Research and Development expenses in 2004 were 3,462.50€. This 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 the VRL project at the International Biennale of Contemporary Art in Cetinje.

General and Administrative costs were 3,503.00€. In the autumn of 2004, D.M. and The Man Foundation applied for funding of the VRL project to the Zagreb City Office for Culture which granted 70,000.00 HRK to the project’s multimedia production but this sum will arrive to our account in 2005.

Short-term Investment in ZB-trend Shares
The Foundation held 365 ZBtrend shares during a 12 month period for 2004, purchased for a total sum of 37,310.30€. After 12 months, these 365 shares gained 2,391.00€ in value.

Long-term Depts The Man Foundation has no material long-term debt. The management ensured that existing cash and short-term investments together with The Man Foundation’s personal funds and those generated from operations were sufficient to meet operating requirements.

General Economic and Geo-Political Risks
The sensitivity of the arts industry continued through 2004. Financial markets, corporate information technology and other changes in the general economic conditions that affect demand for such projects adversely affected the Foundation’s revenues. Continued terrorist activity and the threat of prolonged armed conflict in Iraq and other parts of the world posed the additional risk of general economic disruption and required changes in VRL international operations and security arrangements increasing the Foundation’s operating costs.

Natural and Topographical Risks
In the fourth quarter, the weather and related specific risks, such as avalanches and storms, were lower than average. The risks related to the topography of the Variable Risk Landscape continued to be high in the case of steep slopes. Unfortunately, one injury was reported which slowed down project development for 14 days, with no damage to the equipment. At the end of the fourth quarter, tsunami related risks were very high.

Competition
During 2004, The Man Foundation experienced intensive competition across the art market. These competitive pressures resulted in decreased sales volumes and increased operating costs such as marketing incentives, resulting in lower revenues, gross margins and operating income. In its middle and final stages, the project considerably improved its recognition on the market. In August 2004, the VRL project participated at the International Biennale of Contemporary Art in Cetinje and the 2nd quarterly report was publicly presented at the Museum of Contemporary Art, Zagreb. The VRL project participated in the exhibition at the 1. Congress of Croatian Architects in Zadar.

Quantitative and Qualitative Disclosures About Market Risk
The Foundation was exposed to changes in foreign currency, interest rates, and fixed income and equity price risks. A portion of these risks was hedged, but these fluctuations had an impact on the Foundation’s results of operations and financial position. The Foundation monitored its foreign currency exposures daily to maximize the overall effectiveness of its foreign currency hedge positions. Special hedge measures were in place for the euro and US dollar.

A Dividend of 2,391€ was paid to shareholders on December 29, 2004 at the closing event of the Variable Risk Landscape project. On the same day, The Man Foundation ceased to exist.

The Annual Report is scheduled to be released in June 2005.