CORE Internet Council of Registrars


Report of the Auditors

to the Plenary Meeting


Financial Statements

30 June 2000


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 30 June 2000 and the related statements of income and cash flows for the six-month period 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 30 June 2000, and of the results of its operations and its cash flows for the period 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, statement of cash flows and expenses and notes to the financial statements)

Enclosure 1.1



Balance Sheet at                                                                                 30 June        31 December
                                                                                                                2000                 1999



                                                                                     Notes                  USD                   USD


Current assets

Accounts receivable                                                          3                   115,374                144,341

Other receivables                                                                                       3,565                    2,039

Prepaid registration fees to NSI                                                           5,541,970             1,649,442

Cash and cash equivalents                                                                   2,896,452             1,352,000


Total assets                                                                                    8,557,361             3,147,822




Current liabilities

Accounts payable and accruals                                                               580,776                202,009

ISOC                                                                            4                       119,934                119,934

Accrued prepayments by members                                5                    2,179,760             1,677,549

Deferred registration income                                          6                    6,753,056             2,191,657


                                                                                                           9,633,526             4,191,149


Accumulated deficit

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

Excess of expenditure over income for the year                                        (32,838)             (288,561)


                                                                                                          (1,076,165)          (1,043,327)


     Total liabilities and accumulated deficit                                             8,557,361             3,147,822



See accompanying Notes to the Financial Statements.

Enclosure 2.1



Statement of Income and Expenses                                                    

for the Period to                                                                                  30 June           31 December

                                                                                                                2000                    1999
                                                                                                           (6 months)          (12 months)



                                                                                     Notes                  USD                     USD



Result of registrations

Registration income                                                                         1,703,862                194,189

NSI - Registration fees                                                                  (1,359,306)             (133,652)


Gross result of registrations                                                          344,556                  60,537





Initial membership fees                                                                              30,000                  70,000

Interest received                                                                                       36,235                  13,141


Total other income                                                                            66,235                  83,141


Total income                                                                                          410,791                143,678


Enclosure 2.2


Statement of Income and Expenses                                                    

for the Period to                                                                                  30 June           31 December

                                                                                                                2000                    1999
                                                                                                           (6 months)          (12 months)



                                                                                     Notes                  USD                     USD


Registrations expenses


ICANN domain fees                                                                           49,930                  39,174

NSI license fees                                                                                           -                  10,000


                                                                                                           49,930                  49,174


Administrative expenses


     SRS development - CSL GmbH                                                        126,025                117,410

SRS development - ETSI                                                                    39,724                         

Secretariat                                                                                           74,701                  72,000

Accounting                                                                                                   -                    5,622

Legal fees                                                                                          113,538                  50,313

Administrative fees                                                                                 6,000                  16,060

SRS fees – Emergent                                                                             2,868                    6,000

IAHC / POC / ISOC                                                                               390                    6,473

Public relations                                                                                         250                    9,877

Lobbying                                                                                                      -                  17,500

Travel expenses                                                                                   18,758                  38,240

Meetings                                                                                               1,190                         

Telephone                                                                                             6,672                  26,470

Postage                                                                                                    849                    1,692

Internet                                                                                                     900                    1,824

Bank charges                                                                                         1,834                    3,358

ICANN                                                                                                       -                    8,550

Other administrative expenses                                                                       -                    1,676


Total administrative expenses                                                             393,699                383,065


Total expenses                                                                                   443,629                432,239



Excess of expenses over income for the period                                    (32,838)             (288,561)



See accompanying Notes to the Financial Statements.


Enclosure 3


Statement of Cash Flows

for the Period ended                                                                            30 June           31 December
                                                                                                                2000                    1999
                                                                                                           (6 months)          (12 months)



                                                                                     Notes                  USD                     USD


Cash flow from operating activities


Cash receipts from registrations                                                       6,265,261             2,385,846

Cash paid to NSI                                                                          (5,057,234)          (1,770,665)

Other registration payments                                                                (49,930)               (49,174)


                                                                                                      1,158,097                566,007


Cash received from prepaid registrations                                            344,011                256,149

Cash received in membership fees                                                        30,000                  70,000

Cash received in monthly contributions                                               187,167                554,559

Cash paid to suppliers                                                                      (209,532)             (367,092)


Net cash received from operating activities                                      1,509,743             1,079,623



Cash flow from investing activities                                                                 


Interest received                                                                                  34,709                  11,102


Increase in cash and cash equivalents                                                   1,544,452             1,090,725


Cash and cash equivalents at start of period                                  1,352,000                261,275


Cash and cash equivalents at end of period                                    2,896,452             1,352,000



Enclosure 4.1



Notes to the Financial Statements

Period ended 30 June 2000



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.




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

Period ended 30 June 2000



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 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, which can be separately identified and quantified is recognised as an intangible asset and amortised over a period of three years.  Other development costs are recognised in the statement of income and expenditure as an expense is incurred.


f)              Income tax



Enclosure 4.3



Notes to the Financial Statements

Period ended 30 June 2000



3        Accounts receivable


                                                                                                       2000                    1999

                                                                                                       USD                     USD


Member contributions outstanding                                     447,274               470,941

Provision for uncollected contributions                              (331,900)            (326,600)


                                                                                         115,374               144,341


Accounts receivable are member contributions outstanding from members. The member contributions are recognized by accrual.  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

Period ended 30 June 2000



5               Accrued prepayments


Monthly contributions

                                                                                                      2000                    1999

                                                                                                       USD                     USD


Deferred member contributions                                                  1,579,600             1,421,400

Registration payments                                                                   600,160                256,149


                                                                                                 2,179,760             1,677,549


Deferred member contributions

                                                                             Contributions       Provision              Net

                                                                                    USD                USD                USD


Balance as at 1 January 2000                                  1,748,000         (326,600)       1,421,400

Member contributions during the period                      163,500                                 163,500

Increase in provision for uncollected

contributions                                                                                  (5,300)            (5,300)


Balance as at 30 June 2000                                     1,911,500         (331,900)       1,579,600



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 account 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 period is held to pay for similar registrations in the future.


Enclosure 4.5



Notes to the Financial Statements

Period ended 30 June 2000



6        Deferred registration income


CORE receives a fee for each registration.  The registration is for either a one-year or 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 30 June 2000 was as follows :


                                                                             Registration           NSI                 Net

                                                                                 Income              Fees

                                                                                    USD                USD                USD


Balance at 1 January 2000                                          2,191,657         (1,649,442)           542,215


Cash received or (paid / accrued) during the period      6,265,261         (5,251,834)         1,013,427


Recognised as (income) or expense in the period        (1,703,862)         1,359,306           (344,556)


Deferred income /

(prepaid expense) at 30 June 2000                          6,753,056         (5,541,970)         1,211,086






7        Contingencies









8        Related parties