Research and Development expenses in the second quarter of fiscal 2004 were 2.205,00€. The increase was primarily due to higher headcount-related costs, project development costs, and third party development costs. The revenues in August are related to participation of VRL at Cetinje International Biennale.

General and Administrative costs were 20,00€ in the first quarter.

Short-term Investment in ZB-trend Shares
The Foundation holds 365 shares of ZB trend purchased for a sum total of 37.310,30€ during the first 9 months period of fiscal 2004.

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

General Economic and Geo-Political Risks
Softness in arts industry continues. 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. Continued Terrorist activity and the threat of prolonged 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 third quarter the weather and related specific risks, such as avalanches and storms, were lower than average. The risks related to topography of Variable Risk Landscape continued to be high in case of the steep slopes. Unfortunately one injury was reported which slowed down a project development for14 days, no damage to equipment.

Competition
The Foundation continues to experience intensive competition across all art market. These competitive pressures result in decreased sales volumes, and increased operating costs such as marketing incentives, resulting in lower revenues, gross margins and operating income. The project is in the middle stages and has improved considerably its recognition on the market. In August 2004, VRL project participated at International Biennale of Contemporary Art in Cetinje (C&MN). 2. quarterly report was given publicly at The Museum of Contemporay Art, Zagreb.

Quantitative and Qualitative Disclosures About Market Risk
The Foundation is still 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 Annual Report is scheduled to be released in June 2005.