6-Month Financial Report for Period Ending 31 December 2000

The Board of Directors
Internet Corporation for Assigned Names and Numbers
Los Angeles, California

We have compiled the accompanying statement of financial position of Internet Corporation for Assigned Names and Numbers of California, as of December 31, 2000 and the related statements of activities and cash flows for the six months then ended in accordance with Statement on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants.

A compilation is limited to presenting in the form of financial statements information that is the representation of management. We have not audited or reviewed the accompanying financial statements and, accordingly, do not express an opinion or any other form of assurance on them.

February 27, 2001

NOTE A - ORGANIZATION

Internet Corporation for Assigned Names and Numbers (ICANN) was established in September 1998 under the laws of the state of California. ICANN coordinates a select set of the Internet's technical management functions such as the assignment of protocol parameters, the management of the domain name system, the allocation of Internet protocol (IP) address space, and the management of the root server system. Categories of Internet domains include Generic Top Level Domains (gTLDs) which include the .com, .net, .org, and .edu domains and Country Code Top Level Domains (ccTLDs) examples of which are .us, .uk, and .fr. ICANN generates income from fees received from domain name registrars and related accreditation activities. Its primary sources of revenue are as follows:

Domain name registry and registrar fees - Amounts contributed by organizations responsible for the registration and administration of Internet Domain Names.

Address registry fees - Amounts contributed by organizations responsible for the assignment and administration of Internet addresses.

Accreditation fees - Amounts paid in connection with initial and renewal accreditation of organizations engaged in the registration and administration of domain names in the .com, .net and .org Internet domains.

Application fees - Amounts paid in connection with processing of applications to become accredited domain name registrars.

ICANN also receives contributions and grants from other organizations.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation - The financial statements of ICANN have been prepared on the accrual basis of accounting.

ICANN recognizes contributions, including unconditional promises to give, as revenue in the period received. Contributions and net assets are classified based on the existence or absence of donor-imposed restrictions. As such, the net assets of ICANN and the changes therein are classified and reported as follows:

• Unrestricted net assets - Net assets that are not subject to donor-imposed stipulations and that may be expendable for any purpose in performing the objectives of ICANN.
  
• Temporarily restricted assets - Net assets subject to donor-imposed stipulations that may or will be met either by actions of ICANN and/or the passage of time. As the restrictions are satisfied, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the accompanying financial statements as net assets released from restrictions.
  
• Permanently restricted net assets - Net assets subject to donor-imposed stipulations that resources be maintained in perpetuity. Investment income generated from these funds is available for general support of ICANN?s programs and operations unless otherwise stipulated by the donor.

As of December 31, 2000, ICANN has no permanently restricted net assets.

Functional allocation of expenses - Expenses that can be identified with a specific program or supporting service are charged directly to the related program or supporting service. Expenses that are associated with more than one program or supporting service are allocated based on methods determined by management. As of and for the six months ended December 31, 2000, ICANN's expenses are classified as follows:

Program services	$2,467,760
Supporting services - management and general	493,781
TOTAL	$2,961,541

Cash and cash equivalents - Cash and cash equivalents include deposits in bank, money market accounts, and marketable commercial paper. The cash balance includes approximately $92,000 of Domain Name Support Organization funds held in ICANN bank accounts. This is offset by a corresponding liability shown in accounts payable.

Concentration of credit risk - The accompanying financial statements include certain ccTLD and IP Address registry accounts receivable balances totaling $1,138,000 as of December 31, 2000. The inclusion of these receivables is based solely on verbal understandings between ICANN and the participating registries. Such receivables and revenues are not supported by written agreements nor has any allowance for doubtful accounts been established relating to these accounts.

It is the policy of management to reserve against all invoices that remain unpaid for more than 180 days. An exception to this policy has been made for certain name and address registry operators for amounts billed in the prior fiscal year. In the event that a written agreement is not reached with these entities by March 31, 2001, management intends to create a reserve for the unpaid balance.

An allowance of $53,372 has been established for other accounts receivable as of December 31, 2000.

All of ICANN's cash and cash equivalents are maintained at one commercial bank. At December 31, 2000, ICANN had cash in the bank in excess of Federal Deposit Insurance Corporation (FDIC) insurance limits of approximately $577,000.

Property and equipment - Property and equipment are stated at cost or, for contributed items, at fair market value at date of contribution. The equipment, furniture and fixtures are being depreciated using the accelerated method over estimated useful lives of five to seven years or the remaining lease term, whichever is shorter.

Deferred revenue/Accreditation fees - Accreditation fees attributable to future activities are included in cash and cash equivalents or accounts receivable and reflected as deferred revenue until earned.

Promises to give - Unconditional promises to give that are expected to be collected within one year are recorded at estimated net realizable value. Unconditional promises to give that are expected to be collected in future years are recorded at the present value of the estimated future cash flows. Conditional promises to give are not included as support until the conditions are substantially met.

Contributed services - Contributed services are recognized only if the services (a) create or enhance long-lived assets, or (b) require specialized skills, are provided by individuals possessing those skills and would typically need to be purchased if not provided by donation. For the six months ended December 31, 2000, contributed legal services totaling $87,500 are included in the statement of activities as contributed services and professional services expense.

Income taxes - ICANN is exempt from federal and state income taxes under the provisions of Section 501(c)(3) of the Internal Revenue Code and Section 23701(d) of the California Revenue and Taxation Code. Accordingly, no provision for income taxes has been made in the accompanying financial statements.

Use of estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

NOTE C - ACCOUNTS RECEIVABLE

Accounts receivable totaling approximately $2,361,000 at December 31, 2000 include amounts receivable from ccTLDs, gTLDs and IP address registries of $710,000, $1,213,000, and $438,000 respectively, for various registry and accreditation fees. Refer to NOTE B (concentration of credit risk) regarding verbal understandings on ccTLD receivables and management policy with respect to establishing appropriate allowance for doubtful accounts.

NOTE D - PROPERTY AND EQUIPMENT

Property and equipment at December 31, 2000 consists of the following:

Computer equipment	$222,833
Furniture and fixtures	35,741
Construction in progress	45,291
	303,865
Less: accumulated depreciation	64,732
	$ 239,133

NOTE E - NOTES PAYABLE

As of December 31, 2000, notes payable are summarized as follows:

Note payable to Cisco Systems, Inc., dated August 2, 1999, bearing interest at 6.5%; principal and interest payable at maturity date on February 2, 2001; unsecured. Note paid in full on maturity date.		$ 150,000
Note payable to Deutsche Telekom AG, Inc., dated October 13, 1999, bearing interest at 6.6% through October 12, 2000; subsequent to October 12, 2000 the interest rate was increased to 7.29%; principal and unpaid interest due on October 12, 2001; unsecured.		200,000
Note payable to 3COM, dated August 23, 1999, bearing interest at 6.5%; principal and interest payable at maturity date on August 23, 2001; unsecured.		175,000
Note payable to MCI Worldcom, Inc., dated July 28, 1999, bearing interest at 6.5%; principal and interest payable at maturity date on July 28, 2001; unsecured.		500,000
Note payable to USC/ISI for construction of leasehold improvements, dated July 28, 2000, bearing interest at 11%; principal and interest payable in equal monthly installments of $1,229 through September 1, 2003.		33,939
		$1,058,939

Scheduled principal payments on debt are as follows:

NOTE F - COMMITMENTS AND CONTINGENCIES

Lease commitment - In January 1999, ICANN entered into a five-year sublease agreement for an office facility. Future minimum lease payments for the remaining term under the operating lease, including addendums, as of December 31, 2000 are as follows:

Rent and other facilities costs totaled $71,023 for the six months ended December 31, 2000.

Legal matters - In the ordinary course of business, ICANN is subject to lawsuits and other potential legal actions. In the opinion of management, such matters will not have a material effect on the financial position of ICANN.

NOTE G - RELATED PARTY TRANSACTIONS

The services of ICANN's president and chief executive officer are provided to ICANN through a professional services agreement with a company that is owned by the president and his spouse. Total payments for the six months ended December 31, 2000, including fees for professional services and reimbursed travel, were $127,042.

NOTE H - TEMPORARILY RESTRICTED NET ASSETS

Temporarily restricted net assets totaling $13,397 at December 31, 2000 were restricted by donors for specific activities and projects as follows:

International Bank for Reconstruction and Development

$13,397