Financial Statements

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  • 1. Financial Statements 2006 table of content
  • 2. table of content
  • 3. Table of Contents Key figures 4 Buma five-year plan 6 Stemra five-year plan 7 Report of the management boards 8 Directors’ report 10 Buma financial statements for 2006 13 Stemra financial statements for 2006 31 Composition of the management boards and directors 47 3 Financial Statements 2006 table of content
  • 4. Key figures buma/Stemra turnover development Results of buma/Stemra Turnover in EUR millions Result in EUR millions 200 20 15 150 10 5 100 0 -5 50 -10 -15 0 -20 2002 2003 2004 2005 2006 2002 2003 2004 2005 2006 Stemra 70,432 61,972 60,757 53,455 48,421 Buma 111,577 106,002 112,770 113,575 119,972 Financial result Buma Profit/loss on ordinary activities Stemra Operating loss breakdown of 2006 turnover in percentages - buma breakdown of 2006 turnover in percentages - Stemra 0.5% Performing Rights Online Licensing 9.8% HHome Copy/Lending Rights 9.5% Cable 11.4% Mechanical Rights Abroad 10.5% Workplaces 2.2% Mechanical Rights Online 8.8% Sales Outlets Licensing 7.3% Performing Rights Abroad 12.6% Radio & TV Mechanical Rights 35.2% Radio & TV Performing Rights 49.4% Biem Phonomechanical Rights/ 15.3% Stage Central Licensing 12.9% Catering 14.6% Special Licensing/Private Labels Distribution by buma Distribution by Stemra Royalties in EUR millions Royalties in EUR millions 110 80 100 90 80 60 70 60 40 50 40 30 20 20 10 0 0 2002 2003 2004 2005 2006 2002 2003 2004 2005 2006 Associates and members Central licensing Foreign organisations Associates and participants Administrative costs deducted Foreign organisations Administrative costs deducted 4 Buma/Stemra table of content
  • 5. buma/Stemra staffing levels As at year-end 350 300 Number of FTEs 250 200 150 100 50 0 2002 2003 2004 2005 2006 Part-time FTEs Full-time FTEs Net turnover of Buma can be specified as follows: (EUR x 1,000) 2006 2005 2004 2003 2002 Radio & TV Performing Rights 42,286 41,981 41,180 37,739 47,519 Stage 18,354 15,499 15,443 14,910 11,620 Catering 15,431 14,582 15,279 14,683 13,876 Workplaces 12,620 11,853 11,172 10,805 10,055 Sales Outlets 10,605 9,935 10,389 9,806 9,379 Performing Rights Online Licensing 564 331 380 201 591 Cable 11,387 11,110 10,495 10,998 10,481 Performing Rights Abroad 8,725 8,284 8,432 6,860 8,056 119,972 113,575 112,770 106,002 111,577 Net turnover of Stemra can be specified as follows: (EUR x 1,000) 2006 2005 2004 2003 2002 Biem Phonomechanical rights/Central Licensing 23,917 25,859 30,474 33,627 37,478 Special Licensing/Private labels 7,064 9,540 8,421 8,648 7,865 Radio & TV Mechanical Rights 6,124 7,430 10,376 10,040 13,103 Mechanical Rights Online Licensing 1,081 827 833 1,005 - Home Copy - Lending Rights 4,727 5,093 5,296 3,404 5,037 Mechanical Rights Abroad 5,508 4,706 5,357 5,248 6,949 48,421 53,455 60,757 61,972 70,432 5 Financial Statements 2006 table of content
  • 6. Buma five-year plan for 2002 to 2006 Buma five-year plan for 2002 to 2006 (EUR x 1,000) 2006 2005 2004 2003 2002 Turnover 119,972 113,575 112,770 106,002 111,577 Profit and loss accoun Income 2,828 2,764 2,723 2,951 2,578 Expenses -14,772 -14,129 -13,790 -12,706 -12,696 Operating profit/loss -11,944 -11,365 -11,067 -9,755 -10,118 Financial result 9,392 8,400 8,148 11,497 2,780 Profit/loss on ordinary activities -2,552 -2,965 -2,919 1,742 -7,338 Extraordinary loss - - - -1,050 -1,500 Result -2,552 -2,965 -2,919 692 -8,838 Distribution To be distributed at year-end 136,798 128,614 126,012 116,484 121,680 Available for distribution 121,578 114,814 113,356 110,128 105,989 Key index figures Total turnover index (2002 = 100) 108 102 101 95 100 Operating costs index (2002 = 100) 116 111 109 100 100 To be distributed at year-end / available 112.5% 112.0% 111.2% 105.8% 114.8% Operating costs as % of turnover 12.3% 12.4% 12.2% 12.0% 11.4% Available for distribution as % of turnover 101.3% 101.1% 100.5% 103.9% 95.0% 6 Buma/Stemra table of content
  • 7. Stemra five-year plan for 2002 to 2006 Stemra five-year plan for 2002 to 2006 (EUR x 1,000) 2006 2005 2004 2003 2002 Turnover 48,421 53,455 60,757 61,972 70,432 Profit and loss account Income 5,248 4,916 5,089 5,675 5,541 Expenses -9,652 -9,296 -8,930 -9,964 -9,663 Operating profit/loss - 4,404 -4,380 -3,841 -4,289 -4,122 Financial result 4,325 4,226 4,201 4,544 4,548 Profit/loss on ordinary activities -79 -154 360 255 426 Extraordinary loss - - - -750 -1,500 Result -79 -154 360 -495 -1,074 Distribution To be distributedat year-end 51,332 56,513 51,774 47,303 50,278 Available for distribution 50,344 55,652 61,868 61,743 70,271 Key index figures Total turnover index (2002 = 100) 69 76 86 88 100 Operating costs index (2002 = 100) 100 96 92 103 100 To be distributed at year-end /available 102.0% 1 01.5% 83.7% 76.6% 71.5% Operating costs as % of turnover 19.9% 17.4% 14.7% 16.1% 13.7% Available for distribution as % of turnover 104.0% 1 04.1% 101.8% 99.6% 99.8% 7 Financial Statements 2006 table of content
  • 8. Report of the Management Boards Financial Statements The new website which was introduced in September represents a We are pleased to present the financial statements of Vereniging Buma significant step forward in terms of the level of service we provide. [Buma Association] and Stichting Stemra [Stemra Foundation]. Both Right owners now have direct online access to our administrative sys- sets of financial statements received an unqualified auditor’s report tems in so far as it concerns their own accounts. In 2007 the website following auditing by KPMG Accountants N.V. We recommend that will also offer the possibility for users to apply for and obtain licences. you approve the 2006 financial statements of Buma and Stemra, including the proposals by the board of directors, and discharge the After a few months of preparation in the course of 2006, Buma’s management boards and the board of directors. management board also took an important decision concerning their strategy with regard to supporting Dutch music copyrights. Management boards The existing Conamus Foundation, financed by Buma, has always The management boards of Buma and Stemra met seven times during focused on supporting Dutch music on a domestic and international the reporting year. The Supervisory Board met five times. scale. In addition, Buma itself was responsible for supporting music in the classical sector, as well as jazz and cabaret. These activities were During the year under review, considerable attention was paid to the placed in a single group in the course of 2006 and transferred to the role that our organisations would like and need to play in the realm of Buma Culture Foundation. European music copyrights. The basic premise encompasses the policy plans of the European Commission, which focus on stimulating mutual The new pension plan for music authors commenced in 2006. competition between rights organisations. The emphasis is on giving Unfortunately, a great deal of time was taken up by acquiring the right owners the freedom to be represented by the rights organisation obligatory participation of independent artists in the new occupational of their choice when it comes to the use of their works in an online pension scheme. As a result, circumstances changed considerably, environment. This can clearly have significant implications for our requiring numerous new adaptations. But by the end of 2006, aside organisations. Fortunately, the organisations have carefully prepared from a number of minor points, all those who were eligible for the themselves for this development in recent years. In 2006, this enabled pension scheme had joined the new system. us to clearly define the future role of our organisations and to take decisions with regard to realising that role. It is our ambition to During the reporting year, the management boards extensively grow into one of the larger music copyright organisations in Europe. discussed the progress of the implementation of the new computer However, in order to become and remain an attractive partner for system Axapta, the licences for online music use, the relationship with domestic and international right owners and users, we will need to keep Creative Commons and the results achieved with the Fingerprinting our costs as low as possible. As a result, we have decided to outsource a system. In addition, the annual report for 2005 was discussed and significant proportion of the back-office activities to a third party. The attention was paid to the Vaste Commissie Plagiaat (Permanent organisations will be geared to the international role we want to fulfil. Committee on Plagiarism), the new pension plan for music publishers, arbitration rules, the Cannes Agreement, the investment policy and the At the Joint Meeting of Members and Associates of the Vereniging budgets for 2007 for Buma and Stemra. Buma and Stichting Stemra, a decision was taken to commence for- mal preparations for the possibility of including copyright and other The Annual General Meeting of Members and Affiliates, which was legal entities as right owners. This concerns the so-called ‘Auteurs BV’ held at the Schouwburg in Amstelveen for the second time, re-elected [Dutch private limited company for authors]. There is an increasing Messrs. Van Empelen, Schrama and Abdoelbasier. demand for Buma/Stemra to make it possible for payments to go to Messrs. Westbroek and Mensink were appointed to the management the personal BVs of authors as this offers benefits with regard to value board of Buma. The meeting re-elected Messrs. Brands and Kosterman added tax. The decision that has been taken opens the door to the fur- and appointed Mr. Bruens to the management board of Stemra. ther elaboration of the Auteurs BV to acquire the role of right owners in regulations and contracts. This year was the second time that the annual meeting included a public section to which representatives of music users, government authori- Much time was spent on the discussion concerning Flexible Collective ties, politics and the media were invited. After a detailed explanation Management. Within this framework, the organisations are looking of the policy of Buma/Stemra by Chairman Mr. J. Boerstoel, State for ways to improve the level of service provided to participants, and Secretary Ms. K. van Gennip of Economic Affairs spoke about creativity to offer more tailor-made solutions, while retaining the benefits of the and entrepreneurship. The open section of the annual general meeting existing collective management. The initial details of this concept were included a performance by Jeroen van Merwijk, winner of the 2005 presented to the organisations in the autumn. It involves three projects Annie M.G. Schmidt Award. that will be tested in the first half of 2007. 8 Buma/Stemra table of content
  • 9. The meeting said farewell to Jan Boerstoel as chairman. He stood up for Buma in his final speech. On behalf of the management boards, vice-chairman Mr. K. Boehmer thanked Mr. Boerstoel for the great contribution he had made during his ten years as chairman. He commented on how Buma/Stemra had changed over this period into an efficiently operating organisation, where improving the level of service provided to right owners and tough cost control go hand in hand. At the meeting of 6 September, Mr. K. Boehmer was appointed chairman of the management boards of both Buma and Stemra. The management boards are extremely concerned about the turnover development at the organisation. It is clear that the trend of online music use offers insufficient compensation for the drop in sales of CDs and DVDs. Also against this background, it is important for the com- ing period that Buma/Stemra succeeds in generating extra turnover by attracting foreign right owners and acquiring contracts with large international music users. We can only safeguard the continuity of our activities in the long term by increasing turnover and reducing costs. The management boards of Buma and Stemra Hoofddorp, 4 April 2007 9 Financial Statements 2006 table of content
  • 10. Directors’ Report General remained virtually unchanged at EUR 42.3 million. Turnover increased A stringent cost policy, coupled with the highest level of service, by 5.3% in the Performance Rights Abroad category. leading to the highest possible payments to our right owners, has been at the heart of Buma/Stemra’s financial policy for the past decade. Stemra’s turnover Our cost percentages, which are among the lowest in the sector of Stemra’s turnover continued to be under great pressure in 2006, due copyright organisations, prove that we are successful in this. In 2006, to the downward-moving music market. In the Netherlands, CD and preparations were made for a significant step, which is expected to start DVD sales dropped even further in 2006, not only in terms of quantity, having an impact on the organisation’s financial framework from 2008 but also in terms of money. As a consequence, Stemra was forced to onwards. It involves outsourcing a significant proportion of the back- accept a drop in turnover of EUR 5 million to EUR 48 million. Nearly office processes. This will make a significant contribution towards all the categories experienced a drop in turnover in 2006. In the case further lowering the cost levels of Buma/Stemra on a structural basis. of Radio & TV Mechanical Rights, the drop was limited to just over EUR 1.3 million. Turnover in the Mechanical Rights Abroad category It was decided to redefine a number of turnover categories in this increased to EUR 5.5 million partly thanks to sales of the Rolling Stones annual report, so that the origin of the relevant turnover is expres- “A Bigger Bang” CD in 2005 and extra turnover generated from sales sed more clearly. This has resulted in the Radio & Television and of the “Hung Up” CD by Madonna. The Special Licensing/Private Label Satellite categories being combined at Buma to become the Radio & TV category had to deal with contracting parties who switched to a foreign Performing Rights category. The Online Licensing category has become rights organisation. The Mechanical Rights Online Licensing category a category in its own right and is now called Performing Rights Online formed a positive exception, as its turnover increased. Licensing. The same applies to the Foreign turnover category, which is now called Performing Rights Abroad. Buma’s result Buma’s result amounted to a EUR 2.6 million loss compared with a Starting with this annual report, the following turnover categories EUR 3.0 million loss in 2005. It should be noted that the result impro- are going to be included in the financial records for Stemra: the Radio ved despite expenses on major investments. These mainly concern the & Television and Satellite turnover categories have been combined further development of the fingerprinting system, the implementation in the Radio & TV Mechanical Rights category, whereby the Online of the integrated software system in which all administrative proces- Licensing category has become a category in its own right and is now ses have been brought together, and the development of a website and called Mechanical Rights Online Licensing. The same applies to the portal specifically geared to this, which enables right owners to view Foreign turnover category, which is now called Mechanical Rights their accounts online. Abroad. Turnover in the Dutch Industry, Central Licensing and Central Licensing Foreign categories have now been incorporated into Biem Expenses rose by 4.5% from EUR 14.1 million in 2005 to Phonomechanical Rights/Central Licensing. The Special Licensing EUR 14.8 million in 2006. On the other hand, income amouted and Private Labels categories have also been combined. Home Copy/ to EUR 2.8 million. As a result, the operating loss amounted to Lending Rights turnover has remained unchanged. In order to facilitate EUR 11.9 million compared with EUR 11.4 million the year before. comparison with previous years, the turnover distribution for Buma and The positive development of the stock markets contributed to a rise in Stemra has been adjusted to the new categories for the period up to the the financial result from EUR 8.4 million in 2005 to EUR 9.4 end of 2002. million in 2006. It was thus possible to add EUR 1.3 million to the revaluation reserve. The final result was a EUR 2.6 million loss Buma’s turnover (2005: a EUR 3.0 million loss). In 2006, Buma’s turnover rose by 5.6% (EUR 6.4 million) to EUR 120 million. All the categories contributed to this turnover increase, partly Translated into cost percentages, this result means that Buma only thanks to the indexing of rates in 2006. The biggest increase took withholds 2.1% of each euro collected to cover the costs it incurs. place in the Stage category. The concert series by Marco Borsato in the This once again makes Buma one of the most efficient music copyright Gelredome and the concerts given by Robbie Williams, Madonna and organisations, with by far the lowest cost withholding percentage. the Rolling Stones in the ArenA contributed to this. Turnover in the Catering sector rose by 5.8% to EUR 15.4 million, Stemra’s result partly due to the fact that various amateur football clubs were invoiced Stemra’s result improved slightly in 2006 and amounted to a loss of for arrears. The continued focus on marketing also resulted in increases EUR 0.1 million. Income increased somewhat to EUR 5.2 million in other categories. Sales Outlets rose by 6.7%, in particular in the sec- (2005: EUR 4.9 million). Expenses amounted to EUR 9.7 million tor Background Music Mechanical. Supermarkets & Workplaces rose (2005: EUR 9.3 million). Income from investing activities went up by 6.5% as a result of an increase in the Social Work and Healthcare slightly to EUR 4.3 million compared with EUR 4.2 million in 2005. sectors. Turnover in the Radio & TV Performance Rights category The result from ordinary business operations and the final result 10 Buma/Stemra table of content
  • 11. amounted to a loss of EUR 0.1 million. This was a slight improve- Outlook ment compared with 2005, which was rounded off with a loss of Compared with 2006, we see possibilities for increasing Buma’s EUR 0.2 million. turnover in the current financial year, while Stemra’s turnover will continue to drop. Although Stemra does indeed benefit from the Accounting policies for determining the investment growth of the online music market, the amounts involved are not yet result big enough to compensate for the drop in sales of CDs and DVDs. Shares and bonds are stated on the balance sheet at market prices at Internally, attention will be focused on such points as implementing balance sheet date. The ensuing price performance is not taken directly the outsourcing of a number of Back Office activities. We have high as result to the profit and loss account, but is first incorporated into the expectations with regard to the new website and portal that were revaluation reserve. Insofar as the balance of this revaluation reserve launched in the autumn of 2006. They have made it possible for right allows it, in addition to the share dividend received and, from the owners to complete a significant number of their administrative tasks beginning of 2006, in addition to the interest received on the fixed- with us online. Our ambition is to improve the online services provided income portfolio, a ‘standard return’ is included in the financial result. to music users in the current financial year so that, for example, they The method above fits in with the requirement that the recorded invest- can apply for and obtain licences online. We would like to thank our ment results on shares and fixed-income securities show the most even employees for their commitment and our right owners and users for development possible in the profit and loss account over the years. their confidence in our organisation over the past year. Distribution The board of directors of Buma/Stemra For the year 2006, Buma had EUR 121.6 million available for distribu- Hoofddorp, 4 April 2007 tion, compared with EUR 114.8 million for the previous year. In terms of a percentage of turnover, 101.3% is available for distribution. In 2005, this amounted to 101.1%. Stemra has EUR 50.3 million available for distribution (2005: EUR 55.7 million); as a percentage of turnover, this amounts to 104.0% (2005: 104.1%). Commission rates In 2006, the European Commission terminated the procedure concerning the Cannes Extension Agreement of 18 November 2003 which had been presented to it. Once the Commission had indicated its objections, music publishers and music copyright organisations amended the agreement on the points in question. The European Commission subsequently approved these amendments, as a result of which the procedure was brought to a close. No changes were introduced to the commission rates that apply. Organisation In 2006, a decision was taken to outsource a number of activities of the Back Office to a third party. Expectations are that full agreement can be reached in 2007, and that the transfer of the activities will take place during the present financial year. As a consequence of this, a large number of jobs will be lost. Even though some of the existing costs will be replaced by the cost of outsourcing the activities, the move will result in savings in the longer term. Buma/Stemra took this decision because this move will enable it to reduce costs on a structural basis. Secondly, it will allow the organisa- tion to concentrate fully on improving the level of service provided to right owners who are already associates, and on attracting new right owners and large international music users in the Netherlands and beyond. 11 Financial Statements 2006 table of content
  • 12. table of content
  • 13. Financial statements for 2006 Buma table of content
  • 14. Buma balance sheet as at 31 December 2006 Buma balance sheet as at 31 December 2006 After appropriation of the result (EUR x 1,000) 31 December 2006 31 December 2005* Assets Fixed assets Intangible fixed assets (1) Company information system 914 2,063 914 2,063 tangible fixed assets (2) Hardware/Computer equipment 424 519 Other operating assets 858 1,435 1,282 1,954 financial fixed assets (3) Securities 173,938 180,089 Participating interests -549 -232 173,389 179,857 Current assets accounts receivable Debtors 12,181 12,529 Current account balances (4) 12,197 8,775 Taxes and dividends 326 83 Other receivables and prepayments (5) 8,326 8,190 33,030 29,577 cash at bank and in hand (6) Time deposits 20,689 8,808 Other cash at bank and in hand 2,052 1,311 22,741 10,119 231,356 223,570 Liabilities funds (7) 16,589 13,860 Revaluation reserve financial fixed assets (8) 14,475 13,132 31,064 26,992 Provisions (9) 15,455 17,482 46,519 44,474 current liabilities Royalties to be distributed (10) 136,798 128,614 Debts to credit institutions - 3,000 Creditors 7,346 5,188 Current account balances (11) 37,030 36,480 Taxes and social security contributions 696 379 Other accruals and deferred income (12) 2,967 5,435 184,837 179,096 231,356 223,570 * adjusted for comparison purposes. 14 Buma/Stemra table of content
  • 15. Buma profit and loss account for 2006 Buma profit and loss account for 2006 (EUR x 1,000) 2006 2005* Income Administrative costs charged 689 534 Entrance fees and annual allowances 457 495 Other income 1,682 1,735 2,828 2,764 Expenses Staff costs (13) 8,949 8,680 Accommodation costs 1,110 1,068 Depreciation and amortisation 594 547 Investment costs 1,459 1,094 Other costs 2,660 2,740 14,772 14,129 Operating profit/loss -11,944 -11,365 Financial result (14) 9,392 8,400 Result -2,552 -2,965 Result deducted from royalties to be distributed -2,552 -2,965 * adjusted for comparison purposes. 15 Financial Statements 2006 table of content
  • 16. Buma cash flow statement Buma cash flow statement (EUR x 1,000) 2006 2005 cash flow from operating activities Turnover 119,972 113,575 Distribution -98,640 -97,775 Operating profit/loss -11,944 -11,365 Depreciation and amortisation 594 547 Investment costs, including charge-on 2,063 1,823 Depreciation and amortisation charged on 421 451 Withdrawal from Fund for cultural and social purposes -7,867 -5,247 Changes in indemnification obligation 26 -1 Withdrawal from provisions -2,053 -2,294 Result of participating interests 317 232 Changes in accounts receivable (excl. interest due) -3,538 -3,902 Changes in current liabilities (excl. royalties to be distributed) 557 -323 -2,981 -4,225 Cash flow from business operations -92 -4,279 Interest received on securities 8,617 7,740 Interest paid on securities -712 -549 7,905 7,191 Cash flow from operating activities 7,813 2,912 cash flow from investing activities Investments in intangible fixed assets -989 -2,401 Investments in tangible fixed assets -276 -401 Disposal of tangible fixed assets 8 - Disposal of participating interests - 229 Cash flow from investing activities -1,257 -2,573 cash flow from investing activities Purchase of securities -120,468 -90,254 Repayments/sales 129,534 83,827 Cash flow from securities trading 9,066 -6,427 changes in cash at bank and in hand and debts to credit institutions 15,622 -6,088 16 Buma/Stemra table of content
  • 17. Notes to the Buma balance sheet and profit and loss account General Tangible fixed assets The valuation of tangible fixed assets takes place on the basis of histori- objective of Vereniging buma [buma association] cal cost less cumulative depreciation. The Association’s aim is to promote both the tangible and intangible interests of music authors and publishers, without a profit motive of its The depreciation is calculated as a percentage of the purchase price own. The Association participates in the implementation and promotion according to the straight-line method on the basis of the expected of various activities in this context for the purpose of this objective. economic life. Accounting policies for the valuation of assets and liabilities and The following expected economic lives are used: determination of result • Hardware/Computer equipment 3 years General • Other operating assets 3 - 7 years The policies used for the valuation of assets and liabilities and the determination of result are based on historical cost. Financial fixed assets Bonds and shares are stated at market value. Value adjustments are Unless stated otherwise, assets and liabilities are stated at face value. taken directly to the revaluation reserve. This prevents the operating Income and expenses are allocated to the period to which they apply. result from being influenced too strongly by price fluctuations. If the revaluation reserve is insufficient, the reductions in value are Where applicable, the figures for the previous financial year have been charged to the result. Each year, the size of the revaluation reserve adjusted to facilitate comparison with 2006 needed to absorb these price fluctuations is determined by the board of directors in consultation with its asset managers. Accounting policies for the conversion of foreign currencies If the revaluation reserve is larger than deemed necessary, this surplus Transactions in foreign currencies are converted to euros at the appli- is eligible for addition to the royalties to be distributed. With regard to cable exchange rate on the transaction date. Monetary assets and the result for shares, a standard return is entered, if possible. liabilities are converted to euros at balance sheet date at the exchange rate applicable on that date. Exchange rate differences occurring during Participating interests conversion are taken to the profit and loss account. Non-monetary Participating interests are capital interests in which significant influence assets and liabilities in foreign currency that are valued on the basis of is exercised on the business and financial policy. Participating interests historical costs are converted at the applicable exchange rate on the are included at net asset value. transaction date. Standard return Principles of consolidation The standard return is calculated as a percentage of the average value In view of the transparent structure, Stichting Buma Stemra Obligatie- of the shares over the financial year, and comprises the effective return fonds [Buma Stemra Bond Fund Foundation] and Stichting Buma Stemra on 5-year Euro government bonds at the end of the financial year plus Aandelenfonds [Buma Stemra Equity Fund Foundation] are included in a risk mark-up. The difference between the standard return and the the Buma financial statements by means of proportional consolidation. dividend received on shares is withdrawn from the revaluation reserve, Assets and liabilities, as well as income and expense, are included in if possible. proportion to the participating interest. On the basis of the information provided in the notes, no separate financial statements for Buma Accounts receivable are included. Accounts receivable are stated at face value less a provision for uncol- lectability. Intangible fixed assets The intangible assets concern the expense for the new business infor- Determination of result mation system to support the primary business processes. These are Income and expense are recorded in the year to which they apply. valued at historical cost less cumulative investment expenses or amorti- The result is determined by calculating the difference between the sation. The investments are charged to the profit and loss account over income realised on the one hand, and the costs and other expenses a period of three years. incurred for operation for the year on the other. The balance of the profit and loss account and the movement in the funds is therefore added to/deducted from the royalties to be distributed. 17 Financial Statements 2006 table of content
  • 18. Notes to the Buma balance sheet and profit and loss account Turnover In the financial statements, the turnover in royalties is added to the roy- alties to be distributed. Buma includes the exploitation of performing rights in the turnover, insofar as these relate to the financial year, can be determined in a reliable manner, and there is reasonable certainty that the revenue is collectible. Taxes With regard to Buma, the Dutch tax authorities stipulated in an agree- ment dated 6 November 2001, determining the legal relationship between the parties, that Vereniging Buma is liable to pay corporation tax. This agreement is valid until 31 December 2007. Foreign withhol- ding tax available for set-off and Dutch dividend tax may be deducted from the tax due by virtue of this agreement determining the legal relationship between parties. A tax item is only included in the financial statements if corporation tax is still owed after deduction of the foreign withholding tax available for set-off. accounting policies for cash flow statement The cash flow statement is drawn up according to the indirect method. Use of estimates Drawing up the financial statements requires the management to form opinions and make estimates and assumptions that influence the appli- cation of policies and the reported value of assets and liabilities, and of income and expense. The estimates and the associated assumptions are based on past expe- rience and various other factors that are considered reasonable in view of the circumstances. The outcome forms the basis for the opinion on the carrying value of assets and liabilities that does not emerge clearly from other sources. The actual outcomes may deviate from these estimates. 18 Buma/Stemra table of content
  • 19. Notes to the Buma balance sheet as at 31 December 2006 (1) Intangible fixed assets The changes in the intangible fixed assets can be specified as follows: (EUR x 1,000) business information system Actual cost as at 1 January 2006 5,454 Cumulative investment costs -3,391 balance sheet value as at 1 January 2006 2,063 Change during financial year: Investments 989 Amortisation -75 Investment costs -2,063 -1,149 Actual cost as at 31 December 2006 6,443 Cumulative amortisation -75 Cumulative investment costs -5,454 balance sheet value as at 31 December 2006 914 Amortisation in number of years on average: 3 The intangible assets concern the expense for the new business infor- mation system to support the primary business processes. It consists of a basic investment of EUR 5.5 million, which has been charged to the profit and loss account over a period of three years from 2004 until the end of 2006. In the autumn of 2006, a further investment of EUR 1.0 million was made in the online environment to increase effi- ciency and maintain cost leadership for the benefit of our right owners both at home and abroad. This investment is to be amortised using the straight-line method over a period of three years starting from the last quarter of 2006. The investment costs accounted for in the statement of movements are partly charged on as the assets in question are used by Stemra. 19 Financial Statements 2006 table of content
  • 20. Notes to the Buma balance sheet as at 31 December 2006 (2) tangible fixed assets The changes in the tangible fixed assets can be specified as follows: (EUR x 1,000) Hardware/ other total computer equipment operating assets Actual cost as at 1 January 2006 1,570 5,156 6,726 Cumulative depreciation -1,051 -3,721 -4,772 balance sheet value as at 1 January 2006 519 1,435 1,954 Changes during financial year: Investments 268 8 276 Depreciation -355 -585 -940 Disposals -160 - -160 Depreciation of disposals 152 - 152 -95 -577 -672 Actual cost as at 31 December 2006 1,678 5,164 6,842 Cumulative depreciation -1,254 -4,306 -5,560 balance sheet value as at 31 December 2006 424 858 1,282 Depreciation in number of years on average: 3 7 The depreciation accounted for in the statement of movements is partly charged on as the assets in question are used by Stemra or sub-tenants. The amounts charged on to Stemra and the sub-tenants are EUR 0.2 million and EUR 0.2 million respectively. 20 Buma/Stemra table of content
  • 21. Notes to the Buma balance sheet as at 31 December 2006 (3) financial fixed assets The changes in the financial fixed assets can be specified as follows: (EUR x 1,000) Securities Participating total interests balance sheet value as at 1 January 2006 180,089 -232 179,857 Changes during the financial year: Acquisitions 120,468 - 120,468 Repayments/sales -129,534 - -129,534 Price movements 2,915 - 2,915 Result of participating interests - -317 -317 -6,151 -317 -6,468 balance sheet value as at 31 December 2006 173,938 -549 173,389 Shares and bonds of Vereniging Buma are carried at market value. The results on shares are stated at a standard return, which was 6.3% for 2006 (2005: 5.6%) Valuation differences on bonds and shares are charged or credited to the revaluation reserve for financial fixed assets. The total face value of the bonds amounted to EUR 110.3 mil- lion (2005: EUR 112.8 million) compared to a market value of EUR 112.3 million (2005: EUR 117.9 million). The participating interests are Stichting Buma/Stemra projects in formation, which are stated at net asset value. Buma’s securities have been placed in Stichting Buma Stemra Obliga- tiefonds [Buma Stemra Bonds Fund Foundation] and Stichting Buma Stemra Aandelenfonds [Buma Stemra Equity Fund]. The foundations are proportionally consolidated in Buma’s financial statements at an average rate of 64.1% (2005: 63.9%). The participations give Vereniging Buma a 68.1% interest in Stichting Buma Stemra Aandelenfonds [Buma Stemra Equity Fund Foundation] [Buma Stemra Equity Fund] (2005: 68.0%) and a 62.0% interest in Stichting Buma Stemra Obligatiefonds [Buma Stemra Bond Fund Foundation] (2005: 62.0%) at year-end 2006. 21 Financial Statements 2006 table of content
  • 22. Notes to the Buma balance sheet as at 31 December 2006 financial fixed assets (continued) The fully-combined financial statements of Stichting buma Stemra obligatiefonds (bSo) [buma Stemra bond fund foundation] and Stichting buma Stemra aandelenfonds (bSa) [buma Stemra equity fund foundation] can be represented in condensed form as follows: (EUR x 1,000) 31 December 2006 31 December 2005 Assets fixed assets Financial fixed assets 271,748 281,751 other assets 42,241 18,775 313,989 300,526 Liabilities Participants account Participants, including current account with participants 334,734 322,660 Overall revaluation reserve -21,133 -22,500 313,601 300,160 current liabilities Creditors 388 366 313,989 300,526 (4) current account balances The current account with Stemra includes a loan of EUR 6.6 million from Buma to Stemra. This loan is subject to the Euribor 3-month rate. The term of the loan is three months from the commencement date of the loan agreement. (5) other receivables and prepayments (EUR x 1,000) 31 December 2006 31 December 2005 Cable fees due 4,379 4,301 Interest due 2,813 2,898 Other receivables and prepayments 1,134 991 8,326 8,190 (6) cash at bank and in hand All the cash at bank and in hand is freely available. 22 Buma/Stemra table of content
  • 23. Notes to the Buma balance sheet as at 31 December 2006 Funds (7) funds The changes in the funds can be specified as follows: (EUR x 1,000) balance as at additions Withdrawals balance as at 1 January 2006 2006 2006 31 December 2006 Continuity fund 4,457 - - 4,457 Fund for cultural and social purposes 9,403 10,596 -7,867 12,132 13,860 10,596 -7,867 16,589 balance as at additions Withdrawals balance as at 1 January 2005 2005 2005 31 December 2005 Continuity fund 4,457 - - 4,457 Fund for cultural and social purposes 4,417 10,233 -5,247 9,403 8,874 10,233 -5,247 13,860 continuity fund fund for cultural and social purposes The continuity fund’s aims include guaranteeing the continuity of the For the benefit of this fund, in accordance with Article 29, paragraph work. It also serves to fulfil obligations in respect of third parties, in 3 of the Articles of Association, each year a percentage defined by particular with regard to distribution of the royalties yet to be distribu- the management board on the recommendation of the board of direc- ted in accordance with the financial statements. tors, with a maximum of 10%, is deducted from the Dutch royalties available for distribution. The amounts deducted are reserved by the This fund furthermore serves to level out unwanted fluctuations in the management board for payments to institutions or organisations whose amounts available for distribution, resulting, among other things, from purpose is to represent the idealistic or material interests of composers, domestic and international pressure on turnover, as well as continuing lyricists and music publishers, or who otherwise promote Dutch music. changes in the distribution of rights. 23 Financial Statements 2006 table of content
  • 24. Notes to the Buma balance sheet as at 31 December 2006 (8) Revaluation reserve for financial fixed assets The changes in the revaluation reserve financial fixed assets can be specified as follows: (EUR x 1,000) 2006 2005 balance as at 1 January 13,132 4,560 Transaction result and revaluation 2,915 10,174 Withdrawal to the credit of the financial result to standard return -1,572 -1,602 1,343 8,572 balance as at 31 December 14,475 13,132 (9) Provisions The changes in the provisions can be specified as follows: (EUR x 1,000) balance as at additions Withdrawals balance as at 1 January 2006 2006 2006 31 December 2006 Annual allowance for SFB scheme 15,874 - -1,391 14,483 Optimisation of operations 1,140 - -662 478 Indemnification obligation 468 493 -467 494 17,482 493 -2,520 15,455 Provision for annual Sfb allowance The provision for annual SFB allowances concerns a provision for the During the financial year withdrawals were made for the streamlining actual obligations by virtue of the annual allowances paid to (former) of the organisation, which started in 2003. This mainly concerns initial authors and publishers and their next of kin through the Stichting costs of external IT staff and staff redundancy costs. Sociaal Fonds Buma (SFB) [Buma Social Fund Foundation]. Although the obligations have been included provisionally, there is a firm inten- Provision for obligation to indemnify tion to meet the obligations. The part of the provision for which no sub- As a party to the agreements concluded with cable operators concer- sidy has been committed to the SFB as yet is recognised. The expected ning copyright arrangements for relaying programmes from broad- remaining term of the provision is until the end of 2022, and it has been casting companies, Buma has undertaken obligations with regard to calculated on the basis of the nominal amounts of the annual allowances copyright claims that could be enforced against cable operators by third with non-actuarial assumptions with regard to indexing and life expec- parties, not represented in the matter by Buma. tancy. The provision was formed from the Fund for cultural and social purposes; releases are part of the deductions and taken to the Fund. In respect of obligations to indemnify arising from these agreements, the provision for obligations to indemnify amounts to 3% of the Provision for optimisation of operations moneys collected. The international changes with regard to music use and the resulting The addition/withdrawal takes place to the debit/credit of the collection. allocated funds require an adjustment of the organisation in order to optimise the level of service provided in line with domestically and internationally accepted standards and competitive relationships. 24 Buma/Stemra table of content
  • 25. Notes to the Buma balance sheet as at 31 December 2006 (10) Royalties to be distributed (EUR x 1,000) 2006 2005 Royalties to be distributed at the beginning of the year 128,614 126,012 Royalties turnover 119,972 113,575 Addition to Fund for cultural and social purposes -10,596 -10,233 Changes in the royalties to be distributed -2,552 -2,965 available for distribution 235,438 226,389 Distributed in the reporting year: Affiliates and members 54,962 55,600 Foreign organisations 42,021 40,440 Miscellaneous income 1,657 1,735 98,640 97,775 Royalties to be distributed at the end of the year 136,798 128,614 An amount of EUR 4.2 million in indivisible rights will be added to the available amount for distribution, to be included in the 2007 payment (2005: EUR 4.2 million, included in the 2006 payment). available for distribution by buma (EUR x 1,000) 2006 2005 Royalties turnover 119,972 113,575 Indivisible rights 4,158 4,204 Changes in royalties to be distributed -2,552 -2,965 became available for distribution during the year 121,578 114,814 To be distributed at the beginning of the year 128,614 126,012 Available* 117,420 110,610 Distributed -98,640 -97,775 Fund for cultural and social purposes -10,596 -10,233 Royalties to be distributed at the end of the year 136,798 128,614 *Excluding indivisible rights which have already been accounted for in the opening balance sheet. 25 Financial Statements 2006 table of content
  • 26. Notes to the Buma balance sheet as at 31 December 2006 Distribution of turnover buma (EUR x 1,000) 2006 2005* Radio & TV Performing Rights 42,286 41,981 Stage 18,354 15,499 Catering 15,431 14,582 Workplaces 12,620 11,853 Sales Outlets 10,605 9,935 Performing Rights Online Licensing 564 331 Cable 11,387 11,110 Performing Rights abroad 8,725 8,284 119,972 113,575 *The turnover categories were redefined during the reporting year. The figures for the year 2005 have therefore been adjusted for compa- rison purposes The amount available for distribution (including addition for indivisible rights) is allocated to the different categories as followings: (EUR x 1,000) 2006 2005 Live entertainment 16,488 12,156 Entertainment mechanical 31,499 31,281 Radio 5,719 5,791 Television 6,844 6,955 Film 1,662 1,838 Serious categories 3,313 2,466 Cable 10,444 10,160 Satellite 26,288 25,650 International 8,725 8,284 Fund for cultural and social purposes 10,596 10,233 121,578 114,814 26 Buma/Stemra table of content
  • 27. Notes to the Buma balance sheet as at 31 December 2006 (11) current account formulas (EUR x 1,000) 31 December 2006 31 December 2005 Affiliated societies abroad 24,511 24,064 Subsidy obligations 9,969 10,205 Buma members 600 324 Other 1,950 1,887 37,030 36,480 The amounts owed to affiliated societies abroad were largely settled at the beginning of 2007. The subsidy obligations concern subsidies that have been promised to various foundations for social and cultural purposes. (12) other liabilities and accruals (EUR x 1,000) 31 December 2006 31 December 2005 Third-party cable right owners 1,308 4,357 Holiday allowance/annual leave 812 724 Other liabilities and accruals 847 354 2,967 5,435 With effect from the reporting year, the amounts owed to third-party cable right owners are to be settled after the quarter. In previous years, this took place once a year, namely in the year following the reporting year. off-balance sheet commitments In accordance with the decision of the management board, at the Furthermore, there are joint multi-year liabilities for the rental of Xerox end of 2002 part of the bond portfolio of Stichting Buma Stemra printing equipment amounting to EUR 0.1 million a year. In the current Obligatiefonds [Buma Stemra Equity Fund Foundation] amounting to composition, the annual amount for the leasing of cars by Buma/Stemra EUR 27.5 million was pledged as security to ING Bank in connection is EUR 0.2 million. with a cash facility needed for normal operations. The off-balance sheet rental and lease obligations of EUR 8.7 million The financial liability with regard to the business accommodation in can be summarised as follows: Hoofddorp was assumed until 1 August 2011. The annual rent for • less than 1 year: EUR 2.1 million. Buma/Stemra together amounts to approximately EUR 1.8 million. This • between 1 and 5 years: EUR 6.6 million. does not take into account subletting to third parties. • longer than 5 years: nil 27 Financial Statements 2006 table of content
  • 28. Notes to the Buma profit and loss account as at 31 December 2006 Expenses (13) Personnel expenses (EUR x 1,000) 2006 2005* Salaries 8,303 8,459 Social security contributions 1,033 1,012 Pension premiums 800 878 Other staff costs 3,941 3,555 14,077 13,904 Charged to third parties -5,128 -5,224 8,949 8,680 The average number of employees during the reporting year was 197 (2005: 198 employees), which corresponds to an average of 179.8 FTEs (2005: 177.2 FTEs). This includes employees who work partly for Stemra, on the basis of which part of the costs are charged on to Stemra. Buma employs a further 4.5 FTEs, which are charged to other affiliated foundations. (14) Financial result (EUR x 1,000) 2006 2005 Interest income and other income Fixed-income securities Interest received on bonds 5,279 5,043 Shares Share dividend received 2,349 1,693 Withdrawals from revaluation reserve 1,572 1,602 3,921 3,295 Other interest income and similar income 1,221 843 Total income from investments 10,421 9,181 Result of participating interests -317 -232 Interest expenses and other costs -712 -549 9,392 8,400 * adjusted for comparison purposes. 28 Buma/Stemra table of content
  • 29. Other information to: the board of directors and the general assembly of Vereniging buma (buma association) Auditor’s report We have audited the accompanying financial statements 2006 of opinion Vereniging Buma, Hoofddorp, which comprise the balance sheet as at In our opinion, the financial statements 2006 of Vereniging Buma, 31 December 2006, the profit and loss account for the year then ended including the distribution of the received copyrights over 2006, are and the notes. prepared, in all material aspects, in accordance with principles selec- ted and disclosed by the entity, as defined in the notes of the financial Responsibility of the board of directors statements. The board of directors is responsible for the preparation of the financial statements in accordance with principles selected and Amstelveen, 4 April 2007 disclosed by the entity. This responsibility includes: designing, implementing and maintaining internal control relevant to the KPMG ACCOUNTANTS N.V. preparation of the financial statements that are free from material R.J. Groot RA misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. auditor’s responsibility Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our audit in accordance with Dutch law. This law requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor con- siders internal control relevant to the entity’s preparation of the finan- cial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also inclu- des evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 29 Financial Statements 2006 table of content
  • 30. Profit appropriation For Buma, the result for 2006 will be deducted from the royalties to be distributed. Then, according to the assessment of the continuity fund and the revaluation reserve, it will be determined to what extent funds will have to be added to or deducted from this. This movement will also be credited or charged to the royalties to be distributed. As a result of this assessment of the continuity fund and the revaluation reserve, no addition/withdrawal is to take place, as was the case in 2005. A total of EUR 2.6 million will therefore be deducted for 2006 from the copyrights as yet to be paid out (2005: a loss of EUR 3.0 million). Proposal of the board of directors As shown in the financial statements, drawn up by us in accordance with Article 26, paragraph 2 of the Articles of Association, the board of directors proposes the deduction of the negative result of EUR 2.6 million from the royalties to be distributed. The proposal has already been incorporated in the 2006 financial statements. 30 Buma/Stemra table of content
  • 31. Financial statements for 2006 Stemra table of content
  • 32. Stemra balance sheet as at 31 December 2006 Stemra balance sheet as at 31 December 2006 After profit appropriation (EUR x 1,000) 31 December 2006 31 December 2005 Assets Fixed assets tangible fixed assets (1) Hardware/Computer equipment 221 190 221 190 financial fixed assets (2) Securities and private loans 97,809 101,663 Participating interests -549 -233 97,260 101,430 Current assets accounts receivable Debtors 6,647 7,499 Taxes and social security contributions 2,197 1,092 Other receivables and prepayments (3) 1,618 1,758 10,462 10,349 cash at bank and in hand (4) Deposit accounts 9,565 4,478 Other liquid assets 1,137 1,366 10,702 5,844 118,645 117,813 Liabilities foundation capital 1 1 continuity fund (5) 10,390 10,390 Revaluation reserve financial fixed assets (6) 10,672 10,647 21,063 21,038 Provisions (7) 558 1,150 21,621 22,188 current liabilities Royalties to be distributed (8) 51,332 56,513 Debts to credit institutions 13,000 3,000 Creditors 1,084 2,559 Current account balances (9) 12,235 14,609 Other accruals and deferred income (10) 19,373 18,944 97,024 95,625 118,645 117,813 32 Buma/Stemra table of content
  • 33. Stemra profit and loss account for 2006 Stemra profit and loss account for 2006 (EUR x 1,000) 2006 2005* Income Administrative costs charged 4,778 4,389 Entrance fees and annual allowances 456 495 Miscellaneous income 14 32 5,248 4,916 Expense Personnel costs (11) 5,718 5,774 Accommodation costs 740 712 Depreciation and amortisation costs 395 365 Investment costs 604 729 Other costs 2,195 1,716 9,652 9,296 Operating loss -4,404 -4,380 Financial result (12) 4,325 4,226 Result -79 -154 * adjusted for comparison purposes. 33 Financial Statements 2006 table of content
  • 34. Stemra cash flow statement Stemra cash flow statement (EUR x 1,000) 2006 2005 cash flow from operating activities Turnover 48,421 53,455 Distribution -53,523 -48,562 Operating loss -4,404 -4,380 Depreciation and amortisation 395 365 Depreciation and amortisation charged on -267 -257 Withdrawal from provisions -592 -689 Result of participating interests 316 233 Changes in accounts receivable (excl. interest to be received) -253 -1,487 Changes in current liabilities (excl. royalties to be distributed) -3,420 3,376 -3,673 1,889 Cash flow from operating activities -13,327 2,054 Interest received on securities 4,540 4,273 Interest paid on securities -812 -551 3,728 3,722 Cash flows from operational activities -9,599 5,776 cash flow from investing activities Investments in tangible fixed assets -159 -159 Disposal of participating interests - 229 Cash flow from securities trading -159 70 cash flow from securities trading Purchase of securities -62,958 -50,141 Repayments/sales 67,574 46,404 Cash flow from securities trading 4,616 -3,737 changes in cash at bank and in hand and debts to credit institutions -5,142 2,109 34 Buma/Stemra table of content
  • 35. Notes to the Stemra balance sheet and profit and loss account General tangible fixed assets The valuation of tangible fixed assets takes place on the basis of histori- objective of Stichting Stemra cal cost less cumulative depreciation. The Foundation’s objective is to represent and promote both the tangible and non-tangible interests of music authors and publishers Depreciation is calculated as a percentage of the purchase price accor- and other copyright owners, in particular with regard to mechanical ding to the straight-line method on the basis of the expected useful life. reproduction rights. The Foundation’s other goals are exercising and maintaining mechanical reproduction rights for participating authors, The following expected useful lives are used: participating publishers, as well as other authors and copyright owners. • Hardware/Computer equipment 3 years The Foundation participates in the implementation and promotion of various activities in this context for the purpose of this objective. financial fixed assets Bonds and shares are stated at market value. Value adjustments are accounting policies for the valuation of assets and liabilities and incorporated directly into the revaluation reserve. This prevents the determination of result operating result from being influenced too strongly by price fluctua- General tions. If the revaluation reserve is insufficient, the reductions in value The policies used for the valuation of assets and liabilities and the are charged to the result. Each year, the size of the revaluation reserve determination of the result are based on historical cost. Unless stated needed to absorb these price fluctuations is determined by the board otherwise, assets and liabilities are stated at face value. The income of directors in consultation with its asset managers. If the revaluation and expenses are allocated to the period to which they apply. reserve is larger than deemed necessary, the surplus is eligible for addition to the royalties to be distributed. With regard to the result for Where applicable, the figures for the previous financial year have shares, a standard return is entered if possible. been adjusted to facilitate comparisons with 2006. Participating interests accounting policies for the conversion of foreign currency Participating interests are capital interests in which significant influence Transactions in foreign currencies are converted to euros at the is exercised on the business and financial policy. Participating interests applicable exchange rate on the transaction date. Monetary assets and are stated at net asset value. liabilities are converted to euros at balance sheet date at the exchange rate applicable on that date. Exchange rate differences occurring during Standard return conversion are taken to the profit and loss account. Non-monetary The standard return is calculated as a percentage of the average value assets and liabilities in foreign currency that are valued on the basis of of the shares over the financial year and comprises the effective return historical costs are converted at the exchange rate applicable on the on 5-year Euro government bonds at the end of the financial year plus transaction date. a risk mark-up. The difference between the standard return and the dividend received on shares is deducted from the revaluation reserve, Principles of consolidation if possible. In view of the transparent structure, the Stichting Buma Stemra Obligatiefonds [Buma Stemra Bond Fund Foundation] and Stichting accounts receivable Buma Stemra Aandelenfonds [Buma Stemra Equity Fund Foundation] Accounts receivable are carried at face value less a provision for are consolidated proportionally in the Buma financial statements. uncollectability. Assets and liabilities, as well as income and expense, are included in proportion of the participating interest. On the basis of the information provided in the notes, no separate company financial statements are included for Stemra. 35 Financial Statements 2006 table of content
  • 36. Notes to the Stemra balance sheet and profit and loss account Determination of the result Income and expense are recorded in the year to which they apply. The result is determined by calculating the difference between the income realised on the one hand, and the costs and other expenses incurred for operation for the year on the other. The balance of the profit and loss account and the movement in the funds is therefore added to/deducted from the royalties to be distributed. turnover In the financial statements, turnover in royalties is added to the royal- ties to be distributed. Stemra includes the exploitation of mechanical rights in the turnover, insofar as these relate to the financial year, can be determined in a reliable manner and there is reasonable certainty that the revenue is collectible. taxes With regard to Stemra, the Dutch tax authorities stipulated in an agree- ment dated 6 November 2001, determining the legal relationship between the parties, that Stichting Stemra is liable to pay corporation tax. This agreement is valid until 31 December 2007. Foreign withholding tax available for set-off and Dutch dividend tax may be deducted from the tax due by virtue of this agreement determining the legal relationship between parties. A tax item is only included in the financial statements if corporation tax is still owed after deduction of the foreign withholding tax available for set-off. accounting policies for cash flow statement The cash flow statement is drawn up according to the indirect method. Use of estimates Drawing up the financial statements requires the management to form opinions and make estimates and assumptions that influence the application of policies and the reported value of assets and liabilities, and of income and expense. The estimates and the associated assumptions are based on past experience and various other factors that are considered reasonable in view of the circumstances. The outcome forms the basis for the opinion on the carrying value of assets and liabilities that does not emerge clearly from other sources. The actual outcomes may deviate from these estimates. 36 Buma/Stemra table of content
  • 37. Notes to the Stemra balance sheet as at 31 December 2006 (1) tangible fixed assets The changes in the tangible fixed assets can be specified as follows: (EUR x 1,000) Hardware/ computer equipment Actual cost as at 1 January 2006 709 Cumulative depreciation -519 balance sheet value as at 1 January 2006 190 Changes during financial year: Investments 159 Depreciation -128 31 Actual cost as at 31 December 2006 868 Cumulative depreciation -647 balance sheet value as at 31 December 2006 221 The depreciation costs are taken to the profit and loss account, including depreciation of EUR 0.2 million charged on by Buma for the use of Buma assets by Stemra. 37 Financial Statements 2006 table of content
  • 38. Notes to the Stemra balance sheet as at 31 December 2006 (2) financial fixed assets The changes in the financial fixed assets can be specified as follows: (EUR x 1,000) Securities Participating total interests balance sheet value as at 1 January 2006 101,663 -233 101,430 Changes during the financial year: Acquisitions 62,958 - 62,958 Repayments/sales -67,574 - -67,574 Price movements 762 - 762 Result of participating interests - -316 -316 -3,854 -316 -4,170 balance sheet value as at 31 December 2006 97,809 -549 97,260 Bonds and shares of Stichting Stemra are accounted for at market value. The results on shares are stated at a standard return, which is 6.3% for 2006 (2005: 5.6%). Value differences on bonds and shares are charged or credited to the revaluation reserve for financial fixed assets. The total face value of the bonds amounted to EUR 67.7 million (2005: EUR 69.2 million) compared to a market value of EUR 68.9 million (2005: EUR 72.3 million). The participating interests are Stichting Buma/Stemra projects in formation, which are included at net asset value. Stemra’s securities have been placed in Stichting Buma Stemra Obligatiefonds [Buma Stemra Bond Fund Foundation] and Stichting Buma Stemra Aandelenfonds [Buma Stemra Equity Fund Foundation]. The foundations are proportionally consolidated in Stemra’s financial statements at an average of 35.9% (2005: 36.1%). The participations gave Stichting Stemra a 31.9% interest in Stichting Buma Stemra Aandelenfonds [Buma Stemra Equity Fund Foundation] (2005: 32.0%) and a 38.0% interest in Stichting Buma Stemra Obligatiefonds [Buma Stemra Bond Fund Foundation] (2005: 38.0%) at year-end 2006. 38 Buma/Stemra table of content
  • 39. Notes to Stemra balance sheet as at 31 December 2006 financial fixed assets (continued) The full combined financial statements of Stichting Buma Stemra Obligatiefonds (BSO) [Buma Stemra Bond Fund Foundation] and Stichting Buma Stemra Aandelenfonds (BSA) [Buma Stemra Equity Fund Foundation] can be presented in condensed form as follows: (EUR x 1,000) 31 December 2006 31 December 2005 Assets fixed assets Financial fixed assets 271,748 281,751 other assets 42,241 18,775 313,989 300,526 Liabilities Participants accounts Participants including current account with participants 334,734 322,660 Overall revaluation reserve -21,133 -22,500 313,601 300,160 current liabilities Creditors 388 366 313,989 300,526 (3) other accruals and deferred income (EUR x 1,000) 31 December 2006 31 December 2005 Interest to be received 1,618 1,758 (4) cash at bank and in hand All the cash at bank and in hand is freely available. 39 Financial Statements 2006 table of content
  • 40. Notes to the Stemra balance sheet as at 31 December 2006 Funds (5) funds The changes in the continuity fund can be specified as follows: (EUR x 1,000) balance as at additions Withdrawals balance as at 1 January 2006 2006 2006 31 December 2006 Continuity fund 10,390 - - 10,390 continuity fund The continuity fund’s aims include guaranteeing the continuity of the work. This fund furthermore serves to level out unwanted fluctuations in the It also serves to fulfil obligations in respect of third parties, in particular with amounts available for distribution, resulting among other things from regard to the royalties yet to be distributed according to the financial state- domestic and international pressure on turnover, as well as continuing ments. changes in the distribution of rights. (6) Revaluation reserve financial fixed assets The changes in the revaluation reserve for financial fixed assets can be specified as follows: (EUR x 1,000) 2006 2005 balance as at 1 January 10,647 6,807 Transaction result and revaluation 762 4,595 Withdrawal to the credit of the financial result to standard -737 -755 25 3,840 balance as at 31 December 10,672 10,647 (7) Provisions Changes in the provisions can be specified as follows: (EUR x 1,000) balance as at additions Withdrawals balance as at 1 januari 2006 2006 2006 31 december 2006 Optimisation of operations 1,150 - -592 558 Provision for optimisation of operations The international changes with regard to the licensing of mechanical During the financial year, withdrawals were made for streamlining reproduction rights and the resulting allocated funds require in the organisation, which started in 2003. This mainly concerns initial particular an adjustment of the organisation in order to optimise the costs of external IT staff and staff redundancy. services provided in accordance with domestic and internationally accepted standards and competitive conditions. 40 Buma/Stemra table of content
  • 41. Notes to the Stemra balance sheet as at 31 December 2006 (8) Royalties to be distributed (EUR x 1,000) 2006 2005 Royalties to be distributed at the beginning of the year 56,513 51,774 Turnover royalties 48,421 53,455 Changes in the royalties to be distributed -79 -154 available for distribution 104,855 105,075 Distributed in the financial year: Affiliates and members 40,318 34,871 Foreign organisations 7,168 8,347 Central Licensing 1,259 955 Administrative costs withheld in the Netherlands 4,518 4,182 Administrative costs withheld abroad 260 207 53,523 48,562 Royalties to be distributed at the end of the year 51,332 56,513 available for distribution by Stemra (EUR x 1,000) 2006 2005 Turnover royalties 48,421 53,455 Indivisible rights 2,002 2,351 Changes in royalties to be distributed -79 -154 became available for distribution during the year 50,344 55,652 To be distributed at the beginning of the year 56,513 51,774 Available* 48,342 53,301 Distributed -53,523 -48,562 Royalties to be distributed at the end of the year 51,332 56,513 *Excluding indivisible rights which have already been accounted for in the opening balance sheet. 41 Financial Statements 2006 table of content
  • 42. Notes to the Stemra balance sheet as at 31 December 2006 Distribution of Stemra turnover (EUR x 1,000) 2006 2005* Biem Phonomechanical rights/ Central Licensing 23,917 25,859 Special Licensing / Private Labels 7,064 9,540 Radio & TV Mechanical Rights 6,124 7,430 Mechanical Rights Online Licensing 1,081 827 Home Copy/Lending Rights 4,727 5,093 Mechanical Rights Abroad 5,508 4,706 48,421 53,455 *The turnover categories were redefined during the reporting year. The figures for 2005 have therefore been adjusted for comparison purposes. (9) current account balances (EUR x 1,000) 31 December 2006 31 December 2005 Affiliated societies abroad 4,407 5,628 Buma current account 7,828 8,981 12,235 14,609 The amounts owed to affiliated societies abroad were largely settled at the beginning of 2007. The current account balance with Buma includes a loan of EUR 6.6 million from Buma to Stemra. This loan is subject to the Euribor 3-month rate. The term of the loan is three months from the commencement date of the loan agreement. 42 Buma/Stemra table of content
  • 43. Notes to the Stemra balance sheet as at 31 December 2006 (10) other liabilities and accruals (EUR x 1,000) 31 December 2006 31 December 2005 Advances to Dutch Industry 17,790 17,834 To be offset with industry and private labels 175 110 Holiday allowance/annual leave 265 213 Other liabilities and accruals 1,143 787 19,373 18,944 advances to Dutch industry This includes the invoiced advances on reproduction rights to be settled by the Dutch industry for periods up to the end of 2006. When the settlements are received from these producers, these advances are deducted from the royalties to be received. off-balance sheet commitments In accordance with the decision of the management board, at the end of 2002 part of the bond portfolio amounting to EUR 27.5 million was pledged as security to ING Bank in connection with a cash facility needed for normal operations. The financial liability with regard to the business accommodation in Hoofddorp was assumed until 1 August 2011. The annual rent for Buma/Stemra together amounts to approximately EUR 1.8 million. This does not take into account subletting to third parties. Furthermore, there are joint multi-year obligations for Buma/Stemra for the rental of Xerox printing equipment amounting to EUR 0.1 million a year. In the current composition, the annual amount for leasing of cars is EUR 0.2 million. The off-balance sheet rental and lease obligations of EUR 10.5 million can be specified as follows: • lless than 1 year: EUR 2.1 million • between 1 and 5 years: EUR 6.6 million • longer than 5 years: nil 43 Financial Statements 2006 table of content
  • 44. Notes to the Stemra profit and loss account as at 31 December 2006 Liabilities (11) Personnel expenses (EUR x 1,000) 2006 2005* Salaries 1,941 1,937 Social security contributions 260 251 Pension premiums 183 177 Other staff costs 109 228 2,493 2,593 Reimbursed to Buma in respect of shared departments 4,275 4,074 6,768 6,667 Allocated to third parties -1,050 -893 5,718 5,774 The average number of employees during the reporting year was 39 (2005: 44 employees), which corresponds to an average of 33.3 FTEs (2005: 37.4 FTEs). This does not include employees charged on via Buma. Stemra employs a further 12.3 FTEs, which are charged to other affiliated foundations. (12) Financial result (EUR x 1,000) 2006 2005 Interest income and other income Fixed-income securities Interest received on bonds 3,239 3,093 Shares Share dividend received 1,101 799 Withdrawals from revaluation reserve 737 755 1,838 1,554 Other interest income and similar income 376 363 Total income from investments 5,453 5,010 Result of participating interests -316 -233 Interest expenses and other costs -812 -551 4,325 4,226 * adjusted for comparison purposes. 44 Buma/Stemra table of content
  • 45. Other information to: the board of directors and the general assembly of Stichting Stemra (Stemra foundation) Auditor’s report We have audited the accompanying financial statements 2006 of opinion Stichting Stemra, Hoofddorp, which comprise the balance sheet as at In our opinion, the financial statements 2006 of Stichting Stemra, 31 December 2006, the profit and loss account for the year then ended including the distribution of the received copyrights over 2006, and the notes. are prepared, in all material aspects, in accordance with principles selected and disclosed by the entity, as defined in the notes of the Responsibility of the board of directors financial statements. The board of directors is responsible for the preparation of the financial statements in accordance with principles selected and disclosed by the Amstelveen, 4 April 2007 entity. This responsibility includes: designing, implementing and main- taining internal control relevant to the preparation of the financial state- KPMG ACCOUNTANTS N.V. ments that are free from material misstatement, whether due to fraud R.J. Groot RA or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. auditor’s responsibility Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our audit in accordance with Dutch law. This law requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 45 Financial Statements 2006 table of content
  • 46. Profit appropriation For Stemra, the result for 2006 will be deducted from the royalties to be distributed. Then, according to the assessment of the continuity fund, it will be determined to what extent funds will have to be added to or deducted from this. This movement would also be credited or charged to the royalties to be distributed. As a result of this assessment of the continuity fund and the revaluation reserve, no addition/withdrawal is to take place, as was the case in 2005. A total of EUR 0.1 million will therefore be deducted for 2006 from the copyrights as yet to be paid out (2005: a loss of EUR 0.2 million). Proposal of the board of directors As shown in the financial statements, drawn up by us in accordance with Article 26, paragraph 2 of the Articles of Association, the board of directors proposes the deduction of the negative result of EUR 0.1 million from the reserved results of previous years included in the royalties to be distributed. The proposal has already been incorporated in the 2006 financial statements. 46 Buma/Stemra table of content
  • 47. Composition of management board and management as at 1 april 2007 Management board of Management board of Management of Buma/Stemra Vereniging Buma Stichting Stemra Dr. K.P. Boehmer, chairman Dr. K.P. Boehmer, chairman C.P. Vervoord, chairman of the board Mr. H. Kosterman, deputy chairman J. Brands, deputy chairman Drs. W.J. Ketellapper, director general affairs department T. Berk, secretary P. van Empelen, secretary Drs. M. Mackay, director Back Office Mr. C. van Rij, director legal affairs department Drs. S.A.A. Abdoelbasier F. Bruens Mr. E. Boom J.H. Grevelt H.C.M. de Clercq C. van der Hoeven P. van Empelen P.C. Koelewijn M. W. Mensink Mr. H. Kosterman A.A. Sauer A.J. Kraamer C.M. Schrama A. de Raaff H. Westbroek A.C.M. Ruiter A.J. Witte A.A. Sauer All amounts quoted in this annual report are in euro Publication Text contributions: Erik de Boer Boardroom Financial PR Translation: English Services (Communications) BV Design and realisation: Link Design BV, Amsterdam Photography: Getty Images (coverfoto ) Matthew Niederberger (photo on page 12/13) Link Design BV (foto pag. 31) Printed by: WC den Ouden BV, Amsterdam 47 Financial Statements 2006 table of content
  • 48. table of content Buma Association/Stemra Foundation Siriusdreef 22-28 2132 WT Hoofddorp The Netherlands t +31 (0)23 799 79 99 f +31 (0)23 799 77 77 e info@bumastemra.nl www.bumastemra.nl Office in The Hague Lange Voorhout 86-12 2514 EJ The Hague The Netherlands t +31 (0)70 310 91 09 f +31 (0)70 310 91 00 e denhaag@bumastemra.nl table of content