Annual Report 2003

AGICOA - Annual Report 2003

Contents

3

Message from the President 4

Facts and figures 5

Managing Director’s Report 6

■ Collections 6■ Distributions 8■ Payments to Rightsholders 10■ Improvement of the distribution system 11■ A modern collecting society 12■ Recent developments and prospects 15■ Conclusion 17

Figures 18

Executive Committee

President John M. JacobsenVice Presidents Ronald Frohne, substitute: Gertraude Müller-Ernstberger

Nicole La BouverieTreasurer Michael BrodieMembers Chris Marcich, substitute: Jane Saunders

Bertrand Moullier, substitute: Valérie Lépine

Lawrence SafirAlain Sussfeld, substitute: Idzard Van der Puyl

Wim Verstappen

Senior Management Team

Managing Director André ChaubeauFinance Director Tom de LangeInformation Systems and

Technology Director Maryvonne GarçonCustomers and Distribution Director Jean-Michel GosteliLegal and Business Director Helmut Koszuszeck

Contact

Corporate Communication Corinne ChantrierAGICOA – rue de Saint-Jean, 26 – CH-1203 Geneva Tel: +41 22 340 32 00 – Fax: +41 22 340 34 32Internet: www.agicoa.org

Impressum

Editorial AGICOA, GenevaConcept and graphic design VTX Interactive Solutions SA, PaudexPhotos Magali Koenig and Lionel HenriodLitho Zuliani SA, MontreuxPrinter Paperforms SA, Villars-Ste-Croix

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Message from the President

We predicted last year that AGICOA would continue its positive trend regarding costs reduction, higherpayments and faster payouts. Our results for 2003 clearly show that we have lived up to these promisesand I trust the pages that follow will give you grounds to share my satisfaction.

In this perspective, we wanted this year's Annual Report to be more than a mere account of a year of goodresults. Our wish has been to reveal some indicators that testify to the magnitude of our activities. We decided to share with you what it took – in terms of processes, effort and manpower – to have AGICOAprogress in its overall mandate as a collecting society, as well as in its day-to-day services to its Clients.

To make this tangible, we chose to interlace the usual Managing Director's Report with some facts andfigures, quotes and numbers, faces and graphs.

You will find details on the increase in countries of collection, exceeded distribution, development of onlineservices, acceleration of payment processes, and below-budget costs.

You will meet with the people that constitute AGICOA; those we work for, our Clients, and those who workfor them; our Staff. Some of our Clients were courteous enough to comment on our services and most ofthe Staff agreed to appear in the following pages.

While this report attests to another good year, AGICOA now faces a future filled with great possibilities butalso one of major challenges in the form of sometimes inappropriate local laws, rapidly changingtechnologies, and new viewing habits.

Let us all make sure AGICOA gets the support it needs to face these prospects so we can all reap greaterrewards in the coming years.

John M. Jacobsen

AGICOA President

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“While this report attests to another good year, AGICOA now

faces a future filled with great possibilities but also one of

major challenges.”

John M. Jacobsen, AGICOA President

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Facts and figures

■ Some 61.49 M e have been collected in 2003 under the control of AGICOA Geneva, representing anincrease over 2002 of 8.44 %;

■ From twenty countries in 2002, AGICOA expanded its territories of collection to twenty-six by the end of2003;

■ Amounts put into distribution by the AGICOA Group amounted 122.3 M e in 2003. The commitment madeto distribute 115 M e was fulfilled and even exceeded;

■ During 2003, payments to Rightsholders from AGICOA Geneva increased by 56.7 %;

■ In 2003, the AGICOA Group handled the full encoding of 47 International channels, representing some 119 channels/countries of retransmission paid automatically;

■ 468,154 acts of retransmission, corresponding to 151,192 different broadcasted works have been paidautomatically in 2003;

■ At the end of 2003, the unique and International AGICOA repertoire was constituted of some 5,600 finalbeneficiaries from 42 various nationalities;

■ At year end, the AGICOA’s database contained 552,828 declarations of works;

■ An average of 6,100 new declarations of works are handled monthly by AGICOA, as well as some 6,600updates of existing declarations. That represents 5,305,130 lines of rights increased by a monthly averageof 51,500 new lines and 82,200 updates;

■ The cost ratio is constantly enhanced: 10.384 in 2003 vs. 23.434 in 2000.

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“We have benefited a lot from AGICOA and for me it is obvious

that all producers should mandate AGICOA for the collection of

their rights.”

Knud Bjørne-Larsen, Norsk filmstudio as – Norway

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Managing Director’s Report

General Management

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André Chaubeau, Corinne Chantrier, Jacqueline Grivel

It is a real pleasure to present annual results which show that promises taken were kept and even surpassed.

How stimulating to see that efforts undertaken during 2003 proved to be worth it and that strategieselaborated over the past years were relevant and appropriate.

How comforting to us and to our Rightsholders, to look at yearly results that confirm AGICOA’s ability toadapt and to progress after more than twenty years in existence.

An increase in collections

Fully operational in twenty countries, AGICOA Group collected in 2003 some 79,071,946 e from eighteen ofthem. Funds for Bulgaria and Finland were recovered only late in 2004.

Excluding Germany and Spain, as they are not entered into the accounts of AGICOA Geneva, the collectedamount totaled 61,494,069 e for sixteen countries, representing an increase over 2002 of 8.44 %.

Collections over the last four years

Current collections in red and the exceptional amounts collected for the past in Belgium in grey

Millions of e:

10080604020

02000 2001 2002 2003

Collections

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New collections

Royalties were collected for the first time in Portugal as well as on “authors’ share”. The latter refers toroyalties, specific to some countries, due to producers for US produced audiovisual works under applicationof the agreements between the US authors’ Guilds and the US producers’ organizations. This collectionstarted in Switzerland in 2003 and may be extended to several other countries during 2004.

Collections per country in 2003

Millions of e:

1 The Netherlands 22,216,650 11 Special “authors' share” 1,034,9782 Belgium 18,467,181 12 Slovenia 786,2953 Germany 14,500,000 13 Luxembourg 720,0004 Denmark 3,827,379 14 Portugal 704,9835 Ireland 3,822,601 15 Austria 507,9626 Spain 3,077,927 16 Lithuania 126,2847 Switzerland 2,855,799 17 Estonia 96,3248 France 2,544,185 18 Latvia 76,2099 Norway 2,429,716 19 Canada 22,74310 Sweden 1,254,780

Total 79,071,996

excl. Germany & Spain 61,494,069

Collection contracts

From twenty countries in 2002, AGICOA expanded its territories of collection to twenty-six countries by theend of 2003.

New collection contracts were signed in the course of 2003 in Bosnia Herzegovina, Macedonia, Portugal,Slovakia, The Netherlands (for some additional channels), Ukraine and in Poland with an interimagreement.

Some contracts were also renewed:■ in Germany, with a significant increase of collection due to the full inclusion of satellite broadcasted

channels. Lifting of former legislative ambiguity on this subject facilitated this process;■ in Belgium, where a contract was finally signed concerning the retransmission of three channels that had

been reserved in the former 2002 global contract;■ in Ireland, with the addition of the new BBC channels.

“I can sincerely say the AGICOA’s services have been first rate.

It is sometimes a great battle to recover world-wide earnings,

and you have helped us immeasurably.”

Peter Yeldham, Australia

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Information Systems & Technology Department

Maryvonne Garçon, Jean-Marc Giagnoli, Annika Andrivet, Stéphane Vercellotti (missing Geneviève Marcouly)

Distributions

Commitment fulfilled and even exceeded

Some 122,292,591 e have been put into distribution by the AGICOA Group in 2003. This amount includespart of the Belgium litigation, which was received in late 2002 for the years 1996 to 2001, and wasdistributed without any fees as compensation for the late recovery of these royalties.

Additionally, there was the distribution of 3 M e of the General Reserve, as per the Board’s decision to lowerthis source. This has been distributed, on a pro rata basis, to all Rightsholders who were credited someroyalties in the period November 2002 to October 2003. This excludes amounts distributed from Germany,Spain and France, as those countries do not contribute to the Group’s General Reserve.

Distributions over the last four years

New distributions in red, surrounded of white: Belgium litigation and final distributions in grey

Millions of e:

14012010080604020

02000 2001 2002 2003

Detailed distributions

First distributions 108,122,253 e

■ “Normal” distributions (Geneva) 58,143,527 e■ Belgium litigation (1996-2001) 37,447,209 e■ General reserve 3,000,000 e■ Germany (AGICOA GmbH) 9,531,517 e

Final distributions 14,170,338 e

■ Geneva 9,801,855 e■ AGICOA GmbH 4,368,483 e

Total 122,292,591 e

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Information Systems & Technology Department

Edith Tanner, Pascal Collart, Pierryves Fournier, Salvatore Silvestri, Dean Thom, José Blanco

The commitment made in December 2002 to the Board of Directors to put into distribution 115 M e wasfulfilled and even exceeded!

Country/Periods put in distribution

New distributions Final distributions

Austria 1997 Belgium 1998 & 1999Belgium 2002 Denmark 1999Belgium - litigation 1996 to 2001 Ireland 1996Canada 2001 Netherlands 1999Denmark 2002 Sweden 1998 & 1999Finland 2001 Germany 1992 to 1994

France 2001 & 2002Ireland 2002Luxembourg 2001Netherlands 2002Norway 2001Sweden 2002Switzerland 2001Mark-up * 2002General reserve 2003Germany 2002

Total 108.1 M e Total 14.2 M e

* Estonia, Latvia, Lithuania and Slovenia

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Legal and Business Department

Brigitte Ansermet, Catherine Ferry, Helmut Koszuszeck

Payments to Rightsholders on the rise again

From the overall distributable amounts are additionally paid to the Rightsholders, royalties correspondingto late claims and to resolved conflicts from previous years. The AGICOA service fee and reserves for lateand conflicting claims are themselves deductible from the amount put into distribution.

In total, payments from the AGICOA Group to its Rightsholders amounted to 97.6 M e. Out of this, 77.8 M e

were paid under the responsibility of AGICOA Geneva, which is 56.7 % more than in 2002, confirming lastyears trend to the rise. This amount was paid to 1,142 different Rightsholders’ accounts, some of these beingAgents’ accounts, representing a significant number of final beneficiaries:

■ 77.8 M e paid to 1,142 Rightsholders’ accounts

– 15 RH with more than 1 M e– 9 RH between 500 K e and 1 M e– 55 RH between 100 K e and 500 K e– 31 RH between 50 K e and 100 K e– 166 RH between 10 K e and 50 K e– 347 RH between 1,000 e and 10,000 e– 519 RH between 25 e and 1,000 e

■ In addition around 800 Rightsholders’ accounts were credited with less than 25 e.

The remaining 19.8 M e were paid by AGICOA GmbH. That was an exceptional amount due to thedistribution of reserves, the very significant volume of resolved conflicts and the funds blocked in 2002because of legal complexities.

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Improvement of the distribution system

As promised during the 2002 General Assembly, AGICOA endeavoured to remunerate on an automatic basisthe programs of an increased number of stations. This has reduced to a marginal level the cases ofbroadcasts remunerated only on the base of ad hoc claims by each concerned Rightsholder.

Therefore, the full programs of 47 channels have been encoded in 2003, which adds for example newchannels like RAI Uno (Italy) or four Finnish national programs. As the programs of most of the concernedchannels are retransmitted in several countries, these are some 119 channels/countries of retransmissionthat were paid automatically to Rightsholders in 2003. In other words, this represents 151,192 differentbroadcasted works paid on an automatic basis, representing 468,154 acts of retransmission.

A reduction of fiduciary funds stock

During the May 2003 General Assembly, the Management committed to reduce by 2006 the stock offiduciary funds pending distribution to the equivalent of one year and a half of collections.

A significant first step was made in that direction in the course of 2003. On December 31st, 2003, AGICOAheld 181 M e of fiduciary funds when the collection during the year was 61.5 M e. The ratio therefore wasreduced in the course of the year from 3.37 on December 31st, 2002 to 2.94 on December 31st, 2003. Thatwas an encouraging step but AGICOA will have to accelerate further its distribution processes in the comingyears.

“During our long established relations with AGICOA, we have

always been supplied with up-to-date information and

smooth, quick and effective administration.”

Marietta Dárdai, Interpannonia Film Ltd – Hungary

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A modern collecting society

Our team's energy and skills have been largely dedicated to further progress on the modernization of AGICOA.A lot has been achieved in 2003 to develop our working tools and to allow the deconcentration of some of ourprocesses. The results have already been demonstrated in the previous lines and can be further highlightedby AGICOA’s overall enhanced productivity.

Sophisticated tools

An International repertoire

One of AGICOA’s main assets is its International repertoire, composed of its constantly updated databaseof works, rights and Rightsholders.

It is comprised of some 3,652 Rightsholders’ accounts, some of those belonging to Agents handling thecatalogues of a significant number of final beneficiaries. In total over 5,600 different companies from 42 various nationalities are represented by the AGICOA Group.

The AGICOA database contains 552,828 declarations of works. An average of 6,100 new declarations arehandled monthly and additionally more than 6,600 updates of existing declarations are performed duringthe same lapse of time. In other words, this represents some 5,305,130 lines of rights increased by amonthly average of 51,500 new lines and 82,200 lines updated.

Handling such huge volumes of data in a single International database permits substantive economies ofscale. Indeed, this allows AGICOA to be active in twenty-six countries and its Rightsholders to declare theirworks and retransmission rights not twenty-six times but just once.

IRRIS

The completion of IRRIS version 1, the AGICOA International Rights Royalties Information System, wascertainly our main achievement in 2003.

This project, initiated more than five years ago, provides AGICOA with a complete integrated informationand process system covering the entire AGICOA activity:

■ registration of Rightsholders, works and rights;■ encoding of channels’ programs;■ identification of broadcasts (i.e. matching between broadcasted programs and works registered);■ full distribution process;■ handling of claims to some external collecting societies;■ allocation of funds to programs and to their respective Rightsholders;■ payments to Rightsholders.

Finance Department

Samia Tilouche, Léonie Nagy, Ségolène Cholat, Monique Ngo Nack, Stéphanie Guffroy-Droux, Tom de Lange, Françoise Minetta

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This major achievement required the active involvement of most of the AGICOA Geneva staff. This was donewhile simultaneously meeting and even exceeding normal commitments. These members of the team are tobe particularly thanked, for this is an outstanding performance handled with no additional resources.

Conflict resolution procedure

Additional evidence of AGICOA’s evolution has been shown with the launch, in January 2003, of the newconflict resolution procedure and its result, at end of March 2004, of conflicts solved for 1.2 M e representing77 % of successful resolutions on initiated procedures.

Until the end of 2002, AGICOA’s activity has been clouded by the high volume of royalties blocked due toconflicting claims that could be resolved only by parties’ agreements. With no active means to solve theseconflicts, royalties could have been frozen indefinitely.

The progressive opening of the new conflict resolution procedure has proven very encouraging. The mere factthat AGICOA is now in a position to make a recommendation and possibly to an enforceable decision by anarbitrator, leads Rightsholders who could not solidly substantiate their claims to withdraw, therefore allowingsignificant amount of royalties to be released and paid to their legitimate claimants.

A deconcentrated modus operandi

New partners

AGICOA has intensified the deconcentration of its activities. New cooperation agreements have been signedduring 2003 with two new Partners: GEDIPE in Portugal and Tuotos in Finland.

The cooperation agreement with SEKAM (the Netherlands) has been successfully renewed.

Negotiations have been moving forward as well with DACIN SARA (Romania) and EGEDA (Spain), althoughthey were not completed by the end of the year 2003.

Distributed tasks

Mainly thanks to the availability of the IRRIS system, Portfolio Managers handling the declarations of worksand rights are today located with Partners in Brussels, Paris, Warsaw, Helsinki, and Lisbon just as well as inGeneva. Those Portfolio Managers can update and add to the International IRRIS database directly for thebenefit of the whole AGICOA Group.

Encoding of the works broadcast by TV channels is also a largely deconcentrated activity. It is performed inMunich, Paris, Brussels, Amsterdam, Helsinki, Copenhagen, Bern, Stockholm, and Vienna, the same way itis done in Geneva.

“The AGICOA staff has been extremely pleasant to deal with

and royalties have been reported and paid in a timely manner.

We are very pleased to be a client of AGICOA.”

Karen Konicek, Zipporah Films – U.S.A

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The listings of programs encoded in a single format can therefore be used for the distribution of theroyalties in the different countries where the channels are retransmitted. There again, the economies ofscale resulting from the existence of an International group are significant. The information and the workperformed in one place are available for all the countries of intervention.

Another tool, necessary for a proper deconcentrated activity, is a joint control of the fiduciary funds held inthe different countries by the local Partner and by AGICOA. Representing a substantial guarantee forRightsholders that all fiduciary funds are handled properly, this is done by keeping the fiduciary fundseither in a joint bank account (local Partner + Geneva) or, if local legislation requires, on an accountbelonging to the local Partner but which can be used only with undersigning of both parties. In the courseof 2003, this system was implemented in Norway, Sweden, Luxembourg and Portugal. France remains theonly country where the funds are held by the Partner alone.

Controlled cost

The significantly increased activity and output of AGICOA, did not incur a similar increase in cost. On thecontrary, the operational cost for 2003, 11,433,296 CHF (7,331,385 e) was kept below budget.

Productivity constantly enhanced

The productivity of a collecting society can be measured by the ratio of its actual cost divided by the newamounts put into distribution. In 2003, this ratio for the AGICOA Group was a spectacular 6.77 % becauseof the exceptional amount put into distribution with the funds recovered in Belgium for the last six years.By Board decision, AGICOA did not deduct any service fee on those funds, as a mere compensation for thelong delays with which these royalties were finally received by Rightsholders. If that exceptionaldistribution was not included, the AGICOA Group cost ratio would have been 10.38 %, still a significantdecrease compared to the previous years:

In %: Millions of e: * incl. Belgium litigation – ** excl. Belgium litigation

25 Cost New distr. %2015 2000 8.038 34.3 23.43410 2001 7.284 45.1 16.1505 2002 6.702 50.3 13.3240 2003 * 108.0 6.770

2000 2001 2002 2003 2003 **7.331

70.6 10.384

These tables show the very positive trend of the cost ratio and the economies of scale resulting from an integrated

International Group broadening its geographical scope.

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Jean-Daniel Girod, Valérie Jaussi, Mireille Vicin, Yvonne André, Maryline Gonin-Favre

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Customers & Distribution Department

Carla Dechamboux, Karola Hardt, Gohar Okanessian, Sylvie Besuchet, Marie-Andrée Greco, Sabrina Maroofi, Véronique Perrin

Recent developments and prospects

Collections

New collection contracts are pending in Croatia, Poland, Romania and Serbia.

Some others will have to be renewed, such as in the Netherlands after the cancellation by the cableoperators of the existing global contract for March 31st, 2005. This is a serious concern as the Netherlandsremain the AGICOA Group’s largest country of collection. The Dutch cable operators have expressed theirdesire to substitute to the global contract, a series of separate contracts per broadcasting entity. This non-constructive attitude, which is likely to complicate not only Rightsholders’ but also cable operators’business, has thus so far been confronted in a clear statement of solidarity by all groups of Rightsholders.

The French situation also remains unsatisfactory. For the past four years, most cable operators have beenoperating outside any contract with producers and have paid them royalties of around 70 % of the tariffstipulated in the former contract. This unacceptable situation cannot last for ever and the amounts still duewill have to be paid.

In another continent, prospects are much better. After the clarification of the copyright legislation inAustralia in 2003, this country should become a significant market for cable retransmission royalties.AGICOA is working in close cooperation with Screenrights (the Australian audiovisual copyright society andAGICOA’s Member) to achieve proper collection and to operate according to the partner model set in manycountries.

AGICOA will also be very active to establish proper collection in countries like Hungary where cable royaltieshave been collected for several years, although no foreign Rightsholder has benefited from them yet. Thisalso applies to the Czech Republic where a ridiculously low tariff has lead AGICOA to refuse the marginalamounts proposed by local collecting societies.

In Israel, the litigation with cable operators continues, while they are still retransmitting a large range ofchannels without any remuneration to producers.

Finally, AGICOA will be exploring the possibilities to intervene in Latin America and Turkey.

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Challenges

In the years to come, one of the main challenges for AGICOA as well as for the whole audiovisual industry,will be to define its policy in an ever-changing technical environment.

The simultaneous retransmission of television channels by telephone operators seems not to raise anyparticular difficulty of principle. They are a new type of cable operators, but their activity is unquestionablya form of cable retransmission as regards to copyright.

On the other hand, the business model concerning Satellite Digital Platform retransmission remains a pointof controversy among Rightsholders. If nobody denies that it is an act of communication to the public by athird party, therefore requiring authorisation by copyright holders, some think that in the silence of theEuropean legislation, it should be handled individually whereas some consider it as to be managedcollectively on a similar base as cable retransmission.

These opposing approaches regarding the preferred business model, result from different businesscultures, from the levels of resources and the economic weight of individual Rightsholders. These divergingviews may lead AGICOA to operate in this field, in the name of only some of its Rightsholders. Such a breachin the solidarity on which AGICOA was founded twenty-two years ago may set a new pattern with whichAGICOA may have to live in the present state of legislation.

Regardless of the outcome, AGICOA which has always operated on the base of precise mandates grantedto it by its Rightsholders, and not on the base of usurped representation, will operate where and how itsRightsholders wish so. AGICOA will not interfere with the business strategy of its constituents. TheAssociation is there to serve them and not to dictate to them how they should run their business.

AGICOA will, in any event, continue the constant improvement of its tools to provide its Rightsholders with:

■ increasing collections;■ a growing number of encoded channels, which programs are paid on automatic base;■ the speeding of payment processes;■ a further reduction of funds pending distribution;■ the resolution of pending conflicts stock inherited from the last twenty-two years of operation;■ the enlargement of registered works and of represented Rightsholders;

while keeping its cost under control and reducing its cost ratio.

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Kristi Andersen Cosendai, Jean-Michel Gosteli, Olivia Strobel, Fanny Perez (missing Daniel Urweider)

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Conclusion

There is no doubt that 2003 was a remarkable year for the whole Group. But beyond the exceptional aspectof its yearly activity, the increased efficiency of its operation and the broadening of its geographical scopewith no additional cost illustrate that AGICOA has become a modern collecting society.

Thanks to its International integration, significant economies of scale have been allowed, compared to whatcountry by country isolated national operations would cost. It also provides a guarantee that nodiscrimination appears in the handling of Rightsholders, whatever their nationality, therefore ensuringeffective full national treatment in all countries of intervention: a rare concrete occurrence in collectivemanagement.

Once again the AGICOA staff is heartily congratulated for its exceptional work throughout 2003 and theExecutive team thanked for its outstanding dedication.

André Chaubeau

Managing Director

“Without AGICOA, I do not know how we could keep track of

the retransmissions of our works on cable networks, let alone

get back related royalties.”

Ludolph Wentholt, RCV Nederland BV – The Netherlands

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Figures

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Fiduciary funds managed by AGICOA

Statement of movements in fiduciary funds for the year endedDecember 31 (EURO)

2003 2002

Amounts collected awaiting distribution at beginning of year 143,296,054 102,670,614

Royalties earned 60,052,723 48,706,756

Other revenues 5,936,523 5,120,741

Distributed to rightholders (77,879,512) (49,677,417)

AGICOA fees (6,187,325) (5,180,530)

Provisions and allocations to reserves (1,833,513) 42,137,109

Other expenses and exchange differences (1,879,513) (481,219)

Amounts collected awaiting distribution at end of year 121,505,437 143,296,054

Fiduciary reserves and provisions 38,626,897 36,621,769

Fiduciary liabilities, reserves and provisions 21,144,783 11,499,741

Total fiduciary liabilities 181,277,117 191,417,564

Financial statements of AGICOA

Balance sheet at December 31 (CHF)

2003 2002Assets

Current assets

Cash and term-deposits 2,287,517 872,320

Receivable from fiduciary funds 0 1,533,299

Other assets 1,804,835 1,444,282

4,092,352 3,849,901Fixed assets

Deposits and guarantees 9,450 9,450

Investments in affiliates 20,966 99,930

Advance to ISAN International Agency 308,012 0

Tangible fixed assets, net 1,638,177 1 ,297,431

1,976,605 1,406,811

Total assets 6,068,957 5,256,712

Liabilities and operating reserve

Current liabilities

Accounts payable 895,506 1,505,067

Accrued andother short term liabilities 907,509 1 464,775

Payable to fiduciary funds 2,058,036 0

3,861,051 2,969,842

Operating reserve 2,207,906 2,286,870

Total liabilities and operating reserve 6,068,957 5,256,712

Statement of income for the year ended December 31 (CHF)

2003 2002Revenues

Operating expense reimbursement 12,115,426 10,562,843

Interest and bank charges, net 3,662 11,719

Services to ISAN International Agency 59,217 0

Total operating income 12,178,305 10,574,562

Excess of expenses for the year 78,964 897,309

12,257,269 11,471,871Expenses

Salaries and social charges 5,273,445 4,973,817

Professional fees and administrative expenses 1,709,318 1,865,961

Subcontracted work 3,458,159 1,703,414

Depreciation 593,497 545,281

Special projects 30,044 226,776

Other expenses

Exchange difference, net 38,013 40,394

Exceptional expenses 298,977 401,159

Taxes 114,469 (8,344)

Total operating expenses 11,515,922 9,748,458

Return of operating expenses reimbursement 741,347 1,723,413

12,257,269 11,471,871

We have audited, in accordance with auditing standards promulgated by the Swiss profession, the financial statements of AGICOA, Geneva for the year ended December 31, 2003.In our audit report we expressed an unqualified opinion on those financial statements, which are not presented herein. In our opinion, the information set forth in theaccompanying condensed financial statements is consistent, in all material respects, with the audited financial statements from which it has been derived.

PricewaterhouseCoopers SA

Geneva, May 3, 2004 WM Wright A Bainton