CORE Internet Council of Registrars


Report of the Auditors

to the Plenary Meeting


Financial Statements

31 December 1999


Report of the Auditors to the Plenary Meeting of


CORE Internet Council of Registrars, Geneva



We have audited the accompanying balance sheet of CORE Internet Council of Registrars ("CORE") as of 31 December 1999 and the related statements of income and cash flows for the year then ended.  These financial statements are the responsibility of CORE's management.  Our responsibility is to express an opinion on these financial statements based on our audit.


We conducted our audit in accordance with International Standards on Auditing.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting 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.  We believe that our audit provides a reasonable basis for our opinion.


In our opinion the financial statements give a true and fair view of the financial position of CORE as at 31 December 1999, and of the results of its operations and its cash flows for the year then ended, in accordance with International Accounting Standards.



KPMG Fides Peat





Henry B Ferguson                         David R Curry

Auditors in charge





Financial Statements (balance sheet, statement of income and expenses, statement of cash flows and notes to the financial statements)

Enclosure 1.1




Balance Sheet as at 31 December                                                        1999                 1998



                                                                                 Notes                      USD                   USD


Current assets

Accounts receivable                                                       3                       144,341                  89,500

Other receivables                                                                                       2,039                          -

Prepaid registration fees to NSI                                     6                    1,649,442                          -

Cash and cash equivalents                                                                   1,352,000                261,275


Total assets                                                                                    3,147,822                350,775



LIABILITIES AND ACCUMULATED DEFICIT                                             


Current liabilities

Accounts payable                                                                                   202,009                173,607

ISOC                                                                            4                       119,934                119,934

Accrued prepayments by members                                5                    1,677,549                812,000

Deferred registration income                                          6                    2,191,657                          -


                                                                                                           4,191,149             1,105,541


Accumulated deficit

Retained deficit                                                                                     (754,766)                         -

Excess of expenditure over income for the year                                      (288,561)             (754,766)


                                                                                                          (1,043,327)             (754,766)


     Total liabilities and accumulated deficit                                             3,147,822                350,775



See accompanying Notes to the Financial Statements.

Enclosure 2.1



Statement of Income and Expenses

for the Year ended 31 December                                                          1999                  1998

                                                                                                          (12 months)       (15 months)



                                                                                     Notes                  USD                   USD



Result of registrations

Registration income                                                                            194,189                          -

NSI - Registration fees                                                                     (133,652)                         -


Gross result of registrations                                                            60,537                          -





Initial membership fees                                                                              70,000                901,000

Interest received                                                                                       13,141                    4,074

Miscellaneous income                                                                                        -                    3,756


Total other income                                                                            83,141                908,830


Total income                                                                                          143,678                908,830


Enclosure 2.2



Statement of Income and Expenses

for the Year ended 31 December                                                          1999                  1998
                                                                                                          (12 months)       (15 months)



                                                                                     Notes                  USD                   USD



Registration expenses


ICANN domain fees                                                                           39,174                          -

NSI license fees                                                                                   10,000                          -


                                                                                                           49,174                          -


Administrative expenses


SRS development - CSL GmbH                                                             117,410                          -

Secretariat                                                                                                72,000                151,287

Accounting                                                                                                 5,622                  32,481

Legal fees                                                                                                 50,313                  68,429

Administrative fees                                                                                   16,060                    2,905

Acceptance review fees                                                                                                       90,000

SRS fees – Emergent                                                                                  6,000                474,480

IAHC / POC / ISOC                                                                                 6,473                260,820

Public relations                                                                                           9,877                266,782

Lobbying                                                                                                  17,500                199,007

Other contracts                                                                                                                   30,622

Travel expenses                                                                                        38,240                  30,553

Meetings                                                                                                                             29,988

Telephone                                                                                                26,470                  19,763

Postage                                                                                                      1,692                    1,669

Internet                                                                                                      1,824                    2,487

Bank charges                                                                                             3,358                    2,323

ICANN                                                                                                     8,550                          -

Other administrative expenses                                                                     1,676                          -


Total administrative expenses                                                             383,065             1,663,596


Total expenses                                                                                       432,239             1,663,596



Excess of expenses over income for the period                                      (288,561)             (754,766)



See accompanying Notes to the Financial Statements.


Enclosure 3



Statement of Cash Flows

for the Year ended 31 December                                                          1999                  1998
                                                                                                          (12 months)       (15 months)



                                                                                                                USD                   USD


Cash flow from operating activities


Cash receipts from registrations                                                       2,385,846                          -

Cash paid to NSI                                                                          (1,770,665)                         -

Other registration payments                                                                (49,174)                         -


                                                                                                         566,007                          -


Cash received from prepaid registrations                                            256,149                          -

Cash received in membership fees                                                        70,000                901,000

Cash received for monthly contributions                                             554,559                722,500

Cash received from other income                                                                  -                3,756

Cash paid to suppliers                                                                      (367,092)          (1,370,055)


Net cash received from operating activities                                      1,079,623                257,201


Cash flow from investing activities


Interest received                                                                                  11,102                    4,074


Increase in cash and cash equivalents                                                   1,090,725                261,275


Cash and cash equivalents at start of year                                                261,275                          -


Cash and cash equivalents at end of year                                       1,352,000                261,275



Enclosure 4.1



Notes to the Financial Statements

Year ended 31 December 1999



1        Organisation and activity


CORE is a not-for-profit Swiss association created in October 1997 based on the Generic Top-Level Domains Memorandum of Understanding (TLD-MoU) signed on 1 May 1997, under the auspices of the International Telecommunication Union.  The association has been chartered based on Article 67 of the Swiss Code of Obligations.  In order to become members of CORE, applicants had to submit the Application to Qualify to sign the CORE-MoU and pay the application fee, a process administered by the Internet Society prior to CORE's existence.


The purpose of the Association is the coordination of registrations in generic top-level domains.  Originally, it was expected to act as a registry for newly created Internet Top-Level domains by the first quarter of 1998.  Preparations were undertaken accordingly and involved investments in an automated shared registration system (SRS).  The launch of a separate US government process concerning the launch of the new top-level domains created a requirement for CORE to initiate lobbying and public relations activities in the US in order to preserve the interests of CORE's members.  During the entire first period (October 1997 to December 1998) of its existence, CORE was not in a position to facilitate domain registrations for its members.


CORE has been funded over the period with the original membership application fees (collected prior to CORE's existence by the Internet Society) and member contributions credited for future registrations. The latter were based on a compulsory assessment decided by the membership.  Also, during the year, CORE commenced processing .com, .org and .net registrations for its members.


The accounting year is from January to December, with the exception of the first year running from October 1997 through December 1998.



2        Significant accounting policies


a)             Statement of compliance


The financial statements have been prepared in accordance with the accounting standards issued by the International Accounting Standards Committee ("IASC"), interpretations issued by the Standing Interpretations Committee of the IASC and the requirements of Swiss law.

Enclosure 4.2



Notes to the Financial Statements

Year ended 31 December 1999



b)             Basis of preparation


The financial statements are presented in United States dollars ("USD"), rounded to the nearest dollar.


The financial statements are prepared on the historical cost basis.


The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the financial statements :


c)             Revenue recognition


Initial membership fees are recognised upon receipt.


Members’ contributions are firstly recognised on the accrual basis and are then deferred until such time that members use their contributions to register domain names with CORE.


d)             Foreign currencies


Transactions in foreign currencies are recorded using the rate of exchange approximating that at the date of the transaction.  Monetary assets and liabilities denominated in foreign currencies are translated using the rate of exchange ruling at the balance sheet date and gains or losses on translation are included in the profit and loss account.


e)             Intangible assets


Expenditure on developing software is recognised in the statement of income and expenditure as an expense is incurred.


f)              Income taxes




Enclosure 4.3



Notes to the Financial Statements

Year ended 31 December 1999



3        Accounts receivable

                                                                                                       1999                    1998

                                                                                                       USD                     USD


Member contributions outstanding                                            470,941                297,500

Provision for uncollected contributions                                     (326,600)             (208,000)


                                                                                           144,341                  89,500



Accounts receivable are member contributions outstanding from members.  A reserve was constituted for the majority of member contributions that had accrued but had not been collected by year-end. As from April 31, 1999 members who had remained delinquent in terms of member contributions saw their membership terminated by decision of the 1999 Annual Plenary Meeting in Nice. From a contractual standpoint, the termination of membership does not extinguish CORE's claim for the period. A member whose membership was terminated can reapply for membership, in which case any dues actually paid or outstanding as of the date of termination are taken in to account. A number of members paid dues after the year-end. The reserve for uncollected member contributions is in line with the amount outstanding from members whose membership was terminated.



4        ISOC


Prior to the existence of CORE, during summer 1997, the Internet Society (which had been the driving force behind the TLD-MoU) performed the fiduciary duty of collecting the checks for future members' application fees. By virtue of its charter documents, CORE is bound to reimburse justified expenses of the Internet Ad Hoc Committee (IAHC) and its successor organization, the Policy Oversight Committee (POC). ISOC paid the recognized costs immediately before transferring the remainder to CORE. However, in the course of 1998 ISOC accounted for additional expenses relating to the IAHC and thereafter registered expenses related to telephone conferences and limited travel related to the POC. In early 1998, when it appeared that the expected launch of new gTLDs would be delayed in a significant manner, CORE and ISOC agreed that CORE would pay the outstanding amount as soon as CORE was in a position to register domain names in new gTLDs managed by CORE.

Enclosure 4.4



Notes to the Financial Statements

Year ended 31 December 1999



5        Accrued prepayments



                                                                                                       1999                    1998

                                                                                                       USD                     USD


Deferred member contributions                                              1,421,400                812,000

Registration payments                                                               256,149                           -


                                                                                        1,677,149                812,000


Deferred member contributions

                                                                             Contributions       Provision              Net

                                                                                    USD                USD                USD


Balance as at 1 January 1999                                  1,020,000         (208,000)          812,000

Member contributions during the year                         728,000                                 728,000

Increase in provision for uncollected

contributions                                                                              (118,600)        (118,600)


Balance as at 31 December 1999                            1,748,000         (326,600)       1,421,400



As member contributions have the status of a member prepayment for future registrations in new gTLDs to be managed by CORE, they are recognised as deferred income. In the event that CORE starts to register domains as a registry in a new gTLD, CORE is to allow members to register domains for the amount equivalent to their accumulated contributions.


The provision for uncollected contributions which was made against accounts receivables (see note 3) is also made against the deferred income.


Registration payments


Members prepay for .org, .com and .net registrations.  Any prepayment remaining at the end of the year is held to pay for similar registrations in the future.

Enclosure 4.5



Notes to the Financial Statements

Year ended 31 December 1999



6        Deferred registration income and prepaid NSI fees


CORE receives a fee for each registration.  The registration is for a two-year period.  Only the income from the date of registration to the balance sheet date (on a pro rata basis) is recognised in the statement of income and expenses.  The remaining income is deferred in the balance sheet and is recognised in the period to which the registration relates.


The same principle is applied to the amount of registration fees which CORE pays to NSI.


Therefore the position as at 31 December 1999 was as follows :


                                                                             Registration           NSI                 Net

                                                                                 Income              Fees

                                                                                    USD                USD                USD


Cash received or (paid / accrued) during the year         2,385,846         (1,783,094)           602,752


Recognised as (income) or expense in the year             (194,189)           132,652             (60,537)


Deferred income /

(prepaid expense) at 31 December 1999                 2,191,657         (1,649,442)           542,215





7        Contingencies









8        Related parties