Research and Development
Expenses in the first quarter of fiscal 2004 were 1.110,50€. The increase was primarily due to headcount-related costs, project development costs, and third party development costs.

General and Administrative
Costs were 21,50€ in the first quarter.

Short-term Investment in ZB-trend Shares
During the first 3 months period of fiscal 2004, the Foundation purchased 365 shares of ZB trend for a sum total of 37.310,30€.

Long-term Depts
Man Foundation has no material long-term debt. Management believes existing cash and short-term investments together with funds (expected to be) generated from operations should be sufficient to meet operating requirements

General Economic and Geo-Political Risks
Continued softness in arts industry, financial markets, corporate information technology or other changes in general economic conditions that affect demand for such projects could adversely affect the foundation’s revenues. Terrorist activity and the threat of armed conflict in Iraq or other parts of the world pose the additional risk of general economic disruption and could require changes in our international operations and security arrangements increasing the Foundation’s operating costs.

Natural and Topographical Risks
In the first quarter the weather and related specific risks, such as avalanches and snowstorms, were higher than average. The risks related to topography of Variable Risk Landscape were high in case of the steep slopes upwards and downwards. No injuries and no damage to equipment were reported.

Competition
The Foundation continues to experience intensive competition across all art market for its project. These competitive pressures may result in decreased sales volumes, price reductions, and/or increased operating costs such as marketing incentives, resulting in lower revenues, gross margins and operating income. The project is still in the early stages and suffers somewhat from the lack of recognition.

Quantitative and Qualitative Disclosures About Market Risk
The Foundation is exposed to foreign currency, interest rate, and fixed income and equity price risks. A portion of these risks is hedged, but fluctuations could impact the foundation’s results of operations and financial position. The Foundation monitors its foreign currency exposures daily to maximize the overall effectiveness of its foreign currency hedge positions. Principal currencies hedged include the Euro and US dollar.

The next Quarterly Report is scheduled to be released in October 2004.