canadian agents for the private placement received 209,300
compensation warrants, each of which entitled them to acquire without additional
payment an option to acquire one common share of the  Corporation  at a price of
$7.48 per share until  September 1, 2000.  During  1999,  107,020 of the options
were  exercised for proceeds of $800,510 and the balance  outstanding of 102,280
of the Canadian agents' options were exercised in 2000 for proceeds of $765,054.

The Corporation granted a Canadian Underwriter 85,000 options to purchase common
shares as additional consideration for the share offering completed on March 17,
2000.  The  options  are  exercisable  at any time prior to March 17, 2002 at an
exercise price of $20.40 per share.

11.      Earnings Per Share

For all of the years  presented,  diluted  loss per share  equals basic loss per
share due to the anti-dilutive effect of convertible preferred shares,  employee
stock options and warrants.  These instruments  could  potentially  dilute basic
earnings per share in the future by being converted into common shares:
<TABLE>
<CAPTION>

                                                  Number of common shares to be issued
                                                         on exercise or conversion
                                                     2000             1999           1998
                                           ---------------  ---------------  -------------
<S>                                             <C>                <C>            <C>
Convertible preferred shares                    6,355,698                -              -
Employee stock options                            820,106          542,972        256,385
Warrants                                          344,271          371,551        519,300
                                           ---------------  ---------------  -------------

Total potentially dilutive instruments          7,520,075          914,523        775,685
                                           ===============  ===============  =============
</TABLE>


<PAGE>


WORLD HEART CORPORATION
Notes to the Consolidated Financial Statements
December 31, 2000
--------------------------------------------------------------------------------





12.      Income Taxes

The Corporation operates in several tax jurisdictions.  Its income is subject to
varying rates of tax and losses incurred in one  jurisdiction  cannot be used to
offset  income  taxes  payable in  another.  A  reconciliation  of the  combined
Canadian federal and provincial income tax rate with the Corporation's effective
tax rate is as follows:
<TABLE>
<CAPTION>

                                                     Year ended             Year ended            Year ended
                                                     December 31,           December 31,          December 31,
                                                            2000                   1999                  1998
                                                     --------------         --------------        -------------
<S>                                                  <C>                    <C>                   <C>
Domestic loss                                        $ (16,600,519)         $ (17,442,741)        $ (3,665,269)
United States' loss                                    (18,796,828)                     -                    -
                                                     --------------         --------------        -------------

Loss before income taxes                             $ (35,397,347)         $ (17,442,741)        $ (3,665,269)
                                                     ==============         ==============        =============

Expected statutory rate                                      43.95%                 44.62%               44.62%
Expected recovery of income tax                      $ (15,557,000)          $ (7,779,000)        $ (1,615,071)
Effect of foreign tax rate differences                     546,000                      -                    -
Permanent differences                                    1,359,000                 97,000               96,361
Provincial income tax incentives                          (571,000)              (352,000)                   -
Change in valuation allowance                            8,010,000              8,034,000            1,518,710
Effect of changes in SR&ED carryforwards                   368,000                      -                    -
Effect of tax rate changes                                 283,000                      -                    -
Effect of exchange rate differences                         19,000                      -                    -
                                                     --------------         --------------        -------------

Recovery of income taxes                             $  (5,543,000)                     -                    -
                                                     ==============         ==============        =============
</TABLE>

The Canadian  statutory income tax rate of 43.95% is comprised of federal income
tax at 29.13% and provincial  income tax at 14.83%.  For the year ended December
31, 2000,  the recovery of income taxes  relates  entirely to the United  States
operations.  For the year ended December 31, 2000, permanent  differences relate
primarily to imputed interest expense on the Preferred Shares.


<PAGE>


WORLD HEART CORPORATION
Notes to the Consolidated Financial Statements
December 31, 2000
--------------------------------------------------------------------------------





The primary temporary differences affecting future taxes are approximately as
follows:

                                                2000                    1999
                                        ---------------          ---------------

Future tax assets:
SR&ED expenditures                       $ 15,590,000            $    8,990,000
Net operating losses                        9,770,000                 6,690,000
Investment tax credits                      4,040,000                 2,440,000
Share issue costs                           3,230,000                 3,190,000
Asset basis differences                       600,000                         -
                                        ---------------          ---------------

                                           33,230,000                21,310,000
Less: valuation allowance                 (29,320,000)              (21,310,000)
                                        ---------------          ---------------

                                            3,910,000                         -
Future tax liabilities:
Asset basis differences                    (8,740,000)                        -
                                        ---------------          ---------------

Net future income tax liability          $ (4,830,000)           $            -
                                        ==============           ===============


As at December 31, 2000, the Corporation has unclaimed  Scientific  Research and
Experimental Development (SR&ED) expenditures, income tax loss carryforwards and
investment  tax  credits.  The  unclaimed  amounts and their expiry dates are as
follows:
<TABLE>
<CAPTION>

                                                                2000                1999
                                                            ------------        ------------
<S>                                                         <C>                 <C>
SR&ED expenditures (carried forward without expiry)         $ 35,500,000        $ 20,000,000
Income tax loss carryforwards:
    Federal (Canada)      (expire 2003-2007)                  14,300,000          12,000,000
    Provincial            (expire 2003-2007)                  25,800,000          20,000,000
    United States         (expire 2010-2015)                   9,600,000                   -
Investment tax credits    (expire 2006-2010)                   7,200,000           4,400,000

</TABLE>

<PAGE>


WORLD HEART CORPORATION
Notes to the Consolidated Financial Statements
December 31, 2000
--------------------------------------------------------------------------------





13.  Related Party Transactions

CVD is  considered  a related  party by virtue of the fact that the Chairman and
Chief Scientific Officer of the Corporation is also the Director of CVD.

The  following  related  party  amounts are included in amounts  receivable  and
accounts payable and accrued liabilities:
<TABLE>
<CAPTION>

                                                       2000              1999                 1998
                                              ------------------- -----------------  ----------------------
            <S>                                  <C>                <C>                   <C>
            Due from CVD                         $  188,276         $  175,454            $  164,107
                                              =================== =================  ======================

            Due to CVD                           $  443,089         $  218,510            $  491,770
                                              =================== =================  ======================
</TABLE>

During the year ended December 31, 2000, the Corporation paid $1,000,000 (1999 -
$7,600,000,  1998 - $400,000) for research and  development  fees to CVD under a
Research  Agreement  entered into by the two  organizations.  In  addition,  the
Corporation paid $150,000 (1999 - $150,000,  1998 - $225,000) to CVD relating to
the research chair under the Research Agreement.

Also during the year 2000, the  Corporation  incurred salary expense of $670,271
(1999 -  $2,509,055,  1998 -  $3,294,295)  relating to employees  that have been
seconded by the  Corporation to CVD.  These funds were  reimbursed by CVD to the
Corporation.

14.  Contingencies and Commitments

(a)  Research Agreement

The  Corporation's  research  funding  under the  Research  Agreement  was $17.1
million for the period April 1, 1996 to December 31, 2000.  CVD's research costs
for the same period have been estimated at $29.3 million (unaudited).

The Corporation has agreed to fund, to the extent  reasonable (and to the extent
funding is not  available  from other  sources),  any  additional  research  and
development  costs incurred by CVD in connection with such product  development,
and to the extent reasonable, the costs of the product's commercialization.  The
Research Agreement provides that any funding for research and development of the
HeartSaver  provided  by the  Corporation  in  excess  of $33  million  will  be
creditable  against any future CVD royalty  entitlement  over a period up to ten
years,  with  interest  at 8% per annum  from the year in which  such  excess is
provided.  The Research Agreement  stipulates that the parties will negotiate to
establish payment terms for repayment of any remaining balance, provided that if
agreement as to such payment  terms is not reached then such  remaining  balance
shall become due and repayable by CVD within twelve months  following the end of
the respective ten-year period.

The  Corporation  has also  agreed  with CVD to fund  $150,000  per year for the
period  from  July 1,  1996 to June 30,  2001 for a  research  chair in  medical
devices at the University of Ottawa Heart Institute.


<PAGE>


WORLD HEART CORPORATION
Notes to the Consolidated Financial Statements
December 31, 2000
--------------------------------------------------------------------------------





(b)  Legal Proceedings

The Corporation filed a complaint against Abiomed,  Inc. in the Federal District
Court for the District of Delaware on January 20, 1998.  The complaint was based
on alleged breach of contract,  misappropriation of trade secrets, conversion of
trade secrets and patent infringement relating to the Corporation's patented TET
technology. Abiomed, Inc. filed a motion to include a counterclaim alleging that
the  Corporation  misappropriated  its trade  secrets.  Prior to the trial,  the
Corporation dropped its claim against Abiomed Inc. for patent  infringement.  On
February  4, 2000,  the trial of this suit  concluded  with the jury  finding in
favour of Abiomed, Inc. The Corporation does not plan to take any further action
at this time.

(c)  Distribution and Supply Agreements with Edwards Lifesciences

The  Corporation  has entered into a distribution  agreement  (the  Distribution
Agreement)  with Edwards  whereby  Edwards will be the sole  distributor  of the
Corporation's  heart assist and heart replacement  products for a period of five
years  commencing  July 1,  2000.  As a result  of the  Distribution  Agreement,
WorldHeart is committed to paying a minimum of US$2 million  annually to Edwards
in guaranteed  gross margin on sales.  The  Corporation  has also entered into a
supply  agreement  with Edwards  whereby  Edwards  will be the sole  supplier of
certain  components  to the heart assist and heart  replacement  products of the
Corporation for a period of five years.

(d)  Operating Leases

The Corporation is committed to minimum lease payments for office facilities and
equipment as follows:

     Year ended December 31, 2001          $ 1,060,100
                             2002              377,500
                             2002               38,700
                             2003               14,400

15.  Capital Lease Obligation

In  December  1997,  the  Corporation  entered  into  a  capital  lease  with  a
sixty-five-month  term with  interest  charged at a  floating  rate equal to the
prevailing rate for Bankers' Acceptances plus 3%.

The Corporation has provided a $419,130 letter of credit in favour of the lessor
to cover the term of the lease (1999 - $575,450, 1998 - $684,656). As collateral
for this  letter  of  credit,  the  Corporation  has  pledged  $226,316  (1999 -
$377,247, 1998 - $517,444) in cash and cash equivalents.

The minimum  lease  payments,  prior to any  adjustment  for changes in interest
rates, are as follows:

     Year ended December 31, 2001          $   173,796
                             2002              173,796
                             2003               64,923
                                           -----------
                                               412,515
     Less: amount representing interest        (35,268)
                                           -----------

    Capital lease obligation               $   377,247
                                           ===========

<PAGE>


WORLD HEART CORPORATION
Notes to the Consolidated Financial Statements
December 31, 2000
--------------------------------------------------------------------------------





16.  Net Change in Operating Components of Working Capital

The net change in operating components of working capital is comprised of:
<TABLE>
<CAPTION>

                                                             Year ended           Year ended             Year ended
                                                           December 31,          December 31,           December 31,
                                                                   2000                 1999                   1998
                                                       ----------------------------------------------------------------------
<S>                                                       <C>                     <C>                    <C>
Accounts receivable and other                             $ (2,871,227)           $  (214,013)           $     (2,565)
Prepaid expenses                                              (143,723)              (110,350)                (39,796)
Inventory                                                    1,580,137                      -                       -
Accounts payable and accrued liabilities                     2,783,026                453,468                (110,167)
Accrued compensation                                           672,981                329,388                  48,692
                                                       ----------------------------------------------------------------------

                                                          $  2,021,194            $   458,493             $  (103,836)
                                                       ======================================================================
</TABLE>

17.  Segmented  Information

Operating  segments  are  defined as  components  of an  enterprise  about which
separate financial  information is available that is evaluated  regularly by the
Corporation's  chief  decision  maker in deciding how to allocate  resources and
assess  performance.  The  Corporation's  chief  decision  maker  is  the  Chief
Executive Office.

The Corporation's  reportable segments are its commercial  operations related to
the sale of the Novacor LVAS and related components and research and development
focused  mainly  on  development  of the  HeartSaver.  On  June  30,  2000,  the
Corporation  acquired  Novacor  whose  commercial  operations  now  comprise the
Corporation's commercial operations segment.

The accounting policies of the Corporation's  operating segments are the same as
those described in Note 1.


<PAGE>


WORLD HEART CORPORATION
Notes to the Consolidated Financial Statements
December 31, 2000
--------------------------------------------------------------------------------





The following  presents segment  operating  results for the year ending December
31, 2000 and identifiable long-lived assets as at December 31, 2000:
<TABLE>
<CAPTION>

                                                        Commercial             Research and
                                                        operations             development          Total
                                                      -------------            ------------    --------------

<S>                                                   <C>                      <C>             <C>
Revenue                                               $  4,674,485                    -        $   4,674,485
                                                      -------------            ------------    --------------
Cost of goods sold
          Direct materials and labour                    2,443,610                    -            2,443,610
          Overheard and other                            4,825,735                    -            4,825,735
                                                      -------------            ------------    --------------
                                                         7,269,345                    -            7,269,345
                                                      -------------            ------------    --------------


Gross margin                                            (2,594,860)                   -           (2,594,860)
                                                      -------------            ------------    --------------


Expenses
          Selling, general and administrative            1,894,622               4,865,655        6,760,277
          Research and development                               -              18,395,885       18,395,885
                                                      -------------            ------------    --------------

                                                         1,894,622              23,261,540       25,156,162
                                                      -------------            ------------    --------------

Loss before the undernoted                            $ (4,489,482)           $(23,261,540)     (27,751,022)
                                                      =============           =============

          Amortization of intangibles                                                            (7,491,865)
          Other income (expenses), net                                                             (154,460)
          Recovery of future income taxes                                                         5,542,960
                                                                                               --------------

Net loss for the year                                                                          $(29,854,387)
                                                                                               =============

Long-lived assets                                     $ 22,183,422            $ 34,021,516      $56,204,938
                                                      ============            ============     =============

Additions to long-lived assets                        $ 22,183,422            $ 33,011,79       $55,195,219
                                                      ============            ============     =============

</TABLE>

<PAGE>


WORLD HEART CORPORATION
Notes to the Consolidated Financial Statements
December 31, 2000
--------------------------------------------------------------------------------





The following  geographic area data includes  revenue based on product  shipment
destination and long-lived  assets based on physical  location.  The Corporation
has a location in Canada and the United States:

                                                        Long-lived
                           Revenue                        assets
                       -------------------------------------------------

Canada                    $        93,963             $   5,241,966
United States                   2,712,946                50,962,972
Netherlands                     1,867,576                         -
                       -------------------------------------------------
                            $   4,674,485              $ 56,204,938
                       =================================================

During the year ended December 31, 2000, revenue included  $1,961,539  resulting
from sales to Edwards.

18.  Financial Instruments

Financial  instruments  recognized in the balance sheet consist of cash and cash
equivalents,  short-term  investments,  accounts receivable and other,  accounts
payable and accrued  liabilities and a capital lease.  The Corporation  does not
hold    or    issue    financial     instruments    for    trading     purposes.

The  Corporation   invests  the  majority  of  its  excess  cash  in  high-grade
instruments and diversifies the concentration of cash among different  financial
institutions.

(a)  Fair value

The Corporation  believes that the carrying values of its financial  instruments
other than the capital lease and the preferred  shares  approximates  their fair
values because of their short terms to maturity.  The Corporation  believes that
the carrying value of the capital lease obligation also  approximates fair value
because of its floating market rate of interest.  The Corporation  believes that
the carrying value of the preferred  shares also  approximates  fair value based
originally  on an  independent  valuation  and that  their  imputed  12% rate of
interest approximates market.

(b) Interest rate risk

The  Corporation  is subject to interest rate risks because of the short-term to
maturity of its cash  equivalents  and short-term  investments  and the floating
rate nature of its capital lease.

(c)  Foreign exchange risk

The Corporation  enters into various foreign  exchange  contracts to protect the
Corporation from the risk that the investments  held are not adversely  affected
by changes in currency exchange rates. These contracts are short-term in nature.

As at December 31, 2000,  the  Corporation  had  outstanding a foreign  exchange
forward  contract to sell US$4.1  million at an exchange  rate of US$1 for $1.54
maturing on January 10, 2001.  This  financial  instrument  has been recorded at
fair value at December 31, 2000 with the resultant gain of $165,712  recorded as
a component of other receivables in current assets.


<PAGE>


WORLD HEART CORPORATION
Notes to the Consolidated Financial Statements
December 31, 2000
--------------------------------------------------------------------------------




(d)  Credit risk

Financial   instruments   that   potentially   subject  the   Corporation  to  a
concentration of credit risk consist of accounts receivable. The Corporation has
a limited number of customers, all of which operate in the health care industry.
As at December 31, 2000 approximately 49% of the accounts receivable balance was
due from Edwards.  The Corporation  performs  ongoing credit  evaluations of its
customers'  financial condition and, generally,  requires no collateral from its
customers.   The  Corporation  maintains  an  allowance  for  doubtful  accounts
receivable  based  upon the  expected  collectability  of  accounts  receivable.

19.   United States Accounting Principles

The  consolidated  financial  statements  have been prepared in accordance  with
Canadian GAAP. These principles differ, as they affect the Company, for the year
ended December 31, 2000 in the following  material  respects from US GAAP. These
principles  did not differ from US GAAP in the years ended December 31, 1999 and
1998.  Additionally,  the statement of loss and cash flows, from inception,  are
presented below to conform with US GAAP disclosure  requirements for development
companies.

(a)  Balance sheets
<TABLE>
<CAPTION>

                                                              December 31,            December 31,
                                                                   2000                   1999
                                                           -------------------------------------------
<S>                                                        <C>                     <C>
ASSETS
Current assets                                             $     59,493,594        $   25,632,750
Cash pledged as collateral for capital lease                        226,316               377,247
Capital assets                                                    6,263,544               839,719
Goodwill and other intangible assets (1)                         42,188,399               170,000
                                                           -------------------------------------------
                                                            $   108,171,853        $   27,019,716
                                                           ===========================================

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities                                         $     8,466,534       $     2,030,759
Capital lease obligation                                            226,316               377,247
Deferred income taxes                                             5,066,840                     -
                                                           -------------------------------------------
                                                                 13,759,690             2,408,006
                                                           -------------------------------------------

Preferred shares (2)                                             92,671,602                     -
                                                           -------------------------------------------

SHAREHOLDERS' EQUITY
Common shares (4)                                               122,415,889           106,401,946
Accumulated deficit (3 & 4)                                    (120,675,328)          (81,790,236)
                                                           -------------------------------------------
                                                                  1,740,561            24,611,710
                                                           -------------------------------------------
                                                            $   108,171,853        $   27,019,716
                                                           ===========================================
</TABLE>


<PAGE>


WORLD HEART CORPORATION
Notes to the Consolidated Financial Statements
December 31, 2000
--------------------------------------------------------------------------------





(b)  Statements of loss for the year ended December 31, 2000 and from inception
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                                                   Period from
                                                                          Year ended              April 1, 1996 to
                                                                          December 31,             December 31,
                                                                            2000                      2000
                                                                       -------------------------------------------
<S>                                                                      <C>                      <C>
Net loss before income taxes in accordance with Canadian GAAP            $  (35,397,347)          $   (68,524,433)
Adjustments to reconcile to US GAAP:
Write-off of purchased in-process research                                   (9,036,448)               (9,036,448)
         and development (1)
Amortization of purchased in-process research and development  (1)            1,283,453                 1,283,453
Interest on preferred shares (2)                                              3,049,792                 3,049,792
Foreign exchange translation of preferred shares (3)                         (1,039,542)               (1,039,542)
Compensation expense adjustment for shares issued below
         IPO price (4)                                                                -               (48,663,150)
                                                                       -------------------------------------------
                                                                            (41,140,092)             (122,930,328)
Recovery of deferred income taxes                                             2,255,000                 2,255,000
                                                                       -------------------------------------------
Net loss in accordance with US GAAP                                         (38,885,092)             (120,675,328)
Accretion on preferred shares                                                (3,080,000)               (3,080,000)
                                                                       -------------------------------------------

Net loss applicable to common shareholders                                $ (41,965,092)           $ (123,755,328)
                                                                       ===========================================

Loss per common share
Weighted average number of common shares outstanding                        14,878,625
                                                                       ==================
Basic and diluted loss per common share                                         $(2.82)
                                                                       ==================
</TABLE>


<PAGE>


WORLD HEART CORPORATION
Notes to the Consolidated Financial Statements
December 31, 2000
--------------------------------------------------------------------------------




(c) Statement of cash flow from inception


                                                               Period from
                                                               April 1, 1996 to
                                                               December 31, 2000
                                                               -----------------

Cash provided from (used in) operating activities               $ (52,341,006)
Cash provided from (used in) investing activities                 (24,841,875)
Cash provided from (used in) financing activities                 100,807,430
                                                                --------------

Increase (decrease) in cash and cash equivalents for the period    23,624,549
Cash and cash equivalents, beginning of the period                          -
                                                                --------------
Cash and cash equivalents, end of the period                     $ 23,624,549
                                                                ==============


(d)      Footnotes

(1)  Under US GAAP acquired  in-process  research and development is required to
     be  expensed  if the  related  technology  has  not  reached  technological
     feasibility  and does not have an  alternative  future use.  Under Canadian
     GAAP this amount is  capitalized  and amortized  over its useful life.

(2)  Under US GAAP  mandatorily  redeemable  convertible  preferred  shares  are
     recorded as  mezzanine  financing  at their fair value on the date of issue
     and excluded from both shareholders'  equity and long-term debt.  Dividends
     are  accumulated  on these  shares at the  average  dividend  rate and this
     amount, together with the amount necessary to accrete the fair value to the
     redemption  price on  maturity,  are charged  directly to paid-in  capital.
     Under  Canadian GAAP these shares are treated as compound  instruments  and
     divided into their debt and equity  components based on their fair value at
     the time of issue and imputed  interest and  dividends  related to the debt
     component  are charged to earnings.

(3)  Under US GAAP all monetary  items  denominated  in foreign  currencies  are
     exchanged at the balance sheet rate with resulting exchange gains or losses
     included  in  income.  Under  Canadian  GAAP  exchange  gains or  losses on
     monetary  items with a fixed life are deferred and amortized  over the life
     of the item.

(4)  Under US GAAP,  the  difference  between the issue price and initial public
     offering (IPO) price of shares issued within a one-year period prior to the
     IPO is generally  accounted for as an expense and charged against  earnings
     for the period with a  corresponding  and equal amount  recorded as paid-in
     capital.  This difference of $48,663,150  increased the accumulated deficit
     and capital stock  reported for the period ended December 31, 1996 under US
     GAAP, with no difference reported in total shareholders'  equity.

(5)  Under US GAAP the Corporation's policy is to review the carrying amounts of
     goodwill  and  other  intangible  assets in a manner  consistent  with that
     described in note 1 (h), except that, in the event an impairment exists, an
     impairment  charge would be determined by comparing the carrying amounts of
     the asset to the applicable  estimated  future cash flows,  discounted at a
     risk-adjusted   interest   rate.

(6)  Under US GAAP net loss includes  depreciation and amortization  relating to
     capital assets and goodwill and other  intangible  assets of $1,210,715 and
     $6,208,412 respectively.


<PAGE>


WORLD HEART CORPORATION
Notes to the Consolidated Financial Statements
December 31, 2000
--------------------------------------------------------------------------------




(e)  Share based compensation

The  Corporation  has adopted the  disclosure-only  provisions  of  Statement of
Financial   Accounting   Standards   No.  123,   "Accounting   for  Stock  Based
Compensation"  (SFAS 123). The Corporation  applies Accounting  Principles Board
opinion No. 25,  "Accounting  for Stock Issued to Employees",  in accounting for
its stock option grants and accordingly,  because the exercise price of employee
stock  options  equals the market price of the  underlying  common shares on the
date of grant,  no  compensation  expense  has been  recognized  for grants made
during the period.

Had compensation costs been determined based on the fair value of options on the
date of grant,  consistent with the methodology  prescribed  under SFAS 123, the
Corporation's  net loss and loss per share would have increased to the following
pro-forma amounts:
<TABLE>
<CAPTION>

                                                  Year ended                Year ended              Year ended
                                                  December 31,              December 31,            December 31,
                                                     2000                      1999                    1998
                                               ---------------------------------------------------------------------
<S>                                             <C>                        <C>                   <C>
Net loss under US GAAP                          $ (38,885,092)             $ (17,442,741)        $    (3,665,269)
Estimated share based compensation costs             (877,224)                  (430,141)               (146,237)
                                               ---------------------------------------------------------------------

Pro forma net loss                                (39,762,316)               (17,827,882)             (3,811,506)
Accretion on preferred shares                      (3,080,000)                         -                       -
                                               ---------------------------------------------------------------------

Net loss applicable to common shareholders      $ (42,842,316)             $ (17,827,882)         $   (3,881,506)
                                               =====================================================================

Pro forma basic loss per share                  $       (2.88)             $       (1.33)                  (0.34)
                                               =====================================================================
</TABLE>


The  weighted  average  fair value of the options  issued  during the year ended
December  31,  2000 was $7.52 (1999 - $8.67,  1998 - $5.37).  This fair value of
each option granted  during 2000,  1999 and 1998 is estimated on the date of the
grant  using  the  Black-Scholes  model  with  the  following  weighted  average
assumptions:
                                      2000        1999         1998
                                      ----        ----         ----

Expected option life, in years           7           7            7
Volatility                             75%        66.6%        62.6%
Risk free interest rate                 6%           5%           5%
Dividend yield                         Nil         Nil           Nil
<PAGE>


WORLD HEART CORPORATION
Notes to the Consolidated Financial Statements
December 31, 2000
--------------------------------------------------------------------------------




(f)      New accounting pronouncements

In June 1998, the FASB issued SFAS 133,  "Accounting for Derivative  Instruments
and Hedging  Activities" (SFAS 133) which  established  standards for derivative
instruments  and  hedging  activities.  It  requires  that  all  derivatives  be
recognized as either assets or  liabilities on the balance sheet and be measured
at fair value.  SFAS 133 is effective for fiscal years  beginning after June 15,
1999,  which was the fiscal year beginning  January 1, 2000 for the Corporation.
Prior  periods  should not be restated.  In June 1999,  the FASB issued SFAS No.
137,  which delays the effective  date of SFAS 133 until fiscal years  beginning
after June 15, 2000, which is the fiscal year beginning  January 1, 2001 for the
Corporation.  The Corporation does not expect the adoption of this pronouncement
to have a material  impact on its results of operations  or financial  position.

In  December  1999,  the SEC issued  Staff  Accounting  Bulletin  (SAB) No. 101,
"Revenue Recognition in Financial  Statements",  which was amended in March 2000
by SAB 101A.  The SAB  summarizes  certain  of the SEC staff  views in  applying
generally  accepted  accounting  principles to revenue  recognition in financial
statements. This SAB is effective beginning with the Corporation's first quarter
of fiscal 2001. The Corporation does not expect the adoption of this SAB to have
a  material  impact  on  its  results  of  operations  or  financial   position.
<PAGE>
                                                                     Schedule II

                             World Heart Corporation



Valuation and Qualifying Accounts


Balance at June 30, 2000 acquisition of Novacor              $ 100,912

Bad debt expense for the year                                        -

Write-offs/adjustments                                               -
                                                             ---------

Balance at December 31, 2000                                 $ 100,912
                                                             =========