ifrs-illustrative-financial-statements-investments-funds

IFRS

Illustrative financial statements: Investment funds

December 2010

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© 2010 KPMG IFRG Limited, a UK company, limited by guarantee. All rights reserved.

About this publication

These illustrative financial statements have been produced by the KPMG International Standards Group (part of KPMG IFRG Limited), and the views expressed herein are those of the KPMG International Standards Group.

We would like to acknowledge the principal contributors to this publication. They are Ewa Bialkowska and Arina Tomiste of the KPMG International Standards Group and the following reviewers of the KPMG investment management international standards working group:

Theo Evangelakos KPMG in BermudaJoseph Ryan KPMG in BermudaLino Junior KPMG in BrazilPeter Hayes KPMG in CanadaRichard Reading KPMG in CanadaAndrew Stepaniuk KPMG in the Cayman IslandsHellen Chemeli KPMG in the Cayman IslandsDermot Dempsey KPMG in the Channel IslandsAdmire Chatiza KPMG in the Channel IslandsVivian Chui KPMG in Hong KongGaurav Mohan KPMG in Hong KongSara Partanen KPMG in Hong KongArion Yiu KPMG in Hong KongFrank Gannon KPMG in IrelandBarry Winters KPMG in IrelandVictor Chan Yin KPMG in LuxembourgJoseph De Souza KPMG in LuxembourgGareth Horner KPMG in the UKArevhat Tsaturyan KPMG in the UK

ContentThe purpose of this publication is to assist you in preparing the financial statements of an investment fund in accordance with IFRSs. It illustrates one possible format of financial statements for fund-specific entities based on a fictitious tax-exempt open-ended single-fund investment company, which does not form part of a consolidated entity nor holds investments in any subsidiaries, associates or joint venture entities. The company’s redeemable shares are classified as financial liabilities and the management shares meet the definition of equity; the company is outside the scope of IFRS 8 Operating Segments. The company is not a first-time adopter of IFRSs (see Technical guide). Appendix II provides an example of disclosures for a fund within the scope of IFRS 8 with multiple reportable segments. Appendix III provides an example of disclosures for a fund whose puttable instruments are classified as equity.

This publication reflects IFRSs in issue at 1 December 2010 that are required to be applied by an entity with an annual period beginning on 1 January 2010 (“currently effective” requirements). Other IFRSs or amendments that are effective for annual periods beginning after 1 January 2010 (“forthcoming” requirements) have not been adopted early in preparing these illustrative financial statements. However, example disclosures for the early adoption of IFRS 9 Financial Instruments issued in November 2009 are included in Appendix I. This publication focuses on disclosure requirements that are specific to funds’ activities. For other disclosures that might be relevant, please refer to our publications Illustrative financial statements and Illustrative financial statements: banks.


This publication illustrates only the financial statements component of a financial report, prepared under IFRSs as issued by the IASB, and the independent auditors’ report. However, typically a financial report will include at least some additional commentary by management, either in accordance with local laws and regulations or at the election of the entity (see Technical guide).

When preparing financial statements in accordance with IFRSs, an entity should have regard to its local legal and regulatory requirements. This publication does not consider any requirements of a particular jurisdiction.

The IASB established an Expert Advisory Panel (the panel) to assist the IASB in reviewing best practices in the area of valuation techniques and formulating any necessary additional guidance on valuation methods for financial instruments and related disclosures when markets are no longer active. The panel issued its final report Measuring and disclosing the fair value of financial instruments in markets that are no longer active on 31 October 2008. Part 2 of the report contains guidance on disclosures. This publication does not illustrate these disclosures, unless they are also required by IFRS 7 Financial Instruments: Disclosures. For an illustrative example of disclosures in the panel’s report and explanatory notes see our publication Illustrative financial statements: banks published in January 2010.

IFRSs and their interpretation change over time. Accordingly, these illustrative financial statements should not be used as a substitute for referring to the standards and interpretations themselves.

ReferencesThe illustrative financial statements are contained on the odd-numbered pages of this publication. The even-numbered pages contain explanatory comments and notes on the disclosure requirements of IFRSs. The illustrative examples, together with the explanatory notes, however, are not intended to be seen as a complete and exhaustive summary of all disclosure requirements that are applicable under IFRSs. For an overview of all disclosure requirements that are applicable under IFRSs, see our publication Disclosure Checklist.

To the left of each item disclosed, a reference to the relevant currently effective standard is provided; generally the references relate only to disclosure requirements, except that note 3 highlights key accounting requirements in relation to significant accounting policies. The illustrative financial statements also contain references to our publication Insights into IFRS (7th Edition 2010/11).

What’s new in the 2010 illustrative financial statements‖Major changes from the March 2010 edition of Illustrative financial statement: investment funds are‖highlighted by a double line border running down the left margin of the text within this document. The major ‖changes from the March 2010 edition include the following:

‖ l presentation of the statement of financial position in order of liquidity;‖ l inclusion of management voting shares that meet the definition of equity;‖ l addition of an example of alternative sensitivity analysis disclosures for an entity that does not use a Value-‖ at-Risk (VaR) analysis to manage market risk (see note 4); example VaR analysis disclosure is presented in ‖ Appendix V; and‖l addition of an appendix illustrating example disclosures for the early adoption of IFRS 9 issued in ‖ November 2009.


Other ways KPMG member firm professionals can helpA more detailed discussion of the general accounting issues that arise from the application of IFRSs can be found in our publication Insights into IFRS.

In addition to Insights into IFRS, we have a range of publications that can assist you further, including:

●l IFRS compared to US GAAP●l Illustrative financial statements ●l Illustrative financial statements: banks●l Illustrative financial statements: First-time adopters●l IFRS Handbooks, which include extensive interpretative guidance and illustrative examples to elaborate or

clarify the practical application of a standard●l New on the Horizon publications, which discuss consultation papers●l IFRS Practice Issues publications, which discuss specific requirements of pronouncements ●l First Impressions publications, which discuss new pronouncements●l Newsletters, which highlight recent developments●l Disclosure checklist.

KPMG’s IFRS Briefing Sheet – Issue 227 provides an overview of newly effective IFRSs and other considerations, which are intended to be a reminder of recently issued accounting guidance that may affect interim and annual financial statements for the period ending 31 December 2010.

IFRS-related technical information, including the above Briefing Sheet, is also available at www.kpmg.com/ifrs.

For access to an extensive range of accounting, auditing and financial reporting guidance and literature, visit KPMG’s Accounting Research Online. This web-based subscription service can be a valuable tool for anyone who wants to stay informed in today’s dynamic environment. For a free 15-day trial, go to www.aro.kpmg.com and register today.


Technical guide

Form and content of financial statementsIAS 1 Presentation of Financial Statements sets out the overall requirements for the presentation of financial statements, including their content and structure. Other standards and interpretations deal with the recognition, measurement and disclosure requirements related to specific transactions and events. IFRSs are not limited to a particular legal framework. Therefore financial statements prepared under IFRSs often contain supplementary information required by local statute or listing requirements, such as a directors’ report (see below) and, more specifically for funds, an investment manager’s report and trustee’s report.

Choice of accounting policiesThe accounting policies disclosed in these illustrative financial statements reflect the facts and circumstances of the fictitious tax-exempt open-ended single-fund investment company on which these financial statements are based. They should not be relied upon for a complete understanding of the requirements of IFRSs and should not be used as a substitute for referring to the standards and interpretations themselves. The accounting policy disclosures appropriate for an entity depend on the facts and circumstances of that entity, including the accounting policy choices an entity makes, and may differ from the disclosures presented in these illustrative financial statements. The recognition and measurement requirements of IFRSs are discussed in our publication Insights into IFRS.

Reporting by directorsGenerally local laws and regulations determine the extent of reporting by directors (or similar) in addition to the presentation of financial statements. IAS 1 encourages, but does not require, entities to present, outside the financial statements, a financial review by management. The review describes and explains the main features of the entity’s financial performance and financial position, and the principal uncertainties it faces. Such a report may include a review of:

●l the main factors and influences determining financial performance, including changes in the environment in which the entity operates, the entity’s response to those changes and their effect, and its policy for investment to maintain and enhance financial performance, including its dividend policy;

●l the entity’s sources of funding; and●l the entity’s resources not recognised in the statement of financial position in accordance with IFRSs.

On 8 December 2010 the IASB published IFRS Practice Statement Management Commentary, which proposes a framework for the preparation of management commentary that accompanies financial statements prepared in accordance with IFRSs. An entity is not required to comply with this framework for the preparation and presentation of management commentary in order to assert compliance with IFRSs.

First-time adopters of IFRSsThese illustrative financial statements assume that the entity is not a first-time adopter of IFRSs. IFRS 1 First-time Adoption of International Financial Reporting Standards applies to an entity’s first financial statements prepared in accordance with IFRSs. IFRS 1 requires extensive disclosures explaining how the transition from previous GAAP to IFRSs affected the reported financial position, financial performance and cash flows of an entity. These disclosures include reconciliations of equity and reported total profit or loss at the date of transition to IFRSs and at the end of the comparative period presented in the entity’s first IFRS financial statements, explaining material adjustments to the statements of financial position, changes in equity and comprehensive income, and identifying separately the correction of any errors made under previous GAAP. An entity that presented a statement of cash flows under previous GAAP also explains any material adjustments to its statement of cash flows. For more information see KPMG’s Illustrative financial statements: First-time adopters, published in February 2010.

6 Illustrative financial statements: Investment funds December 2010


Note Reference Explanatory note

1. IAS 1.10 In these illustrative financial statements, the titles of the statements, with the exception of the statement of changes in net assets attributable to holders of redeemable shares (see explanatory note 4 below), are consistent with the titles used in IAS 1. However, these terms are not mandatory and different titles are permitted.

2. IAS 1.45 The presentation and classification of items in the financial statements is retained from one period to the next unless changes are required by a new standard or interpretation, or it is apparent, following a significant change to an entity’s operations or a review of its financial statements, that another presentation or classification would be more appropriate. The entity also considers the criteria for selection and application of accounting policies in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.

3. IAS 1.10(b) A complete set of financial statements comprises, as one of its statements, a statement of comprehensive income for the period.

IAS 1.81 Total comprehensive income represents the changes in equity during a period other than those changes resulting from transactions with owners in their capacity as owners, which is presented either in:

●l one statement (i.e. a statement of comprehensive income); or●l two statements (i.e. a separate income statement and a statement beginning with profit

or loss and displaying components of other comprehensive income).

These illustrative financial statements illustrate a single statement of comprehensive income. For an example of the two statements approach, please refer to our publication Illustrative financial statements published in August 2010.

4. IAS 1.10(c) A complete set of financial statements comprises, as one of its statements, a statement of IAS 1.106 changes in equity. However, as there is a minimal equity in the Fund, no statement of

changes in equity is presented. Instead, a statement of changes in net assets attributable to holders of redeemable shares is presented. Although IFRSs do not require presentation of this statement, it may provide users of the financial statements with relevant and useful information with respect to the components underlying the movements in the net assets of the fund attributable to the holders of redeemable shares during the year.

Illustrative financial statements: Investment funds 7 December 2010


Contents

Reference Page

IAS 1.10, 49 Financialstatements1, 2 Statement of financial position 9 Statement of comprehensive income3 11 Statement of changes in net assets attributable to holders of redeemable shares4 13 Statement of cash flows 15 Notes to the financial statements 17

Independentauditors’report 85

Appendices ‖ I Example disclosures for entities that early adopt IFRS 9 (2009) 87 II Example disclosures of segment reporting – multiple segment fund 97 III Example disclosures of open-ended fund with puttable instruments classified as equity 105 IV Example disclosures of schedule of investments – unaudited 115 ‖ V Example disclosures of exposure to market risk – Value-at-Risk analysis 119




1. IAS 1.55, 58 Additional line items, headings and subtotals are presented separately in the statement of financial position when such presentation is relevant to an understanding of the entity’s financial position. The judgement used is based on an assessment of the nature and liquidity of the assets, the function of assets within the entity, as well as the amounts, nature and timing of liabilities. Additional line items may include, for example, “other assets” for the inclusion of prepayments.

IAS 1.57 IAS 1 does not prescribe the order or format in which an entity presents items. Additional line items are included when the size, nature or function of an item or aggregation of similar items is such that separate presentation is relevant to an understanding of the entity’s financial position and the descriptions used, and the ordering of items or aggregation of similar items may be amended according to the nature of the entity and its transactions to provide information that is relevant to an understanding of an entity’s financial position.

2. IAS 1.60, 61 In these illustrative financial statements we have presented assets and liabilities broadly in order of liquidity. An entity also may present its assets and liabilities using a current/non-current classification if such presentation provides reliable and more relevant information. For each asset and liability line item that combines amounts expected to be recovered or settled within (1) no more than 12 months after the end of the reporting period, and (2) more than 12 months after the end of the reporting period, an entity discloses in the notes the amount expected to be recovered or settled after more than 12 months.

3 IFRS 7.8 The carrying amounts of each of the categories of financial assets and financial liabilities are required to be disclosed in either the statement of financial position or the notes. In these illustrative financial statements this information is presented in the notes.

4. ‖ It has been assumed for the purpose of these illustrative financial statements that ‖ management shares issued by the Fund meet the definition of equity. Determination of ‖ whether an instrument meets the definition of equity can be complex and is further discussed ‖ in our publication Insights into IFRS (3.11.10).

5. IAS 39.48A, In accordance with IAS 39 Financial Instruments: Recognition and Measurement the best AG72 measure of fair value of a financial asset and financial liability is a quoted price in an active

market. The quoted price for an asset held is usually the current bid price and for a liability held is the asking price. On the other hand, in accordance with the Fund’s prospectus, the redemption amounts of the redeemable shares are calculated using the mid-market prices of the Fund’s underlying investments/securities sold short.

Owing to the differences in the measurement bases of the Fund’s underlying investments/securities sold short and the redemption amounts of the redeemable shares, a mismatch results in the statement of financial position giving rise to a presentation issue. In our view, one solution may be to present the net assets attributable to holders of redeemable shares in a two-line format. The first line would be the amount of the net assets attributable to holders of redeemable shares measured in accordance with the prospectus, which reflects the actual redemption amount at which the redeemable shares would be redeemed at the reporting date, and the next line would include an adjustment for the difference between this and the amount recognised in the statement of financial position. This reflects the fact that for a fund with no equity all recognised income and expense should be attributed to holders of redeemable shares, which also means that if all the shares are redeemed, then a dilution levy of such amount would be required. This issue is discussed in our publication Insights into IFRS (3.6.940.50 – 60). The treatment in a fund with no equity is applied by analogy in these illustrative financial statements to a fund with minimal equity.



Reference Statement of financial position1, 2, 3

IAS 1.10(a), 51(c), Asat31December60, 113 In thousands of euro Note 2010 2009

‖AssetsIAS 1.54(i) ‖ Cash and cash equivalents 51 71IAS 1.54(d) ‖Balances due from brokers 10 4,619 3,121IAS 1.54(d) ‖ Receivables from reverse repurchase agreements 11 4,744 3,990IAS 1.54(h) ‖ Other receivables 29 46IAS 1.54(d) ‖ Non-pledged financial assets at fair value through profit or loss 12 26,931 24,471IAS 1.54(d), ‖ Pledged financial assets at fair value through profit or loss 12 2,691 2,346IAS 39.37(a) ‖ ‖ Totalassets 39,065 34,045 ‖ ‖Equity4

‖ Share capital 13 10 10 ‖Totalequity 10 10 ‖ ‖LiabilitiesIAS 1.54(m) ‖ Balances due to brokers 10 143 275IAS 1.54(m) ‖ Payables under repurchase agreements 11 2,563 2,234IAS 1.54(k) ‖ Other payables 103 101IAS 1.54(m) ‖ Financial liabilities at fair value through profit or loss 12 3,621 1,446 ‖ Totalliabilities(excludingnetassetsattributableto ‖holdersofredeemableshares) 6,430 4,056 ‖ IAS 1.6, 54(m), ‖ NetassetsattributabletoholdersofredeemableIAS 32.IE32 ‖ shares5 14 32,625 29,979

Represented by: Net assets attributable to holders of redeemable shares (valued in accordance with prospectus)5 32,647 29,996 Adjustment from mid-market prices to bid/ask-market prices5 14 (22) (17) 32,625 29,979

The notes on pages 17 to 83 are an integral part of these financial statements.




1. IAS 1.81(a) This illustration is based on a single statement of comprehensive income as the Fund has no other components of other comprehensive income other than profit or loss for the period.

IAS 1.32 Items of income and expense are offset only when required or permitted by an IFRS. This issue is discussed in our publication Insights into IFRS (4.1.170).

IAS 1.85 An entity presents additional line items, headings and subtotals when this is relevant to an understanding of its financial performance.

2. IAS 1.99 An entity presents an analysis of expenses based on function or nature. In these illustrative financial statements, this analysis is based on the nature of expenses. Individual material items are classified in accordance with their nature or function, consistent with the classification of items that are not material individually. This issue is discussed in our publication Insights into IFRS (4.1.20 – 40).

IAS 1.87 No items of income or expense may be presented as “extraordinary”. The nature and amounts of material items are disclosed as a separate line item in the statement of comprehensive income or in the notes. This issue is discussed in our publication Insights into IFRS (4.1.82 – 86).

3. IAS 1.82(a) IFRSs do not specify whether revenue can be presented only as a single line item in the statement of comprehensive income, or whether an entity also may include the individual components of revenue in the statement of comprehensive income, with a subtotal for revenue from continuing operations. In these illustrative financial statements, the most relevant measure of revenue is considered to be the sum of interest income, dividend income, net foreign exchange loss and net gain from financial instruments at fair value through profit or loss. However, other presentations are possible.

4. IFRS 7.20(c)(ii) Fee income and expense arising from trust and other fiduciary activities that result in the holding or investing of assets on behalf of individuals, trusts, retirement benefit plans and other institutions are required to be disclosed. In these illustrative financial statements this disclosure has been given in the statement of comprehensive income. Alternatively, it may be given in the notes.

5. IAS 32.35, 40 Interest, dividends, gains and losses relating to a financial instrument or a component that is a financial liability are recognised as income or expense in the statement of comprehensive income. Because redeemable shares are classified as financial liabilities, any distributions on these shares are presented as finance costs. Interest expense and dividends payable on securities sold short have been classified as operating expense, but, depending on the facts and circumstances, presentation as part of finance cost is also possible.

6. IAS 12.2 In our view, withholding taxes attributable to investment income (e.g. dividends received) should be recognised as part of income tax expense, with the investment income recognised on a gross basis. This issue is discussed in our publication Insights into IFRS (3.13.420.30).

7. IAS 33.2, 3 An entity with publicly traded ordinary shares or in the process of issuing ordinary shares that are to be publicly traded, should present basic and diluted earnings per share (EPS) in the statement of comprehensive income. The requirements to present EPS only apply to those funds whose ordinary shares are classified as equity. Nevertheless, some funds may wish to or may be required by local regulations to present EPS. When an entity voluntarily presents EPS data, that data should be calculated and presented in accordance with IAS 33 Earnings per Share. This issue is discussed in our publication Insights into IFRS (5.3.10.10).



Reference Statement of comprehensive income1, 2

IAS 1.10(b), 81(a) Fortheyearended31December In thousands of euro Note 2010 2009

Interest income3 7 603 429IAS 18.35(b)(v) Dividend income3 272 229IAS 1.35 Net foreign exchange loss3 (19) (16)IFRS 7.20(a) Net gain from financial instruments at fair value through profit or loss3 8 3,251 2,397IAS 1.82(a) Totalrevenue3 4,107 3,039

IAS 1.99 Investment management fees4 (478) (447)IAS 1.99 Custodian fees4 (102) (115)IAS 1.99 Administration fees4 (66) (62)IAS 1.99 Directors’ fees (26) (15)IAS 1.99 Transaction costs (54) (73)IAS 1.99 Audit and legal fees (74) (67)IFRS 7.20(b) Interest expense5 (75) (62) Dividend expense on securities sold short5 (45) (19)IAS 1.99 Other operating expenses (8) (41) Totaloperatingexpenses (928) (901)

IAS 1.85 Operatingprofitbeforefinancecosts 3,179 2,138

IAS 32.40 Dividends to holders of redeemable shares5 14 (178) (91)IAS 1.82(b) Totalfinancecosts (178) (91)

IAS 1.85 Profitbeforetax 3,001 2,047

IAS 1.82(d) Withholding tax expense6 9 (45) (39)

IAS 1.6, 1.82(f), IncreaseinnetassetsattributabletoholdersofIAS 32.IE32 redeemableshares 2,956 2,008





1. IAS 1.106 A complete set of financial statements comprises, as one of its statements, a statement of changes in equity. However, as equity in the Fund is minimal and there were no changes in equity balances, no statement of changes in equity is presented. Instead, a statement of changes in net assets attributable to holders of redeemable shares is presented. Although IFRSs do not require presentation of this statement, it may provide users of the financial statements with relevant and useful information with respect to the components underlying the movements in the net assets of the Fund attributable to the holders of redeemable shares during the year.

2. IAS 1.110 When a change in accounting policy, either voluntarily or as a result of the initial application of a standard, has an effect on the current period or any prior period, an entity presents the effects of retrospective application or retrospective restatement recognised in accordance with IAS 8 in the statement of changes in equity. These illustrative financial statements do not demonstrate example of IAS 8 disclosures; for an example of such disclosures, please refer to our publication Illustrative financial statements.



Reference Statement of changes in net assets attributable to holders of redeemable shares1

IAS 1.106 Fortheyearended31December In thousands of euro Note 2010 2009

Balanceat1January 14 29,979 18,461

Increase in net assets attributable to holders of redeemable shares 2,956 2,008 Contributions and redemptions by holders of redeemable shares: Issue of redeemable shares during the year 6,668 15,505 Redemption of redeemable shares during the year (6,978) (5,995) Totalcontributionsandredemptionsbyholdersof redeemableshares (310) 9,510

Balanceat31December 14 32,625 29,979





1. IAS 7.18, 19 In these illustrative financial statements cash flows from operating activities are presented using the direct method, whereby major classes of cash receipts and payments related to operating activities are disclosed. An entity also may present operating cash flows using the indirect method, whereby profit or loss is adjusted for the effects of non-cash transactions, accruals and deferrals, and items of income or expense associated with investing or financing cash flows. For an example statement of cash flows presenting operating cash flows using the indirect method see our publications Illustrative financial statements or Illustrative financial statements: banks.

IAS 7.43 When applicable, an entity discloses investing and financing transactions that are excluded from the statement of cash flows because they do not require the use of cash or cash equivalents in a way that provides all relevant information about these activities.

2. IAS 7.33, 34 Interest paid and interest and dividends received are usually classified as operating cash flows for a financial institution. Dividends paid may be classified as a financing cash flow as they represent a cost of obtaining financial resources. The Fund has adopted this classification for dividends paid to the holders of redeemable shares. In these illustrative financial statements dividends paid on securities sold short are classified as operating cash flows as they result directly from holding short positions as part of the operating activities of the Fund.

3. IAS 7.14(g), 15 In these illustrative financial statements gross receipts from the sale of, and gross payments to acquire, investment securities have been classified as components of cash flows from operating activities as they form part of the Fund’s dealing operations.

IAS 7.16(g), (h) Receipts from and payments for futures, forwards, options and swap contracts are presented as part of either investing or financing activities, provided that they are not held for dealing or trading purposes, in which case they are presented as part of operating activities. However, when a contract is accounted for as a hedge of an identifiable position, the cash flows of the contract are classified in the same manner as the cash flows of the positions being hedged. This issue is discussed in our publication Insights into IFRS (2.3.60.10).

If hedge accounting is not applied to a derivative instrument, then it is preferable that the gains or losses on the derivative instrument are not presented as an adjustment to line items related to the hedged item, even if the derivative instrument is intended to be an economic hedge of these items. However, in our view, derivative gains and losses may be shown in the statement of comprehensive income as either operating or financing items depending on the nature of the item being hedged. In our view, the possibilities for the presentation in the statement of comprehensive income also apply to the presentation in the statement of cash flows. This issue is discussed in our publication Insights into IFRS (5.6.220.110 – 120).

4. IAS 7.22 Cash flows from operating, investing or financing activities may be reported on a net basis if the cash receipts and payments are on behalf of customers and the cash flows reflect the activities of the customer, or when the cash receipts and payments for items concerned turn over quickly, the amounts are large and the maturities are short.

5. IAS 7.21 Major classes of gross cash receipts and gross cash payments arising from investing and financing activities are disclosed separately, except to the extent that the cash flows are reported on a net basis (see explanatory note 4 above).

6. IAS 7.45 When applicable, an entity presents a reconciliation of cash and cash equivalents reported in its statement of cash flows with those presented in the statement of financial position. In these illustrative financial statements the amounts presented in the statement of financial position match the amounts presented in the statement of cash flows and therefore no reconciliation is presented.



Reference Statement of cash flows1

IAS 1.10(d), 113 Fortheyearended31December In thousands of euro Note 2010 2009

IAS 7.10 CashflowsfromoperatingactivitiesIAS 7.31, 33 Interest received2 619 454IAS 7.31, 33 Interest paid2 (73) (63)IAS 7.31, 33 Dividends received2 227 228IAS 7.31, 33 Dividends paid on securities sold short2 (45) (19)IAS 7.15 Proceeds from sale of investments3 9,382 8,271IAS 7.15 Purchase of investments3 (10,613) (17,713)IAS 7.22(b) Net non-dividend receipts/(payments) on securities sold short4 629 (2)IAS 7.22(b) Net receipts/(payments) from derivative activities4 1,581 (3)IAS 7.22(b) Net non-interest (payments)/receipts from repurchase and reverse repurchase agreements4 (428) 299 IAS 7.14 Operating expenses paid (808) (848) Netcashfrom/(usedin)operatingactivities 471 (9,396)

IAS 7.10, 21 Cashflowsfromfinancingactivities5

IAS 7.17 Proceeds from issue of redeemable shares 14 6,668 15,505IAS 7.17 Payments on redemption of redeemable shares 14 (6,978) (5,995)IAS 7.34 Dividends paid to holders of redeemable shares2 14 (178) (91) Netcash(usedin)/fromfinancingactivities (488) 9,419

Net(decrease)/increaseincashandcashequivalents (17) 23 Cash and cash equivalents at 1 January 71 50IAS 7.28 Effect of exchange rate fluctuations on cash and cash equivalents (3) (2) Cashandcashequivalentsat31December6 51 71





1. IAS 1.7 The notes to the financial statements include narrative descriptions or analysis of amounts disclosed in the primary statements. They also include information about items that do not qualify for recognition in the financial statements.



Notes to the financial statements1

Page

1. Reporting entity 19

2. Basis of preparation 19

3. Significant accounting policies 21

4. Financial risk management 33

5. Use of estimates and judgements 61

6. Classifications and fair values of financial assets and liabilities 69

7. Interest income 71

8. Net gain from financial instruments at fair value through profit or loss 71

9. Withholding tax expense 71

10. Balances due from/to brokers 73

‖ 11. Receivables from reverse repurchase agreements and payables under repurchase agreements 73

12. Financial assets and financial liabilities at fair value through profit or loss 75

‖ 13. Equity 75

14. Net assets attributable to holders of redeemable shares 77

15. Related parties and other key contracts 81

16. Subsequent events 83




1. If financial statements are prepared on the basis of national accounting standards that are modified or adapted from IFRSs and are made publicly available by publicly traded companies, then the International Organization of Securities Commissions (IOSCO) has recommended including the following minimum disclosures:

●l a clear and unambiguous statement of the reporting framework on which the accounting policies are based;

●l a clear statement of the entity’s accounting policies on all material accounting areas;●l an explanation of where the respective accounting standards can be found;●l a statement explaining that the financial statements are in compliance with IFRSs as

issued by the IASB, if this is the case; and●l a statement explaining in what regard the standards and the reporting framework used

differ from IFRSs as issued by the IASB, if this is the case.

2. IAS 1.36 When the entity changes the end of its reporting period and annual financial statements are presented for a period longer or shorter than one year, the entity discloses the reason for the change and the fact that comparative amounts presented are not entirely comparable.

In this and other cases an entity may wish to present pro forma information that is not required by IFRSs, for example, pro forma comparative financial statements prepared as if the change in the end of the reporting period was effective for all periods presented. The presentation of pro forma information is discussed in our publication Insights into IFRS (2.1.80).

3. IAS 1.19, In the extremely rare circumstances in which management concludes that compliance with a 20, 23 requirement of a standard or an interpretation would be so misleading that it would conflict

with the objective of financial statements set out in the Framework for the Preparation and Presentation of Financial Statements, an entity may depart from the requirement if the relevant regulatory framework requires or otherwise does not prohibit such a departure. Extensive disclosures are required in these circumstances.

4. IAS 10.17 An entity discloses the date when the financial statements were authorised for issue and who gave that authorisation. If the entity’s owners or others have the power to amend the financial statements after their issue, then the entity discloses that fact.

5. IAS 1.25, Taking account of specific requirements in its jurisdiction, an entity discloses any material IAS 10.16 uncertainties related to events or conditions that may cast significant doubt upon the entity’s

ability to continue as a going concern, and whether they arise during the period or after the reporting date.

6. IAS 21.53, 54 If the financial statements are presented in a currency different from the entity’s functional currency, then an entity discloses that fact, its functional currency, and the reason for using a different presentation currency. If there is a change in the functional currency of the entity, then the entity discloses that fact together with the reason for the change.

7. IAS 1.122 An entity discloses the judgements, apart from those involving estimations, that management has made in the process of applying the entity’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements. The examples that are provided in paragraphs 123 and 124 of IAS 1 indicate that such disclosure is based on qualitative data.

IAS 1.125 An entity discloses the assumptions it makes about the future, and other major sources of estimation uncertainty at the end of the reporting period, that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year. The examples that are provided in paragraph 129 of IAS 1 indicate that such disclosure is based on quantitative data (e.g. appropriate discount rates).



Reference Notes to the financial statements

IAS 1.10(e), 51(a), 1. Reporting entity(b), 1.138(a), (b) [Name] (the Fund) is a company domiciled in [country]. The address of the Fund’s registered

office is [address]. The Fund’s shares are not traded in a public market and it does not file its financial statements with a securities commission or other regulatory organisation for the purpose of issuing any class of instruments in a public market.

The Fund is an open-ended investment fund primarily involved in investing in a highly diversified portfolio of equity securities issued by companies listed on major European stock exchanges and on the New York Stock Exchange (NYSE), unlisted companies, unlisted investment funds, international derivatives and investment grade debt securities with the objective of providing shareholders with above average returns over the medium to long term.

IAS 1.138(a), (b) The investment activities of the Fund are managed by XYZ Capital Limited (the investment manager) and the administration of the Fund is delegated to ABC Fund Services Limited (the administrator).

IAS 1.112(a) 2. Basis of preparation1

(a) StatementofcomplianceIAS 1.16 The financial statements of the Fund as at and for the year ended 31 December 20102 have

been prepared in accordance with International Financial Reporting Standards (IFRSs).3

IAS 10.17 The financial statements were authorised for issue by the board of directors on [date].4

(b) Basisofmeasurement5

IAS 1.117(a) The financial statements have been prepared on the historical cost basis except for financial instruments at fair value through profit or loss, which are measured at fair value.

(c) Functionalandpresentationcurrency 6

IAS 1.51(d), (e) These financial statements are presented in euro, which is the Fund’s functional currency. All financial information presented in euro has been rounded to the nearest thousand.

(d) Useofestimatesandjudgements7

The preparation of the financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

IAS 1.122, 125 Information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements are described in notes 4 and 5.




1. When a change in accounting policy is the result of the adoption of a new, revised or amended IFRS, an entity applies the specific transitional requirements in that IFRS. However, in our view an entity nonetheless should comply with the disclosure requirements of IAS 8 to the extent that the transitional requirements do not include disclosure requirements. Even though it could be argued that the disclosures are not required because they are set out in the IAS 8 requirements for voluntary changes in accounting policy, we believe that they are necessary in order to give a fair presentation. This issue is discussed in our publication Insights into IFRS (2.8.20). For an example of disclosures relating to a change in accounting policy see our publication Illustrative financial statements.

2. IAS 8.28, 29 When a change in accounting policy, either voluntarily or as a result of the initial application of a standard, has an effect on the current period or any prior period, an entity discloses, among other things, the amount of the adjustment for each financial statement line item affected.

IAS 8.49 If any prior period errors are corrected in the current year’s financial statements, then an entity discloses:

●l the nature of the prior period error; ●l to the extent practicable, the amount of the correction for each financial statement line

item affected, and, if IAS 33 applies to the entity, basic and diluted earnings per share for each prior period presented;

●l the amount of the correction at the beginning of the earliest prior period presented; and●l if retrospective restatement is impracticable for a particular prior period, then the

circumstances that led to the existence of that condition and a description of how and from when the error has been corrected.

3. IAS 8.5 Accounting policies are the specific principles, bases, conventions, rules and practices that an entity applies in preparing and presenting financial statements.

4. Accounting policies in these illustrative financial statements reflect the facts and circumstances of the fictitious open-ended single-fund investment company on which these financial statements are based. They should not be relied upon for a complete understanding of IFRS requirements and should not be used as a substitute for referring to the standards and interpretations themselves. Accounting policy disclosures appropriate for an entity depend on the facts and circumstances of that entity and may differ from the disclosures illustrated in this publication.

5. IFRS 7.B5(e) ‖ An entity discloses how the statement of comprehensive income amounts are ‖ determined, for example, whether net gains and losses of financial assets and liabilities ‖ measured at fair value through profit or loss include interest and dividend income. ‖

IFRS 7.20(b) ‖ In these illustrative statements interest income for financial assets at fair value through ‖ profit or loss is presented separately from net gain from financial instruments at fair ‖ value through profit or loss. However, other presentations, for example, inclusion of ‖ interest income with the gain from financial instruments at fair value through profit or loss, ‖ are permitted.

6. The method of calculating the effective interest rate is discussed in our publication Insights into IFRS (4.6.40).




2. Basis of preparation (continued) (e) Changesinaccountingpolicies1, 2

There were no changes in the accounting policies of the Fund during the year.

IAS 1.112(a), 3. Significant accounting policies3, 4

117(a), (b) The accounting policies set out below have been applied consistently to all periods presented in these financial statements.

(a) ForeigncurrencyIAS 21.21, 23(a) Transactions in foreign currencies are translated into euro at the exchange rate at the date

of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the reporting date into euro at the exchange rate at that date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are translated into euro at the exchange rate at the date that the fair value was determined.

Foreign currency differences arising on translation are recognised in the statement of comprehensive income as net foreign exchange loss, except for those arising on financial instruments at fair value through profit or loss, which are recognised as net gain from financial instruments at fair value through profit or loss.

IFRS 7.B5(e) (b) Interest5, 6

IAS 18.35(b)(iii) Interest income and expense, including interest income from non-derivative financial assets at fair value through profit or loss, are recognised in the statement of comprehensive income using the effective interest method.

The effective interest rate is the rate that exactly discounts the estimated future cash payments and receipts through the expected life of the financial asset or liability (or, when appropriate, a shorter period) to the carrying amount of the financial asset or liability. When calculating the effective interest rate, the Fund estimates future cash flows considering all contractual terms of the financial instrument, but not future credit losses. Interest received or receivable, and interest paid or payable are recognised in the statement of comprehensive income as interest income and interest expense, respectively.

IFRS 7.21, (c) DividendincomeanddividendexpenseB5(e) Dividend income is recognised in the statement of comprehensive income when the right to

receive income is established. For quoted equity securities this is usually the ex-dividend date. For unquoted equity securities this is usually the date when the shareholders have approved the payment of a dividend. Dividend income from equity securities designated at fair value through profit or loss is recognised in the statement of comprehensive income as dividend income.

The Fund incurs expenses on short positions in equity securities equal to the dividends due on these securities. Such dividend expense is recognised in the statement of comprehensive income as operating expense when the shareholders’ right to receive payment is established.

IFRS 7.B5(e) (d) Dividendstoholdersofredeemableshares Dividends to holders of redeemable shares are recognised in the statement of comprehensive

income as finance costs when they are authorised and no longer at the discretion of the Fund. [Provide more detail to reflect the circumstances of the particular fund].




1. IFRS 7.B5(e) In these illustrative financial statements net gain from financial instruments at fair value through profit or loss includes:

●l gains and losses, other than interest and dividend income, on financial assets and financial liabilities designated as at fair value through profit or loss upon initial recognition;

●l gains and losses, other than dividends payable on securities sold short classified as held for trading; and

●l gains and losses on all derivatives.

However, other presentations are possible, for example, this line also could include interest and dividend income, interest expense and dividends on securities sold short.

2. ‖ In our view, an entity may apply any reasonable cost allocation method to determine the cost ‖ of financial assets sold that are part of homogeneous portfolio (e.g. average cost or first-in, ‖ first-out). The selected method should be applied consistently. This issue is discussed in our ‖ publication Insights into IFRS (3.6.1280.50).

3. IAS 39.9, 11A Financial assets or liabilities (other than those classified as held for trading) may be designated upon initial recognition at fair value through profit or loss, in any of the following circumstances, if they:

●l eliminate or significantly reduce a measurement or recognition inconsistency (“accounting mismatch”) that would otherwise arise from measuring assets and liabilities or recognising the gains or losses on them on different bases;

●l are part of a group of financial assets and/or financial liabilities that is managed and for which performance is evaluated and reported to key management on a fair value basis in accordance with a documented risk management or investment strategy; or

●l are hybrid contracts in which an entity is permitted to designate the entire contract at fair value through profit or loss.

IAS 39.AG4B These illustrative financial statements demonstrate the fair value option for debt securities and equity investments that are managed and evaluated on a fair value basis as part of the Fund’s documented investment strategy.




3. Significant accounting policies (continued) IFRS 7.21, (e) Netgainfromfinancialinstrumentsatfairvaluethroughprofitorloss1

B5(e) Net gain from financial instruments at fair value through profit or loss includes all realised and unrealised fair value changes and foreign exchange differences, but excludes interest and dividend income, and dividend expense on securities sold short.

‖ Net realised gain from financial instruments at fair value through profit or loss is calculated ‖ using the average cost method.2

IFRS 7.21 (f) Feesandcommissionexpenses Fees and commission expenses are recognised in the statement of comprehensive income as

the related services are performed.

(g) IncometaxIAS 12.2 Under the current system of taxation in [insert name of the country of domicile] the Fund is

exempt from paying income taxes. The Fund has received an undertaking from [insert name of the relevant government body] of [insert name of the country of domicile] exempting it from tax for a period of [insert number of] years up till [insert year of expiry].

However, some dividend and interest income received by the Fund are subject to withholding tax imposed in certain countries of origin. Income that is subject to such tax is recognised gross of the taxes and the corresponding withholding tax is recognised as tax expense.

IFRS 7.21 (h) FinancialassetsandfinancialliabilitiesIAS 39.14, 38 (i) RecognitionandinitialmeasurementIFRS 7.B5(c) Financial assets and liabilities at fair value through profit or loss are recognised initially on the

trade date at which the Fund becomes a party to the contractual provisions of the instrument. Other financial assets and liabilities are recognised on the date they are originated.

Financial assets and financial liabilities at fair value through profit or loss are measured initially at fair value, with transaction costs recognised in the statement of comprehensive income. Financial assets or financial liabilities not at fair value through profit or loss are measured initially at fair value plus transaction costs that are directly attributable to its acquisition or issue.

(ii) Classification The Fund has classified financial assets and financial liabilities into the following categories:

Financial assets at fair value through profit or loss:

●l Held for trading – derivative financial instrumentsl● Designated as at fair value through profit or loss – debt securities and equity investments.3

Financial assets at amortised cost:

●l Loans and receivables – cash and cash equivalents, balances due from brokers, receivables from reverse repurchase agreements and other receivables.

Financial liabilities at fair value through profit or loss:

l● Held for trading – securities sold short and derivative financial instruments.

Financial liabilities at amortised cost:

●l Other liabilities – balances due to brokers, payables under repurchase agreements, redeemable shares and other payables.



This page has been left blank intentionally.




3. Significant accounting policies (continued) (h) Financialassetsandfinancialliabilities(continued) (ii) Classification(continued)IAS 39.9, AG15 A financial instrument is classified as held for trading, if:

●l it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term;

●l on initial recognition it is part of a portfolio that is managed together and for which there is evidence of a recent pattern of short-term profit taking; or

●l it is a derivative, other than a designated and effective hedging instrument.

IAS 39.9 The Fund has designated certain financial assets at fair value through profit or loss when the assets are managed, evaluated and reported internally on a fair value basis.

A non-derivative financial asset with fixed or determinable payments may be classified as a loan and receivable unless it is quoted in an active market, or it is an asset for which the holder may not recover substantially all of its initial investment, other than because of credit deterioration.

Note 6 provides a reconciliation of line items in the statement of financial position to the categories of financial instruments, as defined by IAS 39.

IAS 39.58 (iii) Amortisedcostmeasurement The amortised cost of a financial asset or liability is the amount at which the financial asset

or liability is measured at initial recognition, minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initial amount recognised and the maturity amount, minus any reduction for impairment.

IAS 39.48 (iv) Fairvaluemeasurement Fair value is the amount for which an asset could be exchanged, or a liability settled, between

knowledgeable, willing parties in an arm’s length transaction on the measurement date.

IAS 39.48A When available, the Fund measures the fair value of an instrument using quoted prices in an active market for that instrument. A market is regarded as active if quoted prices are readily and regularly available and represent actual and regularly occurring market transactions on an arm’s length basis.

If a market for a financial instrument is not active, the Fund establishes fair value using a valuation technique. Valuation techniques include using recent arm’s length transactions between knowledgeable, willing parties (if available), reference to the current fair value of other instruments that are substantially the same, discounted cash flow analyses and option pricing models. The chosen valuation technique makes maximum use of market inputs, relies as little as possible on estimates specific to the Fund, incorporates all factors that market participants would consider in setting a price, and is consistent with accepted economic methodologies for pricing financial instruments. Inputs to valuation techniques reasonably represent market expectations and measures of the risk-return factors inherent in the financial instrument. The Fund calibrates valuation techniques and tests them for validity using prices from observable current market transactions in the same instrument or based on other available observable market data.







3. Significant accounting policies (continued) (h) Financialassetsandfinancialliabilities(continued)IAS 39.48 (iv) Fairvaluemeasurement(continued)IFRS 7.28(a) The best evidence of the fair value of a financial instrument at initial recognition is the

transaction price, i.e. the fair value of the consideration given or received, unless the fair value of that instrument is evidenced by comparison with other observable current market transactions in the same instrument (i.e. without modification or repackaging) or based on a valuation technique whose variables include only data from observable markets. When transaction price provides the best evidence of fair value at initial recognition, the financial instrument is initially measured at the transaction price and any difference between this price and the value initially obtained from a valuation model is subsequently recognised in profit or loss on an appropriate basis over the life of the instrument but not later than when the valuation is supported wholly by observable market data or the transaction is closed out.

Assets and long positions are measured at a bid price; liabilities and securities sold short are measured at an asking price.

IFRS 7.B5E All changes in fair value, other than interest and dividend income and expense, are recognised in the statement of comprehensive income as net gain from financial instruments at fair value through profit or loss.

(v) IdentificationandmeasurementofimpairmentIFRS 7.B5(f) At each reporting date the Fund assesses whether there is objective evidence that financial

assets measured at amortised cost are impaired. A financial asset or a group of financial assets is impaired when objective evidence demonstrates that a loss event has occurred after the initial recognition of the asset(s), and that the loss event has an impact on the future cash flows of the asset(s) that can be estimated reliably.

IAS 39.65 Objective evidence that financial assets are impaired can include significant financial difficulty of the borrower or issuer, default or delinquency by a borrower, restructuring of a loan or advance by the Fund on terms that the Fund would not otherwise consider, indications that a borrower or issuer will enter bankruptcy or other observable data relating to a group of assets such as adverse changes in the payment status of borrowers or issuers in the group, or economic conditions that correlate with defaults in the group. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment is reversed through profit or loss.

Impairment losses on assets carried at amortised cost are measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows discounted at the asset’s original effective interest rate. Impairment losses are recognised in profit or loss and reflected in an allowance account against loans and receivables. Interest on impaired assets continues to be recognised through the unwinding of the discount.

The Fund writes off financial assets carried at amortised cost when they are determined to be uncollectible.







3. Significant accounting policies (continued) (h) Financialassetsandfinancialliabilities(continued)IAS 39.15-42 (vi) Derecognition The Fund derecognises a financial asset when the contractual rights to the cash flows from

the financial asset expire, or when it transfers the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred or in which the Fund neither transfers nor retains substantially all the risks and rewards of ownership and does not retain control of the financial asset. Any interest in transferred financial assets that qualify for derecognition that is created or retained by the Fund is recognised as a separate asset or liability in the statement of financial position.

On derecognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset derecognised), and the consideration received (including any new asset obtained less any new liability assumed) is recognised in the statement of comprehensive income.

The Fund enters into transactions whereby it transfers assets recognised on its statement of financial position, but retains either all or substantially all of the risks and rewards of the transferred assets or a portion of them. If all or substantially all risks and rewards are retained, then the transferred assets are not derecognised. Transfers of assets with retention of all or substantially all risks and rewards include, for example, securities lending and repurchase transactions.

The Fund derecognises a financial liability when its contractual obligations are discharged or cancelled or expire.

(vii)OffsettingIAS 32.42 Financial assets and liabilities are offset and the net amount presented in the statement of

financial position when, and only when, the Fund has a legal right to set off the recognised amounts and it intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Income and expenses are presented on a net basis only when permitted under IFRSs, for example, for gains and losses arising from a group of similar transactions, such as gains and losses from financial instruments at fair value through profit or loss.

(viii)SpecificinstrumentsIAS 7.46 Cashandcashequivalents Cash and cash equivalents comprise deposits with banks with original maturities of less than

three months, other than cash collateral provided in respect of derivatives, securities sold short and securities borrowing transactions.

Receivablesandpayablesunderrepurchaseagreementsandsecuritieslentandborrowed

IAS 39.AG51(a)-(c) When the Fund purchases a financial asset and simultaneously enters into an agreement to resell the same or substantially similar asset at a fixed price on a future date (“reverse repo”), the arrangement is accounted for as a loan and receivable, recognised in the statement of financial position as receivables from reverse repurchase agreements, and the underlying asset is not recognised in the Fund’s financial statements.




1. IAS 1.31 When new standards, amendments to standards and interpretations will have no, or no material, effect on the financial statements of the entity, it is not necessary to list them as such a disclosure will not be material.

2. ‖ See Appendix I for example disclosures on the early adoption of IFRS 9 Financial Instruments ‖ issued in November 2009 (IFRS 9 (2009)).




3. Significant accounting policies (continued) (h) Financialassetsandfinancialliabilities(continued) (viii)Specificinstruments(continued) Receivablesandpayablesunderrepurchaseagreementsandsecuritieslentand

borrowed(continued) When the Fund sells a financial asset and simultaneously enters into an agreement to

repurchase the same or similar asset at a fixed price on a future date (“repo”), the arrangement is accounted for as a borrowing, recognised in the statement of financial position as payables under repurchase agreements, and the underlying asset continues to be recognised in the Fund’s financial statements.

Securities borrowed by the Fund are not recognised in the statement of financial position. If the Fund subsequently sells the borrowed securities, the arrangement is accounted for as a short sold position, recognised in the statement of financial position as financial liabilities at fair value through profit or loss, classified as held for trading and measured at fair value through profit or loss. Cash collateral for borrowed securities is included within balances due from brokers.

IAS 39.AG51(a) Securities lent by the Fund are not derecognised from the Fund’s statement of financial position. The Fund discloses cash collateral pledged by the borrower in note 11. When the counterparty has the rights to sell or repledge the securities, the Fund reclassifies them in the statement of financial position as pledged financial assets at fair value through profit or loss.

Receivables from reverse repurchase agreements and payables under repurchase agreements are subsequently measured at amortised cost.

Redeemableshares The Fund classifies financial instruments issued as financial liabilities or equity instruments in

accordance with the substance of the contractual terms of the instruments.

The Fund has two classes of redeemable shares in issue: Class A and Class B that rank pari passu in all material respects and have the same terms and conditions other than [list down the differences in terms between the Class A shares and Class B shares, e.g. management fee rate, incentive fees etc.]. The redeemable shares provide investors with the right to require redemption for cash at a value proportionate to the investor’s share in the Fund’s net assets, after deduction of the nominal amount of equity share capital, at each monthly [daily/quarterly] redemption date and also in the event of the Fund’s liquidation.

The redeemable shares are classified as financial liabilities and are measured at the present value of the redemption amounts. In accordance with the Fund’s prospectus, the redemption amounts of the redeemable shares are calculated using the mid-market prices of the Fund’s underlying investments/securities sold short. On the other hand, in accordance with the Fund’s accounting policies, assets and long positions are measured at a bid price and liabilities and securities sold short are measured at the asking price (see note 3(h)(iv)). The differences in the measurement bases of the Fund’s underlying investments/securities sold short and the redemption amounts of the redeemable shares have been presented as an adjustment in the statement of financial position.

IAS 8.30, 31 (i) Newstandardsandinterpretationsnotadopted 1

A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January 2010, and have not been applied in preparing these financial statements. None of these are expected to have a significant effect on the measurement of the amounts recognised in the financial statements of the Fund. However, IFRS 9 Financial Instruments issued in November 2009 (IFRS 9 (2009)) will change the classification of financial assets.




1. IFRS 7.31 An entity discloses information that enables users of its financial statements to evaluate the nature and extent of risks arising from financial instruments to which it is exposed. Those risks typically include, but are not limited to, credit risk, liquidity risk and market risk.

IFRS 7.33 For each type of risk, an entity discloses:

●l the exposures to risk and how they arise;●l its objectives, policies and processes for managing the risk and the methods used to

measure the risk; and●l any changes in the above from the previous period.

IFRS 7.B6 The disclosures required by paragraphs 31 – 41 of IFRS 7 in respect of the nature and extent of risks arising from financial instruments are either presented in the financial statements or incorporated by cross-reference from the financial statements to another statement, such as a management commentary or risk report, that is available to users of the financial statements on the same terms as the financial statements and at the same time. The location of these disclosures may be guided by local laws. In these illustrative financial statements, these disclosures have been presented in the financial statements.

IFRS 7 requires only risk disclosures for financial instruments. Financial risk exposures from non-financial instruments, e.g. credit risk from operating leases, are disclosed separately if an entity chooses to disclose its entire financial risk position.

2. In these illustrative financial statements the disclosures in respect of financial risk management have been presented to illustrate different potential scenarios and situations that an entity may encounter in practice. An entity tailors its respective disclosures for the specific facts and circumstances relative to its business and risk management practices, and also takes into account the significance of its exposure to risks from the use of financial instruments.

3. Operational risk is not a risk that is specifically discussed in IFRS 7. However, to the extent that operational risk arises from financial instruments, it requires disclosure under the general requirements of the standard.

4. IAS 1.134 The entity discloses information that enables users of its financial statements to evaluate its objectives, policies and processes for managing capital.




3. Significant accounting policies (continued)IAS 8.30, 31 (i) Newstandardsandinterpretationsnotadopted(continued) The standard is not expected to have an impact on the measurement basis of the financial

assets since the majority of the Fund’s financial assets are measured at fair value through profit or loss.

IFRS 9 (2009) deals with classification and measurement of financial assets and its requirements represent a significant change from the existing requirements in IAS 39 in respect of financial assets. The standard contains two primary measurement categories for financial assets: at amortised cost and fair value. A financial asset would be measured at amortised cost if it is held within a business model whose objective is to hold assets in order to collect contractual cash flows, and the asset’s contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal outstanding. All other financial assets would be measured at fair value. The standard eliminates the existing IAS 39 categories of held to maturity, available for sale and loans and receivables.

For an investment in an equity instrument that is not held for trading, the standard permits an irrevocable election, on initial recognition, on an individual share-by-share basis, to present all fair value changes from the investment in other comprehensive income. No amount recognised in other comprehensive income would ever be reclassified to profit or loss. However, dividends on such investments are recognised in profit or loss, rather than other comprehensive income unless they clearly represent a partial recovery of the cost of the investment. Investments in equity instruments in respect of which an entity does not elect to present fair value changes in other comprehensive income would be measured at fair value with changes in fair value recognised in profit or loss.

The standard requires that derivatives embedded in contracts with a host that is a financial asset within the scope of the standard are not separated; instead the hybrid financial instrument is assessed in its entirety as to whether it should be measured at amortised cost or fair value.

The standard is effective for annual periods beginning on or after 1 January 2013. Earlier application is permitted. The Fund does not plan to adopt this standard early.

IFRS 7.31 4. Financial risk management1, 2

(a) IntroductionandoverviewIFRS 7.31, 32 The Fund has exposure to the following risks from financial instruments:

●l credit risk●l liquidity risk●l market risk●l operational risk. 3

IFRS 7.33 This note presents information about the Fund’s exposure to each of the above risks, the Fund’s objectives, policies and processes for measuring and managing risk, and the Fund’s

IAS 1.134 management of capital.4




1. IFRS 7.34 IFRS 7 requires disclosure of quantitative data on credit risk based on the information provided internally to key management personnel of the entity (as defined in IAS 24 Related

Party Disclosures), e.g. the entity’s board of directors. An entity explains how those data are determined. This issue is discussed in our publication Insights into IFRS (5.6.340).

The example shown in these illustrative financial statements in relation to credit risk assumes that the primary bases for reporting to key management personnel on credit risk is monitoring of credit ratings of counterparties to debt securities, reverse repurchase and derivatives transactions, brokers and bankers and industry concentration of debt securities. However, other presentations are possible.




4. Financial risk management (continued) (a) Introductionandoverview(continued) (i) RiskmanagementframeworkIFRS 7.31 The Fund maintains positions in a variety of derivative and non-derivative financial instruments

in accordance with its investment management strategy. [Insert description of the Fund’s investment strategy as outlined in the Fund’s prospectus]. The Fund’s investment portfolio comprises listed and unlisted equity and debt securities, derivative financial instruments and investments in unlisted investment funds.

The Fund’s investment manager has been given a discretionary authority to manage the assets in line with the Fund’s investment objectives. Compliance with the target asset allocations and the composition of the portfolio is monitored by the board of directors on a [daily/weekly/monthly] basis. In instances where the portfolio has diverged from target asset allocations, the Fund’s investment manager is obliged to take actions to rebalance the portfolio in line with the established targets, within prescribed time limits.

IFRS 7.33 (b) Creditrisk1

Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Fund, resulting in a financial loss to the Fund. It arises principally from debt securities held, and also from derivative financial assets, cash and cash equivalents, balances due from brokers and receivables from reverse repurchase agreements. For risk management reporting purposes the Fund considers and consolidates all elements of credit risk exposure (such as individual obligor default risk, country and sector risk).

(i) ManagementofcreditriskIFRS 7.33(b) The Fund’s policy over credit risk is to minimise its exposure to counterparties with perceived

higher risk of default by dealing only with counterparties meeting the credit standards set out in the Fund’s prospectus and by taking collateral. [Insert specific risk management policies and investment guidelines relating to credit risk as outlined in the Fund’s prospectus].

IFRS 7.33(b) Credit risk is monitored on a [daily/weekly/monthly] basis by the investment manager in accordance with policies and procedures in place. [Insert specific risk management procedures. This should include how the risk is managed and measured]. The Fund’s credit risk is monitored on a [monthly, quarterly, other] basis by the board of directors. Where the credit risk is not in accordance with the investment policy or guidelines of the Fund, the investment manager is obliged to rebalance the portfolio within [state number of days] days of each determination that the portfolio is not in compliance with the stated investment parameters.

IFRS 7.33(c) ‖ As a result of the improving economic conditions in 2010, certain credit limits have been ‖ redefined. The Fund’s experience is that the economic recovery has had a greater impact on ‖ [name markets] markets.

(ii) ExposuretocreditriskIFRS 7.36(a), (b) The Fund’s maximum credit risk exposure (without taking into account collateral and other

credit enhancements) at the reporting date is represented by the respective carrying amounts of the relevant financial assets in the statement of financial position. The risk on some of these exposures, principally receivables from reverse repurchase agreements, is mitigated by collateral held.







4. Financial risk management (continued) (b) Creditrisk(continued) (iii) Investmentsindebtsecurities Credit risk arising on debt securities is mitigated by investing primarily in investment-grade

rated instruments, principally with credit ratings of at least “AA” or equivalent as determined by [credit rating agency]. The investment manager reviews a monthly rating update from the rating agency and rebalances the portfolio where necessary. The Fund may also invest in unrated debt securities whereby the investment manager assigns a credit rating to these securities using a methodology that is consistent with that used by the credit rating agency.

IFRS 7.34(c) At 31 December, the Fund was invested in debt securities with the following credit quality:

IFRS 7.36(c) Rating 2010 2009

AAA/Aaa 35.8% 45.7% AA/Aa 61.1% 52.4% BBB/Baa 3.1% 1.9% Total 100.0% 100.0%

(iv) DerivativefinancialinstrumentsIFRS 7.36(c) The Fund enters in two types of derivative transactions: exchange-traded derivatives and over-

the-counter (OTC) derivatives. Credit risk arising from exchange-traded derivatives is mitigated by margin requirements. OTC derivatives expose the Fund to the risk that the counterparties to the derivative financial instruments might default on their obligations to the Fund.

IFRS 7.36(b), (c) Derivative financial instruments are transacted with counterparties that are rated at least AA based on rating agency [X] ratings, within predetermined limits, and with whom the Fund has signed master netting agreements. Master netting agreements provide for the net settlement of contracts with the same counterparty in the event of default. As a result of master netting agreements, at 31 December 2010, the Fund would be entitled to offset derivative assets of €451 thousand (2009: €299 thousand) against derivative liabilities in the event of counterparty defaults. For the purposes of reporting in the statement of financial position, the derivative financial assets and liabilities have not been offset, as they do not meet the offsetting criteria. The net exposure to credit risk mitigated by master netting arrangements may change significantly within a short period of time due to the highly volatile nature of the fair value of the derivatives.

‖ The following table sets out the fair values and the notional amount of derivative assets and ‖ liabilities held by the Fund as at the reporting date: ‖ ‖ 2010 2010 2009 2009

‖In thousands of euro Fairvalue Notional Fairvalue Notional

‖

‖ Derivativeassets ‖ Listed equity index options 249 5,000 29 400 ‖ Foreign currency forward contracts 219 2,000 300 2,700 ‖Equity indices futures contracts 54 7,500 - - ‖ Foreign currency futures contracts 23 2,500 106 1,500 ‖ Total derivative assets 545 17,000 435 4,600







4. Financial risk management (continued) (b) Creditrisk(continued) (iv) Derivativefinancialinstruments(continued) ‖ 2010 2010 2009 2009

‖In thousands of euro Fairvalue Notional Fairvalue Notional

‖ ‖ Derivativeliabilities ‖ Listed equity index options (1,066) (16,000) (756) (15,000) ‖ Foreign currency forward contracts (822) (10,000) (106) (1,200) ‖ Credit default swaps (485) (12,800) - - ‖ Interest rate swaps (464) (5,900) (372) (4,000) ‖ Total derivative liabilities (2,837) (44,700) (1,234) (20,200)

(v) BalancesduefrombrokersIFRS 7.36(c) Balances due from brokers represent margin accounts, cash collateral for borrowed securities

and sale transactions awaiting settlement. Credit risk relating to unsettled transactions is considered small due to the short settlement period involved and the high credit quality of the brokers used. As at the reporting date 72% (2009: 69%) of the balances due from brokers are concentrated amongst three brokers (2009: four brokers) whose credit rating was AA (2009: AA). The investment manager monitors the financial position of the brokers on a quarterly basis.

(vi) CashandcashequivalentsIFRS 7.36(c) The Fund’s cash and cash equivalents are held mainly with XYZ Bank, which is rated AA (2009: AA) based on rating agency [X] ratings. The investment manager monitors the financial

position of XYZ Bank on a quarterly basis.

(vii)ReceivablesfromreverserepurchaseagreementsIFRS 7.36(b) The Fund enters into reverse repurchase agreements that may result in credit loss in the event

that the counterparty to the transaction is unable to fulfil its contractual obligations to the Fund, and the collateral value decreases rapidly and is insufficient to cover the amount due. At 31 December 2010 the fair value of debt securities held as collateral against receivables from reverse repurchase agreements was €4,999 thousand (2009: €4,190 thousand). In instances in which the value of the collateral decreases below the predetermined collateral coverage, the agreement requires the counterparty to post additional collateral. In addition, the Fund minimises its credit risk by monitoring counterparty creditworthiness.

(viii)ConcentrationofcreditriskIFRS 7.34(c) The investment manager reviews credit concentration of debt securities held based on

counterparties and industries [and geographical location].

IFRS 7.B8(a) As at the reporting date, the Fund’s debt securities exposures were concentrated in the following industries:

2010 2009

% %

Banks/financial services 48.8 54.5 Automotive manufacturing 15.1 12.3 Information technology 12.5 8.0 Pharmaceutical 8.2 13.1 Other 15.4 12.1 100.0 100.0




1. IFRS 7. 34(a), An entity discloses summary quantitative data about its exposure to liquidity risk, based on B10A information that is provided internally to key management personnel of the entity (as

defined in IAS 24), e.g. the entity’s board of directors. An entity explains how those data are determined. This issue is discussed in our publication Insights into IFRS (5.6.340).

The example shown in these illustrative financial statements in relation to liquidity risk assumes that the primary basis for reporting to key management personnel on liquidity risk is the ratio of liquid assets to anticipated redemptions and monthly redemption levels. The example also assumes that this is the entity’s approach to managing liquidity risk. However, other presentations are possible.




4. Financial risk management (continued) (b) Creditrisk(continued) (viii)Concentrationofcreditrisk(continued) There were no significant concentrations in this portfolio of credit risk to any individual issuer

or group of issuers at 31 December 2010 or 31 December 2009. No individual investment exceeded five percent of the net assets attributable to the holders of redeemable shares either at 31 December 2010 or 31 December 2009.

(ix) Settlementrisk The Fund’s activities may give rise to risk at the time of settlement of transactions. Settlement

risk is the risk of loss due to the failure of an entity to honour its obligations to deliver cash, securities or other assets as contractually agreed.

For the majority of transactions the Fund mitigates this risk by conducting settlements through a broker to ensure that a trade is settled only when both parties have fulfilled their contractual settlement obligations. Settlement limits form part of the credit approval and limit monitoring processes described earlier.

IFRS 7.37 (x) Pastdueandimpairedassets No financial assets carried at amortised cost were past due or impaired either at 31 December

2010 or 31 December 2009.

IFRS 7.39 (c) Liquidityrisk1

Liquidity risk is the risk that the Fund will encounter difficulty in meeting obligations arising from its financial liabilities that are settled by delivering cash or another financial asset, or that such obligations will have to be settled in a manner disadvantageous to the Fund.

IFRS 7.39(c) (i) Managementofliquidityrisk The Fund’s policy and the investment manager’s approach to managing liquidity is to have

sufficient liquidity to meet its liabilities, including estimated redemptions of shares, as and when due, without incurring undue losses or risking damage to the Fund’s reputation.

The Fund’s prospectus provides for the monthly [daily/quarterly] creation and cancellation of shares and it is therefore exposed to the liquidity risk of meeting shareholder redemptions at each redemption date [at any time].

The Fund’s financial assets include unlisted equity investments, which generally are illiquid. In addition, the Fund holds investments in unlisted open-ended investment funds, which may be subject to redemption restrictions such as side pockets or redemption gates. As a result, the Fund may not be able to liquidate some of its investments in these instruments in due time in order to meet its liquidity requirements.

The Fund’s listed securities are considered to be readily realisable as they are actively traded on major European stock exchanges and on the NYSE.

IFRS 7.33(b), 39(c), The Fund’s liquidity risk is managed on a daily basis by the investment manager in accordance B11E with policies and procedures in place. [Insert specific risk management policies and investment

guidelines relating to liquidity risk as outlined in the Fund’s prospectus as well as the risk management procedures. This should include how the risk is managed and measured].




1. IFRS 7.39 ‖ In addition to disclosures provided under paragraph 34 of IFRS 7 that are based on ‖ information provided internally to key management personnel, an entity also discloses: ‖

‖l a maturity analysis for non-derivative financial liabilities; ‖l a maturity analysis for derivative financial liabilities, which should include those instruments ‖ for which contractual maturities are essential for an understanding of the timing of the cash ‖ flows; and ‖ l a description of how it manages the liquidity risk inherent in the above.

2. IFRS 7.B11D ‖The contractual amounts disclosed in this analysis are gross undiscounted cash flows and ‖ therefore may not agree with the carrying amounts in the statement of financial position. ‖ ‖ IFRS 7 does not define contractual maturities. It therefore leaves open to interpretation the ‖ amounts that need to be included in the analysis for certain types of financial liabilities, such ‖ as derivatives and perpetual instruments. In our view, both the interest and principal cash ‖ flows should be included in the analysis, as this best represents the liquidity risk being faced ‖ by the entity. This issue is discussed in our publication Insights into IFRS (5.6.390.70). ‖ IFRS 7.B11 ‖ In preparing the contractual maturity analyses for financial liabilities, an entity uses its ‖judgement to determine an appropriate number of time bands. ‖ IFRS 7.B11E ‖ An entity discloses how it manages liquidity risk inherent in its maturity analyses for derivative ‖ and non-derivative financial liabilities. An entity also discloses a maturity analysis of financial ‖ assets that it holds for managing liquidity risk, if such information is necessary to enable ‖ users of its financial statements to evaluate the nature and extent of liquidity risk.

3. IFRS 7.B11B ‖ In these illustrative financial statements it is assumed that disclosure of contractual maturities ‖ for all derivative financial liabilities held by the Fund is essential for an understanding of the ‖ timing of the cash flows.




4. Financial risk management (continued) (c) Liquidityrisk(continued) (i) Managementofliquidityrisk(continued) The Fund’s overall liquidity risk is monitored on a [monthly, quarterly, other] basis by the board

of directors. The Fund’s redemption policy only allows for redemptions on the last day of each month [quarter, other] and shareholders must provide 14 days’ notice. It is the investment manager’s policy to have liquid assets comprising cash and cash equivalents and investments in commercial paper for which there is an active and liquid market equal to at least 105 percent of [monthly, quarterly, other] anticipated redemptions. At the reporting date the Fund has investments of €4,891 thousand (2009: €3,415 thousand) in commercial paper.

‖ The board of directors is empowered to impose a redemption gate should redemption levels ‖ exceed 10 percent of the net assets value of the Fund in any redemption period.

IFRS 7.B11F(a), ‖ In addition, the Fund maintains the lines of credit of €300 thousand that it can access to meet50(a) ‖ liquidity needs. If the line of credit is drawn, interest would be payable at the rate of Euribor ‖ plus 150 basis points (2009: Euribor plus 160 basis points). The Fund has no restrictions on the ‖ use of this facility.

IFRS 7.39(a), (b)(ii) Maturityanalysisforfinancialliabilities1, 2

The following are the contractual maturities of financial liabilities, including estimated interest payments.

Gross nominal Carrying inflow/ Lessthan 1to3 3monthsIFRS 7.B11 In thousands of euro amount (outflow) 1month months to1year

31December2010 Non-derivativeliabilities Securities sold short (784) (784) (784) - - Balances due to brokers (143) (143) (143) - - Payables under repurchase agreements (2,563) (2,755) (1,213) (1,542) - Other payables (103) (103) (103) - - Net assets attributable to holders of redeemable shares (32,625) (32,647) (32,647) - -

IFRS 7.B11B Derivativeliabilities3 (2,837) Outflows (9,182) (7,542) (1,640) - Inflows 6,250 5,500 750 - (39,055) (39,364) (36,932) (2,432) -




1. IFRS 7. 34(a) An entity discloses summary quantitative data about its exposure to market risk, based on information that is provided internally to key management personnel of the entity (as

defined in IAS 24), e.g. the entity’s board of directors. An entity explains how those data are determined. This issue is discussed in our publication Insights into IFRS (5.6.340).

In these illustrative financial statements it is assumed that the primary basis for reporting to key management personnel on interest rate risk is a gap analysis and the weighted average number of days to maturity. In respect of foreign exchange risk, it is assumed that the primary basis for reporting to key management personnel is an analysis of concentration risk in relation to individual currencies arising from both monetary and non-monetary assets and liabilities. In respect of other price risk, it is assumed that the primary basis for reporting to key management personnel is an analysis of the portfolio diversification by asset type and industry concentration of equity investments. However, other presentations are possible.

2. IFRS 7.40(a) ‖ An entity discloses how profit or loss and net assets attributable to holders of redeemable ‖ shares would have been affected by changes in a relevant risk variable that were reasonably ‖ possible at the end of the reporting period. Such a sensitivity analysis is disclosed for each ‖ type of market risk to which the entity is exposed at the end of the reporting period. ‖ IFRS 7.41 ‖ In these illustrative financial statements it is assumed that the Fund does not prepare a ‖ sensitivity analysis such as a Value-at-Risk analysis (VaR) that reflects the interdependencies ‖ between risk variables. However, we have illustrated in Appendix V an example disclosure for ‖ a fund that uses a VaR analysis.




4. Financial risk management (continued) (c) Liquidityrisk(continued) (ii) Maturityanalysisforfinancialliabilities(continued) Gross nominal Carrying inflow/ Lessthan 1to3 3monthsIFRS 7.B11 In thousands of euro amount (outflow) 1month months to1year

31December2009 Non-derivativeliabilities Securities sold short (212) (212) (212) - - Balances due to brokers (275) (275) (275) - - Payables under repurchase agreements (2,234) (2,408) - (2,408) - Other payables (101) (101) (101) - - Net assets attributable to holders of redeemable shares (29,979) (29,996) (29,996) - - IFRS 7.B11B Derivativeliabilities (1,234) Outflows (5,330) (2,398) (372) (2,560) Inflows 4,000 2,000 - 2,000 (34,035) (34,322) (30,982) (2,780) (560)

IFRS 7.39(a), (c), The table above shows the undiscounted cash flows of the Fund’s financial liabilities on theB11C, B11D basis of their earliest possible contractual maturity. The gross amounts include interest

payable when appropriate. The Fund’s expected cash flows on these instruments do not vary significantly from this analysis, except for net assets attributable to the holders of redeemable shares, which the Fund has a contractual obligation to redeem within 14 days. Historical experience indicates that these shares are held by the shareholders on a medium or long term basis. Based on average historic information, redemption levels are expected to approximate €600 thousand per month (2009: €500 thousand per month); however, actual monthly redemptions could differ significantly from this estimate.

IFRS 7.39(b), (c), For derivative financial instruments, the gross nominal inflow/(outflow) disclosed in the table B11B, B11D represents the contractual undiscounted cash flows relating to these instruments. The

amounts are compiled on a net basis for derivatives that are net settled, and show gross inflows and outflows for derivatives that have simultaneous gross settlement (e.g. forward exchange contracts and currency swaps).

IFRS 7.31, 32 (d) Marketrisk1, 2

Market risk is the risk that changes in market prices, such as interest rates, equity prices, foreign exchange rates and credit spreads (not relating to changes in the obligor’s/issuer’s credit standing) will affect the Fund’s income or the fair value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

IFRS 7.39(c) (i) Managementofmarketrisk The Fund’s strategy for the management of market risk is driven by the Fund’s investment

objective. [Insert description of the investment objective as outlined in the Fund’s prospectus].







4. Financial risk management (continued) (d) Marketrisk(continued) (i) Managementofmarketrisk(continued) The Fund’s market risk is managed on a daily basis by the investment manager in accordance

with policies and procedures in place. [Insert specific risk management policies and investment guidelines relating to market risk as outlined in the Fund’s prospectus. This should include how the risk is managed and measured]. The Fund’s market positions are monitored on a [monthly, quarterly, other] basis by the board of directors.

An overview of the Fund’s investment portfolio at 31 December 2010 is set out in Appendix IV (unaudited).

The Fund uses derivatives to manage its exposure to foreign currency, interest rate and other price risks. The instruments used include interest rate swaps, forward contracts, futures and options. The Fund does not apply hedge accounting.

(ii) Exposuretointerestraterisk The Fund is exposed to the risk that the fair value or future cash flows of its financial

instruments will fluctuate as a result of changes in market interest rates. In respect of the Fund’s interest-bearing financial instruments, the Fund’s policy is to transact in financial instruments that mature or reprice in the short term, i.e. no longer than 12 months. Accordingly, the Fund would be subject to limited exposure to fair value or cash flow interest rate risk due to fluctuations in the prevailing levels of market interest rates.

IFRS 7.34(a) A summary of the Fund’s interest rate gap position, categorised by the earlier of contractual re-pricing or maturity date, is as follows:

Lessthan 1to3 3months

In thousands of euro 1month months to1year Total

31December2010 Assets Cash and cash equivalents 51 - - 51 Financial assets at fair value through profit or loss: Debt securities 4,891 3,091 2,069 10,051 Receivables from reverse repurchase agreements 550 4,194 - 4,744 Totalassets 5,492 7,285 2,069 14,846

Liabilities Payables under repurchase agreements (1,286) (1,277) - (2,563) Totalliabilities (1,286) (1,277) - (2,563) Effect of derivatives held for interest rate risk management - 1,100 (1,100) - Totalinterestsensitivitygap 4,206 7,108 969 12,283







4. Financial risk management (continued) (d) Marketrisk(continued) (ii) Exposuretointerestraterisk(continued) Lessthan 1to3 3months

In thousands of euro 1month months to1year Total

31December2009 Assets Cash and cash equivalents 71 - - 71 Financial assets at fair value through profit or loss: Debt securities 4,987 6,422 3,102 14,511 Receivables from reverse repurchase agreements 480 3,510 - 3,990 Totalassets 5,538 9,932 3,102 18,572

Liabilities Payables under repurchase agreements (392) (1,842) - (2,234) Totalliabilities (392) (1,842) - (2,234) Effect of derivatives held for interest rate risk management - 2,500 (2,500) - Totalinterestsensitivitygap 5,146 10,590 602 16,338

IFRS 7.34(a) In order to manage interest rate risk the Fund aims to maintain a weighted average days to maturity, or contractual re-pricing date if earlier, for debt securities of less than 90 days. [Insert specific risk management policies and investment guidelines relating to interest rate risk as outlined in the Fund’s prospectus]. At the reporting date the weighted average days to maturity, or contractual re-pricing date if earlier, is 70.3 days (2009: 79.8 days).

IFRS 7.33(b) The internal procedures require the investment manager to manage interest rate risk on a daily basis in accordance with policies and procedures in place. [Insert specific risk management procedures. This should include how the risk is managed and measured]. The Fund’s interest rate risk is monitored on a [monthly, quarterly, other] basis by the board of directors. Where the interest rate risk is not in accordance with the investment policy or guidelines of the Fund, the investment manager is required to rebalance the portfolio within [state number of days] days of each determination of such occurrence.

IFRS 7.40 ‖ The sensitivity analysis reflects how profit or loss and net assets attributable to holders of ‖ redeemable shares would have been affected by changes in the relevant risk variable that were ‖ reasonably possible at the end of the reporting period. [Insert any other information on type of ‖ model, assumptions and parameters used in the sensitivity analysis.] ‖ IFRS 7.B19 ‖ Management have determined that a fluctuation in interest rates of 10 basis points is ‖ reasonably possible, considering the economic environment in which the Fund operates. ‖ ‖ The table below sets out the effect on the Fund’s profit or loss and net assets attributable to ‖ holders of redeemable shares of a reasonably possible increase of 10 basis points in interest ‖ rates at 31 December. This analysis assumes that all other variables, in particular foreign ‖ currency rates, remain constant.







4. Financial risk management (continued) (d) Marketrisk(continued) (ii) Exposuretointerestraterisk(continued) ‖Effect in thousands of euros 2010 2009

‖ ‖ Net impact on profit or loss and net assets attributable ‖ to holders of redeemable shares (12.3) (16.3) ‖ ‖Effect in % of net assets

‖

‖ Net impact on profit or loss and net assets attributable ‖ to holders of redeemable shares (0.04%) (0.05%)

(iii) Exposuretocurrencyrisk The Fund invests in financial instruments and enters into transactions that are denominated

in currencies other than its functional currency, primarily in US Dollars (USD), Pound Sterling (GBP) and Swiss Francs (CHF). Consequently, the Fund is exposed to risk that the exchange rate of its currency relative to other foreign currencies may change in a manner that has an adverse effect on the fair value or future cash flows of that portion of the Fund’s financial assets or liabilities denominated in currencies other than the euro.

IFRS 7.33(b) The Fund’s policy with respect to managing its currency risk is to limit its total foreign currency exposure to less than 50 percent of the Fund’s net assets, with no individual foreign currency exposure being greater than 25 percent of the net assets. [Insert specific risk management policies and investment guidelines relating to currency risk as outlined in the Fund’s prospectus].

The Fund’s currency risk is managed on a daily basis by the investment manager in accordance with policies and procedures in place. [Insert specific risk management procedures taken by the investment manager on currency risk. This should include how the risk is managed and measured]. The Fund’s currency positions and exposures are monitored on a [monthly, quarterly, other] basis by the board of directors.

IFRS 7.34(a) ‖At the reporting date the carrying value of the Fund’s net financial assets and liabilities held in ‖ individual foreign currencies expressed in euro and as a percentage of its net assets were as ‖ follows: ‖ 2010 2009

‖ Thousands %ofnet Thousands %ofnet

‖Currency ofeuro assets ofeuro assets

‖ ‖ USD 7,536 23.1% 4,287 14.3% ‖ GBP 2,023 6.2% 959 3.2% ‖ CHF 881 2.7% 779 2.6% ‖ 10,440 32.0% 6,025 20.1%







4. Financial risk management (continued) (d) Marketrisk(continued) (iii) Exposuretocurrencyrisk(continued)IFRS 7.40 ‖ The table below sets out the effect on the Fund’s profit or loss and net assets attributable to ‖ holders of redeemable shares of a reasonably possible strengthening of euro against the USD ‖ by 8% (2009: 7%), GBP by 4% (2009: 4%) and CHF by 9% (2009: 6%) at 31 December. The ‖ analysis assumes that all other variables, in particular interest rates, remain constant. ‖ ‖Effect in thousands of euros 2010 2009

‖

‖ USD (603) (327) ‖ GBP (81) (42) ‖ CHF (79) (51) ‖ ‖Effect in % of net assets 2010 2009

‖

‖ USD (1.8%) (1.1%) ‖ GBP (0.2%) (0.1%) ‖ CHF (0.2%) (0.2%) ‖ ‖ A weakening of euro against the above currencies would have resulted in an equal but opposite ‖ effect to the amounts shown above.

(iv) Exposuretootherpricerisk Other price risk is the risk that the fair value of the financial instrument will fluctuate as a result

of changes in market prices (other than those arising from interest rate risk or currency risk), whether caused by factors specific to an individual investment, its issuer or factors affecting all instruments traded in the market.

IFRS 7.33(b) Price risk is managed by the investment manager by diversifying the portfolio and economically hedging using derivative financial instruments such as options or futures contracts. [Disclose any additional investment strategies adopted by the Fund and management with respect to its policies on managing price risk].

The Fund’s policy for concentration of its investment portfolio profile is as follows:

Equity investments listed on European stock exchanges and on the NYSE Up to 80% of net assets Unlisted equity investments Up to 15% of net assets Unlisted open-ended investment funds Up to 15% of net assets Short-term commercial paper Up to 40% of net assets Listed corporate debt securities Up to 40% of net assets Equity investments sold short Up to 30% of net assets

IFRS 7.33(b) The internal procedures require the investment manager to manage price risk on a daily basis. [Insert specific risk management procedures. This should include how risk is managed and measured]. The Fund’s procedures require price risk to be monitored on a [monthly, quarterly, other] basis by the board of directors.







4. Financial risk management (continued) (d) Marketrisk(continued) (iv) Exposuretootherpricerisk(continued) Where the price risk is not in accordance with the investment policy or guidelines of the Fund,

the investment manager is required to rebalance the portfolio within [state number of days] days of each determination of such occurrence.

IFRS 7.34(a) The following table sets out concentration of the investment assets and liabilities excluding derivatives held by the Fund as at the reporting date:

2010 2009 %of %of netassets netassets

Equity investments: Exchange traded equity investments 51.8 35.5 Unlisted private equity investments 1.5 - Unlisted open-ended investment funds 5.0 4.0 Total equity investments 58.3 39.5

Debt securities: Commercial paper 15.0 12.9 Exchange traded debt securities 15.8 35.5 Total debt securities 30.8 48.4 Totalinvestmentassets 89.1 87.9

Securities sold short (2.4) (0.7) Totalinvestmentliabilities (2.4) (0.7)

IFRS 7.34(c), B8(a) The investment manager further monitors concentration of risk based on counterparties and industries [and geographical location]. The Fund’s equity investments are concentrated in the following industries:

2010 2009

% %

Healthcare 18.6 21.2 Energy 17.5 15.8 Telecommunication 16.9 14.3 Banks/financial services 15.9 13.5 Information technology 14.5 13.2 Biotechnology 5.6 2.9 Automotive manufacturing 5.1 8.3 Pharmaceutical 3.2 3.1 Other 2.7 7.7 100.0 100.0

There were no significant concentrations of risk to issuers at 31 December 2010 or 31 December 2009. No exposure to any individual issuer exceeded five percent of the net assets attributable to the holders of redeemable shares either at 31 December 2010 or 31 December 2009.




1. Operational risk is not a risk that is specifically discussed in IFRS 7. However, to the extent that operational risk arises from financial instruments, it requires disclosure under the general requirements of the standard.




4. Financial risk management (continued) (d) Marketrisk(continued) (iv) Exposuretootherpricerisk(continued)IFRS 7.40 ‖ The Fund estimates the future reasonably possible market price fluctuations for equity ‖ investments on an individual investment basis. ‖ ‖ The table below sets out the effect on the Fund’s profit or loss and net assets attributable to ‖ holders of redeemable shares of a reasonably possible strengthening in the individual equity ‖ market prices of between 2% and 4% at 31 December. The analysis assumes that all other ‖ variables, in particular interest and foreign currency rates remain constant. ‖ ‖Effect in thousands of euro 2010 2009

‖ ‖ Exchange traded equity investments 561 352 ‖ Securities sold short (25) (7) ‖ ‖ Effect in % of net assets 2010 2009

‖ ‖ Exchange traded equity investments 1.7% 1.2% ‖ Securities sold short 0.0% 0.0% ‖ ‖ A weakening of market prices would have resulted in an equal but opposite effect to the ‖ amounts shown above. ‖ ‖ All investments in commercial paper and listed corporate debt securities are fixed income ‖ instruments and have maturities of six months or less. The Fund expects minimal price ‖ fluctuations for these investments, other than those arising from interest rate or credit risk. As ‖ a result, the Fund is not subject to significant other price risk on these investments. ‖ ‖ The Fund has invested in unlisted open-ended investment funds with underlying equity ‖ portfolios that are benchmarked against certain indices. The Fund estimates the reasonable ‖ change in future value of the funds by combining the expected market increase of the relevant ‖ index with the beta coefficient of the portfolio of stocks. Beta is a measure of a stock’s or stock ‖ portfolio’s volatility in comparison to a relevant broad-based stock market or an index, and is ‖ calculated using regression analysis based on historical returns. ‖ ‖ Considering the reasonably possible index increase of 2.1% to 3.8%, the effect on the Fund’s ‖ profit or loss and net assets attributable to holders of redeemable shares is an increase of ‖ €51 thousand at 31 December 2010 (2009: €36 thousand). A weakening of the indices would ‖ have resulted in an equal but opposite effect to the amounts shown above. (e) Operationalrisk1

Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the processes, technology and infrastructure supporting the Fund’s activities with financial instruments either internally within the Fund or externally at the Fund’s service providers, and from external factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and generally accepted standards of investment management behaviour.

The Fund’s objective is to manage operational risk so as to balance limiting of financial losses and damage to its reputation with achieving its investment objective of generating returns to investors.




1. IAS 1.135 The disclosures in respect of capital management are based on the information provided internally to key management personnel of the entity (as defined in IAS 24), e.g. the entity’s board of directors.

IAS 1.135 When applicable, an entity disclosures changes in quantitative and qualitative data about its (c)-(e) objectives, policies and processes for managing capital as compared to the prior period, a

statement of whether it has complied with externally imposed capital requirements and any instances of non-compliance therewith.

IAS 1.136 When an aggregate disclosure of capital requirements and how capital is managed would not provide useful information or distorts a financial statement user’s understanding of an entity’s capital resources, the entity discloses separate information for each capital requirement to which the entity is subject.

2. IAS ‖When an entity is subject to additional externally imposed capital requirements, an entity 1.135(a)(ii) ‖discloses the nature of those requirements and how those requirements are incorporated into ‖ the management of capital.

3. ‖ The example disclosures presented in these illustrative financial statements illustrates a ‖ possible disclosure for an entity with minimal equity and with net assets attributable to ‖ the holders of redeemable shares. However, other presentations are possible. The example disclosures are not designed to comply with any particular regulatory framework

and assume that the Fund has no externally imposed capital requirements other than the requirement to issue non-redeemable management shares at the inception of the Fund. Other funds may have additional externally imposed requirements imposed by a jurisdiction’s regulators; if this arises, then disclosures of these externally imposed requirements are required.




4. Financial risk management (continued) (e) Operationalrisk(continued)

The primary responsibility for the development and implementation of controls over operational risk rests with the board of directors. This responsibility is supported by the development of overall standards for the management of operational risk, which encompasses the controls and processes at the service providers and the establishment of service levels with the service providers, in the following areas:

●l requirements for appropriate segregation of duties between various functions, roles and responsibilities;

●l requirements for the reconciliation and monitoring of transactions;●l compliance with regulatory and other legal requirements;●l documentation of controls and procedures;●l requirements for the periodic assessment of operational risk faced, and the adequacy of

controls and procedures to address the risks identified;●l contingency plans;●l ethical and business standards; and●l risk mitigation, including insurance if this is effective.

The directors’ assessment over the adequacy of the controls and processes in place at the service providers with respect to operational risk is carried out via regular [or ad-hoc] discussions with the service providers and a review of the service providers’ SAS 70 reports on internal controls, if available.

‖ Substantially all of the assets of the Fund are held by [insert the name of the custodian]. ‖ Bankruptcy or insolvency of the Fund’s custodian may cause the Fund’s rights with respect to ‖ the securities held by the custodian to be delayed or limited. The investment manager monitors ‖ credit ratings and capital adequacy of its custodian on a [monthly, quarterly, other] basis, and ‖ reviews the findings documented in the SAS 70 report on the internal controls annually. ‖ ‖ The Fund has provided the custodian a general lien over the financial assets held in custody for ‖ the purpose of covering the exposure from providing custody services. The general lien is part ‖ of the standard contractual terms of the custody agreement.

IAS 1.134, (f) Capitalmanagement 1, 2, 3

135(a)(ii) ‖ The Fund is required by the [title of legislation or regulation] to maintain authorised and paid ‖ up capital at a minimum amount of €10 thousand in the form of management shares [explain ‖the reason for issuing the shares, if different from above]. The holders of management shares ‖ are entitled to a repayment of up to par value only upon the winding up of the Fund in priority ‖ to redeemable shares. The Fund is not subject to other externally imposed capital requirements.

The redeemable shares issued by the Fund provide an investor with the right to require redemption for cash at a value proportionate to the investor’s share in the Fund’s net assets at each monthly redemption date and are classified as liabilities. See note 14 for a description of the terms of the redeemable shares issued by the Fund. The Fund’s objectives in managing the redeemable shares are to ensure a stable base to maximise returns to all investors, and to manage liquidity risk arising from redemptions. The Fund’s management of the liquidity risk arising from redeemable shares is discussed in note 4(c).




1. IFRS 7.27 ‖ An entity discloses for each class of financial instruments the methods and, when a valuation ‖ technique is used, the significant assumptions applied in determining the fair values of ‖ financial assets and financial liabilities. If there has been a change in valuation technique, then ‖ the entity discloses both the change and the reasons for the change. ‖ ‖ In October 2008 the IASB posted to its website (www.ifrs.org) the final report of its Expert ‖ Advisory Panel (the Panel) Measuring and disclosing the fair value of financial instruments in ‖ markets that are no longer active (the Panel Report), together with an IASB Staff Summary ‖ Using judgement to measure the fair value of financial instruments when markets are no ‖ longer active (the Staff Summary). ‖ ‖ The Panel Report summarises the Panel’s discussions at its seven meetings in 2008 and ‖ identifies practices that experts use for measuring the fair value of financial instruments when ‖ markets become inactive, and practices for fair value disclosures in such situations. The Panel ‖ Report and the accompanying Staff Summary are intended to respond to uncertainty about ‖ how to measure fair values when markets are inactive and about what disclosures may be ‖ appropriate in such circumstances. The Panel Report addresses issues such as determining ‖ whether a market is inactive and using transaction prices and internal models in measuring ‖ fair values. The Panel Report and the accompanying Staff Summary do not have the same ‖ authority as standards and interpretations; however, they do provide useful educational ‖ guidance on fair value measurement.




5. Use of estimates and judgements IAS 1.125 (a) Keysourcesofestimationuncertainty (i) Determiningfairvalues1

The determination of fair value for financial assets and liabilities for which there is no observable market price requires the use of valuation techniques as described in note 3(h)(iv). For financial instruments that trade infrequently and have little price transparency, fair value is less objective, and requires varying degrees of judgement depending on liquidity, concentration, uncertainty of market factors, pricing assumptions and other risks affecting the specific instrument.

IAS 1.122 (b) CriticalaccountingjudgementsinapplyingtheFund’saccountingpolicies (i) Valuationoffinancialinstruments The Fund’s accounting policy on fair value measurements is discussed in note 3(h)(iv).

IFRS 7.27A The Fund measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements:

●l Level 1: Quoted price (unadjusted) in an active market for an identical instrument.●l Level 2: Valuation techniques based on observable inputs, either directly (i.e. as prices)

or indirectly (i.e. derived from prices). This category includes instruments valued using: quoted prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques for which all significant inputs are directly or indirectly observable from market data.

●l Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments for which the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument’s valuation. This category includes instruments that are valued based on quoted prices for similar instruments for which significant unobservable adjustments or assumptions are required to reflect differences between the instruments.

IFRS 7.27 Fair values of financial assets and financial liabilities that are traded in active markets are based on quoted prices or dealer price quotations. For all other financial instruments the Fund determines fair values using valuation techniques. Valuation techniques include net present value and discounted cash flow models, comparison to similar instruments for which market observable prices exist, Black-Scholes, binomial or trinomial option pricing models and other valuation models. Assumptions and inputs used in valuation techniques include risk-free and benchmark interest rates, credit spreads and other premia used in estimating discount rates, bond and equity prices, foreign currency exchange rates, equity and equity index prices and expected price volatilities and correlations. The objective of valuation techniques is to arrive at a fair value determination that reflects the price of the financial instrument at the reporting date that would have been determined by market participants acting at arm’s length.

The Fund uses widely recognised valuation models for determining the fair value of common and more simple financial instruments such as interest rate and currency swaps that use only observable market data and require little management judgement and estimation. Observable prices and model inputs are usually available in the market for listed debt and equity investments, exchange traded derivatives and simple over the counter derivatives, e.g. interest rate swaps.




1. IFRS 7.27A The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustments based on unobservable inputs, that measurement is a Level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability.

The application of IFRS 7 requirements relating to fair value hierarchy is discussed in our publications IFRS Practice Issues: Fair Value Hierarchy (December 2009) and Insights into IFRS (5.6.280.70 – 5.6.300.190).




5. Use of estimates and judgements (continued) (b) CriticalaccountingjudgementsinapplyingtheFund’saccountingpolicies(continued) (i) Valuationoffinancialinstruments(continued) Availability of observable market prices and model inputs reduces the need for management

judgement and estimation and also reduces the uncertainty associated with determination of fair values. Availability of observable market prices and inputs varies depending on the products and markets and is prone to changes based on specific events and general conditions in the financial markets.

For more complex instruments the Fund uses proprietary valuation models, which usually are developed from recognised valuation models. Some or all of the significant inputs into these models may not be observable in the market, and are derived from market prices or rates or are estimated based on assumptions. Examples of instruments involving significant unobservable inputs include certain over the counter derivatives, credit default swaps and certain securities for which there is no active market. Valuation models that employ significant unobservable inputs require a higher degree of management judgement and estimation in the determination of fair value. Management judgement and estimation are usually required for selection of the appropriate valuation model to be used, determination of expected future cash flows on the financial instrument being valued, determination of probability of counterparty default and selection of appropriate discount rates.

‖ The Fund has an established control framework with respect to the measurement of fair ‖ values. This framework includes a portfolio valuation function, which is independent of front ‖ office management and reports to the board of directors, who have overall responsibility for ‖ significant fair value measurements. Specific controls include: verification of observable pricing ‖ inputs and reperformance of model valuations; a review and approval process for new models ‖ and changes to such models; calibration and back testing of models against observed market ‖ transactions; analysis and investigation of significant daily valuation movements; review of ‖ significant unobservable inputs and valuation adjustments; and reporting of significant valuation ‖ issues to the board of directors.

IFRS 7.27B(a) The table below analyses financial instruments measured at fair value at the end of the reporting period by the level in the fair value hierarchy into which the fair value measurement is categorised:1

In thousands of euro Level1 Level2 Level3 Total

31December2010 Financialassetsatfairvaluethrough profitorloss Equity investments 16,894 1,101 1,031 19,026 Debt securities 7,982 2,069 - 10,051 Derivative financial instruments 326 219 - 545 25,202 3,389 1,031 29,622

Financialliabilitiesatfairvaluethrough profitorloss Securities sold short - (784) - (784) Derivative financial instruments (1,066) (1,286) (485) (2,837) (1,066) (2,070) (485) (3,621)







5. Use of estimates and judgements (continued) (b) CriticalaccountingjudgementsinapplyingtheFund’saccountingpolicies(continued) (i) Valuationoffinancialinstruments(continued) In thousands of euro Level1 Level2 Level3 Total

31December2009 Financialassetsatfairvaluethrough profitorloss Equity investments 10,657 950 264 11,871 Debt securities 8,826 5,685 - 14,511 Derivative financial instruments 29 406 - 435 19,512 7,041 264 26,817

Financialliabilitiesatfairvaluethrough profitorloss Securities sold short - (212) - (212) Derivative financial instruments (756) (478) - (1,234) (756) (690) - (1,446)

IFRS 7.27B(b) During the financial year ended 31 December 2010:

i) A debt security with a carrying amount of €1,239 thousand was transferred from Level 2 to Level 1 because it became regularly traded in an active market.

ii) Debt securities with a carrying amount of €200 thousand were transferred from Level 1 to Level 2 because public price quotations in an active market for these instruments were no longer available. However, there was sufficient information available to measure fair values of these securities based on observable market inputs.

IFRS 7.27B(c), The following table shows a reconciliation from the beginning balances to the ending balancesIG13B for fair value measurements in Level 3 of the fair value hierarchy:

Unlisted Unlisted

open-ended private Derivative

investment equity financial

In thousands of euro funds investmentsinstruments Total

Balanceat1January2010 264 - - 264IFRS 7.27B(c)(i) Total gains or losses recognised in profit or loss 57 25 (171) (89)IFRS 7.27B(c)(iii) Purchases 269 475 (152) 592IFRS 7.27B(c)(iii) Sales (59) - - (59)IFRS 7.27B(c)(iv) Transfers into Level 3 - - (267) (267)IFRS 7.27B(c)(iv) Transfers out of Level 3 - - 105 105 Balanceat31December2010 531 500 (485) 546

IFRS 7.27B(d) Total gains or losses for the period included in profit or loss relating to assets and liabilities held at the end of the reporting period: 42 25 (152) (85)







5. Use of estimates and judgements (continued) (b) CriticalaccountingjudgementsinapplyingtheFund’saccountingpolicies(continued) (i) Valuationoffinancialinstruments(continued) These gains and losses are recognised in the statement of comprehensive income as net gain

from financial instruments at fair value through profit or loss.

IFRS 7.27 During the year ended 31 December 2010, the Fund acquired 2.5 percent of the common shares of [name of entity], a newly incorporated company concentrating on business-to-business opportunities of golfing related products and services through the internet. The Fund paid €475 thousand for its investment. As [name of entity] is not listed on any stock exchange, a quoted price in active market is not available. The investment manager estimates the fair value of this investment to be €500 thousand as at 31 December 2010 based on [insert methods, assumptions and judgements used in calculating fair value].

IFRS 7.27B(e) Although the Fund believes that its estimates of fair value are appropriate, the use of different methodologies or assumptions could lead to different measurements of fair value. For fair value measurements in Level 3, changing one or more of the assumptions used to reasonably possible alternative assumptions would have the following effects on profit or loss:

In thousands of euro Favourable (Unfavourable)

2010 Unlisted open-ended investment funds 18 (19) Derivative financial instruments 25 (29) Unlisted private equity investments 43 (41)

2009 Unlisted open-ended investment funds 5 (7)

The favourable and unfavourable effects of using reasonably possible alternative assumptions have been calculated by recalibrating the model values using expected cash flows and risk-adjusted discount rates based on averages of the upper and lower quartiles respectively of the Fund’s ranges of possible estimates. Key inputs and assumptions used in the models at 31 December 2010 include [insert inputs and assumptions used in calculating the favourable and unfavourable effects of using reasonably possible alternative assumptions].

(ii) Determinationoffunctionalcurrency Functional currency is the currency of the primary economic environment in which the Fund

operates. When indicators of the primary economic environment are mixed, management uses its judgement to determine the functional currency that most faithfully represents the economic effect of the underlying transactions, events and conditions. Management has determined that the functional currency of the Fund is euro. The majority of the Fund’s investments and transactions are denominated in euro. Investor subscriptions and redemptions are also received and paid in euro.







6. Classifications and fair values of financial assets and liabilitiesIFRS 7.6, 8, 25 The table below provides a reconciliation of the line items in the Fund’s statement of financial

position to the categories of financial instruments.

Designated atfairvalue through Loans Total Heldfor profitor and Other carrying In thousands of euro Note trading lossreceivables liabilities amount

31December2010 Cash and cash equivalents - - 51 - 51 Balances due from brokers 10 - - 4,619 - 4,619 Receivables from reverse repurchase agreements 11 - - 4,744 - 4,744 Other receivables - - 29 - 29 Non-pledged financial assets at fair value through profit or loss 12 545 26,386 - - 26,931 Pledged financial assets at fair value through profit or loss 12 - 2,691 - - 2,691 545 29,077 9,443 - 39,065

Balances due to brokers 10 - - - 143 143 Payables under repurchase agreements 11 - - - 2,563 2,563 Other payables - - - 103 103 Financial liabilities at fair value through profit or loss 12 3,621 - - - 3,621 Net assets attributable to holders of redeemable shares 14 - - - 32,625 32,625 3,621 - - 35,434 39,055

31December2009 Cash and cash equivalents - - 71 - 71 Balances due from brokers 10 - - 3,121 - 3,121 Receivables from reverse repurchase agreements 11 - - 3,990 - 3,990 Other receivables - - 46 - 46 Non-pledged financial assets at fair value through profit or loss 12 435 24,036 - - 24,471 Pledged financial assets at fair value through profit or loss 12 - 2,346 - - 2,346 435 26,382 7,228 - 34,045

Balances due to brokers 10 - - - 275 275 Payables under repurchase agreements 11 - - - 2,234 2,234 Other payables - - - 101 101 Financial liabilities at fair value through profit or loss 12 1,446 - - - 1,446 Net assets attributable to holders of redeemable shares 14 - - - 29,979 29,979 1,446 - - 32,589 34,035

IFRS 7.25, 29 The financial instruments not accounted for at fair value through profit or loss are short-term financial assets and liabilities whose carrying amounts approximate fair value.




1. IFRS 7.20(b) An entity discloses, either in the statement of comprehensive income or in the notes, total interest income and total interest expense, calculated using the effective interest method, for financial assets and financial liabilities that are not at fair value through profit or loss.

‖ If interest income or expense includes both amounts from instruments at fair value through ‖ profit or loss and from instruments not at fair value through profit or loss, then the disclosure ‖ of total interest income and total interest expense for financial assets that are not at fair value ‖ through profit or loss is required.

IFRS 7.B5(e) In these illustrative statements interest income for financial assets at fair value through profit or loss is presented separately from net gain from financial instruments at fair value through profit or loss.

Presentations other than that shown in these illustrative financial statements are possible. For example, an entity may present interest income and interest expense on financial instruments designated at fair value through profit or loss within net gain from financial instruments at fair value through profit or loss.

2. IFRS 7.20(a)(i) An entity discloses, either in the statement of comprehensive income or in the notes, the net gains or net losses on financial assets or financial liabilities at fair value through profit or loss (separately for those designated upon initial recognition and those classified as held for trading in accordance with IAS 39).

In these illustrative financial statements:

●l net gain from held for trading financial instruments includes the entire profit or loss impact (gains and losses) for held for trading assets and liabilities, excluding dividends on securities sold short; and

●l net gain from financial instruments designated at fair value through profit or loss includes the entire profit or loss impact of assets and liabilities designated at fair value through profit or loss upon initial recognition, but excluding interest income and dividend income.

However, other presentations are possible.

3. There is no requirement under IFRS to disclose an analysis of gains and losses on financial instruments accounted for at fair value through profit or loss account into realised and unrealised portions. However, such information may be useful to investors and therefore many funds include it in their financial statements.




IAS 18.35(b)(iii) 7. Interest income1

In thousands of euro 2010 2009

IFRS 7.20(b) Interest income on financial assets carried at amortised cost: Cash and cash equivalents 2 35 Receivables from reverse repurchase agreements 237 211 239 246

Interest income on financial instruments designated at fair value through profit or loss: Debt securities 364 183 603 429

8. Net gain from financial instruments at fair value through profit or loss2


IFRS 7.20(a)(i) Net gain from held for trading financial instruments: Securities sold short 58 57 Derivative financial instruments 88 (37) 146 20

IFRS 7.20(a)(i) Net gain from financial assets designated at fair value through profit or loss: Equity investments 3,004 1,536 Debt securities 101 841 3,105 2,377 3,251 2,397

Net gain from financial instruments at fair value through profit or loss:3

Realised 1,585 1,208 Unrealised 1,666 1,189 3,251 2,397

The realised gain from financial instruments at fair value through profit or loss represents the difference between the carrying amount of a financial instrument at the beginning of the reporting period, or transaction price when purchased in the current reporting period and its sale/settlement price.

The unrealised gain represents the difference between the carrying amount of a financial instrument at the beginning of the period, or transaction price when purchased in the current reporting period and its carrying amount at the end of the period.

9. Withholding tax expenseIAS 12.81(c) The Fund is exempt from paying income taxes under the current system of taxation in [insert

name of the country of domicile]. Certain dividend and interest income received by the Fund are subject to withholding tax imposed in the country of origin. During the year the average withholding tax rate was 15 percent (2009: 15 percent).







10. Balances due from/to brokers


BalancesduefrombrokersIAS 39 IG D.1.1 Margin accounts 3,491 2,544IAS 39 IG D.1.1 Cash collateral for borrowed securities 823 223IAS 39.38 Sales transactions awaiting settlement 305 354 4,619 3,121

BalancesduetobrokersIAS 39.38 Purchase transactions awaiting settlement 143 275

Margin accounts represent cash deposits with brokers, transferred as collateral against open futures and forward contracts.

IAS 39.38 In accordance with the Fund’s policy of trade date accounting for regular way sale and purchase transactions, sales/purchase transactions awaiting settlement represent amounts receivable/payable for securities sold/purchased, but not yet settled as at the reporting date.

IAS 39.AG51(a), 11. Receivables from reverse repurchase agreements and payables under (b) repurchase agreements

‖In thousands of euro 2010 2009

‖

‖ Receivablesfromreverserepurchaseagreements 4,744 3,990

IFRS 7.15(a) ‖ The fair value of collateral accepted in respect of the above 4,999 4,190 ‖ ‖ Payablesunderrepurchaseagreements 2,563 2,234

‖ The fair value of collateral provided in respect of the above 2,691 2,346 ‖ IAS 39.AG51(b) ‖ Collateral accepted includes investment grade securities that the Fund is permitted to sell or ‖ repledge. The Fund has not recognised these securities in the statement of financial position. ‖ IFRS 7.15(b) ‖ At 31 December 2010 the fair value of financial assets accepted as collateral that have been ‖ sold or repledged is €154 thousand (2009: €166 thousand). The Fund is obliged to return ‖ equivalent securities. ‖ IFRS 7.14(a), ‖ Collateral provided presented in the table above includes securities sold under the repurchaseIAS 39.37(a) ‖ agreements, for which the counterparty has the right to repledge or sell the collateral. The ‖ pledged debt securities are recognised in the statement of financial position as pledged ‖ financial assets as fair value through profit or loss. ‖ IFRS 7.14(b) ‖ These transactions are conducted under terms that are usual and customary to securities ‖ repurchase transactions and borrowing and lending activities.







12. Financial assets and financial liabilities at fair value through profit or loss


PledgedfinancialassetsatfairvaluethroughprofitorlossIFRS 7.8(a)(i) Financial assets designated at fair value through profit or loss: Debt securities 2,691 2,346

Non-pledgedfinancialassetsatfairvaluethroughprofitorlossIFRS 7.8(a)(ii) Held for trading assets: Derivative financial instruments: Equity 303 29 Foreign exchange 242 406 545 435

IFRS 7.8(a)(i) Financial assets designated at fair value through profit or loss: Debt securities 7,360 12,165 Equity investments 19,026 11,871 26,386 24,036 26,931 24,471

FinancialliabilitiesatfairvaluethroughprofitorlossIFRS 7.8(a)(ii) Held for trading liabilities: Securities sold short – equity 784 212 Derivative financial instruments: Equity 1,066 756 Foreign exchange 822 106 Credit 485 - Interest rate 464 372 2,837 1,234 3,621 1,446

IFRS 7.21, B5(a) The Fund designates all debt and equity investments at fair value through profit or loss upon initial recognition as it manages these securities on a fair value basis in accordance with its documented investment strategy. Internal reporting and performance measurement of these securities are on a fair value basis.

13. Equity ‖ Authorised,issuedandfullypaidmanagementvotingshares ‖ Number of shares Authorised Issuedandfullypaid

‖ 2010 2009 2010 2009

‖

‖ Management shares of €1 each 1,000,000 1,000,000 10,000 10,000 ‖ ‖ In thousands of euro Authorised Issuedandfullypaid

‖ 2010 2009 2010 2009

‖ ‖ Management shares 1,000 1,000 10 10




1. IAS 1.80 An entity without share capital, such as a partnership or trust, discloses information equivalent to that required by paragraph 79(a) of IAS 1, showing changes during the period in each category of equity interest, and the rights, preferences and restrictions attaching to each category of equity interest.

The Fund has minimal equity and net assets (after deducting the equity interest) accrue to the holders of redeemable shares. Accordingly, disclosures of changes during the period in the redeemable shares classified as financial liabilities, and the rights, preferences and restrictions attached to the redeemable shares, if applicable, provide users with relevant and helpful information.

2. IAS 1.79(a)(iii) If shares have no par value, then an entity discloses that fact.

3. IAS 1.79(a)(ii) An entity discloses the number of shares issued but not fully paid.

4. IAS 1.79 An entity discloses details of shares reserved for issue under options and sales contracts, (a)(vii) including the terms and amounts.




13. Equity (continued) ‖The holders of management shares are entitled to receive notice of, and to vote at general ‖ meetings of the Fund. Dividends may not be declared in respect of the management shares. ‖ The holders of these shares are only entitled to a repayment of an amount up to par value upon ‖ the winding up of the Fund and such payment is in priority to the holders of the redeemable ‖ shares. At December 2010 and 2009, the management shares were held by the investment ‖ manager.

14. Net assets attributable to holders of redeemable shares1, 2

(a) Redeemableshares The analysis of movements in the number of redeemable shares and net assets attributable to

holders of redeemable shares during the year were as follows:

IAS 1.79(a)(i), (iii) Authorisedredeemableshares

2010 2009

Number of shares ClassA ClassB Total ClassA ClassB Total

Redeemable shares of €0.01 each2 4,000,000 900,000 4,900,000 4,000,000 900,000 4,900,000

In thousands of euro

Redeemable shares of €0.01 each2 40 9 49 40 9 49

IAS 1.79(a)(ii), (iv) Issuedandfullypaid3

2010 2009

IAS 1.135(b), (c) Number of shares ClassA ClassB Total ClassA ClassB Total

Balanceat1January 201,436 59,095 260,531 116,818 56,082 172,900 Issue of redeemable shares during the year 52,800 3,400 56,200 138,818 3,013 141,831 Redemption of redeemable shares during the year (53,100) (4,419) (57,519) (54,200) - (54,200) Balanceat31December 201,136 58,076 259,212 201,436 59,095 260,531

2010 2009

In thousands of euro ClassA ClassB Total ClassA ClassB Total

Balanceat1January 23,242 6,737 29,979 12,498 5,963 18,461 Increase in net assets attributable to holders of redeemable shares 2,344 612 2,956 1,563 445 2,008 Issue of redeemable shares during the year 6,275 393 6,668 15,176 329 15,505 Redemption of redeemable shares during the year (6,448) (530) (6,978) (5,995) - (5,995) Balanceat31December 25,413 7,212 32,625 23,242 6,737 29,979 Netassetsvalueper share(ineuro) 126.35 124.18 115.38 114.00







14. Net assets attributable to holders of redeemable shares (continued) (a) Redeemableshares(continued)IAS 1.79(a)(v), 80 The rights attaching to the redeemable shares are as follows:

●l Redeemable shares may be redeemed on the last business day of each month or such other date or dates as the board of directors shall from time to time determine (valuation day) at the net asset value per share of the respective class based on mid-market prices of those assets. The shareholder must request such redemption at least 14 days prior to the last business day of each month or such other day as the directors may determine.

●l Redeemable shares carry a right to receive notice of, attend and vote at any general meeting of the Fund.

●l The holders of the redeemable shares are entitled to receive all dividends declared and paid by the Fund. Upon winding up, the holders are entitled to a return of capital based on the net asset value per share of their respective classes after deduction of the nominal amount of the management shares. [explain the differences in entitlements to net assets of Class A and Class B, e.g. management fee rate].

Notwithstanding the redeemable shareholders’ rights to redemptions above, the Fund has the right, as set out in its prospectus, to impose a redemption gate limit of not more than 10 percent of the net assets of the Fund in any redemption period in order to manage redemption levels and maintain the strength of the Fund’s capital base.

(b) DividendsIAS 1.107 During the year, the Fund declared and paid a dividend as follows:

2010 2009

ClassA ClassB Total ClassA ClassB Total

Interim dividend paid on [date] Dividend per share (euro) 0.67 0.73 0.54 0.50 Dividend (thousand of euro) 135 43 178 63 28 91

IAS 1.137(a), Subsequent to the year end, the Fund declared an additional dividend in respect of 2010, 10.12, 13 which was paid on [insert date] 2011, as follows:

ClassA ClassB Total

Dividend per share (euro) 0.28 0.31 Dividend (thousand of euro) 57 18 75

The additional dividend has not been recognised in the financial statements and there were no income tax consequences.




1. IAS 39.48A, In accordance with IAS 39 the best measure of fair value of a financial asset and financial AG72 liability is a quoted price in an active market. The appropriate quoted price for an asset held

is usually the current bid price and for a liability held is the asking price. In these illustrative financial statements we have assumed that in accordance with the Fund’s prospectus, the redemption amounts of the redeemable shares are calculated using the mid-market prices of the Fund’s underlying investments/securities sold short.

Owing to the differences in the measurement bases of the Fund’s underlying investments/securities sold short and the redemption amounts of the redeemable shares, a mismatch results in the statement of financial position giving rise to a presentation issue. In our view, one solution may be to present the net assets attributable to holders of redeemable shares in a two-line format. The first line would be the amount of the net assets attributable to holders of redeemable shares measured in accordance with the prospectus, which reflects the actual redemption amount at which the redeemable shares would be redeemed at the reporting date, and the next line would include an adjustment for the difference between this and the amount recognised in the statement of financial position.

This reflects the fact that, for a fund with no equity, all recognised income and expense should be attributed to holders of redeemable shares, which also means that if all the shares are redeemed, then a dilution levy of such amount would be required. This issue is discussed in our publication Insights into IFRS (3.6.940.50 – 60). The treatment in a fund with no equity is applied by analogy in these illustrative financial statements to a fund with minimal equity.

2. There is no requirement under IFRS to disclose a reconciliation of net assets and net assets per share as presented in the financial statements, to net assets and net assets per share calculated in accordance with the Fund’s prospectus using mid-market prices for the underlying financial instruments. However, such information may be useful to investors and therefore funds may wish to disclose this voluntarily.

3. For a more comprehensive illustration of related party disclosures, see our publication Illustrative financial statements.

4. In our view, materiality considerations cannot be used to override the explicit requirements of IAS 24 for the disclosure of elements of key management personnel compensation. This issue is discussed in our publication Insights into IFRS (5.5.110.20).




14. Net assets attributable to holders of redeemable shares (continued) (c) Reconciliationofnetassetsandnetassetsvaluepershare1, 2

In accordance with the Fund’s prospectus, the net assets of the Fund are computed at mid-market prices of the underlying financial instruments for the purpose of calculating redemption amounts of the redeemable shares. However, for financial reporting purposes under IFRSs, the financial assets are required to be valued at bid prices and financial liabilities at ask prices.

A reconciliation of the net assets and net assets value per share between the amounts computed as per the Fund’s prospectus and the amounts computed in accordance with IFRSs is as follows:

2010 2009

In thousands of euro ClassA ClassB Total ClassA ClassB Total

Net assets as per prospectus 25,430 7,217 32,647 23,255 6,741 29,996 Adjustment from mid-prices to bid/ask-prices (17) (5) (22) (13) (4) (17) Net assets as per financial reporting 25,413 7,212 32,625 23,242 6,737 29,979

2010 2009

In euro ClassA ClassB ClassA ClassB

Net assets value per share as per published prices 126.43 124.26 115.45 114.07 Adjustment from mid-prices to bid/ask-prices (0.08) (0.08) (0.07) (0.07) Net assets value per share as per financial reporting 126.35 124.18 115.38 114.00

IAS 24.9, 11, 15. Related parties and other key contracts12, 16-18 (a) Relatedparties3, 4

Investmentmanager The Fund appointed XYZ Capital Limited, an investment management company incorporated in

[name of country], to implement the investment strategy as specified in the prospectus. Under the Investment Management Agreement, the investment manager receives a management fee at an annual rate of 1.5 percent of the net assets value attributable to holders of redeemable shares on each day. The investment management fees incurred during the year amounted to €478 thousand (2009: €447 thousand). Included in other payables at 31 December 2010 are investment management fees payable of €49 thousand (2009: €47 thousand). The investment management contract can be terminated by the Fund at any time.

At 31 December 2010, 20,000 Class A redeemable shares (2009: 20,000 Class A redeemable shares) and all Class B redeemable shares (2009: all Class B redeemable shares) were held by employees of the investment manager.

At 31 December 2010, all management shares were held by the investment manager (2009: all management shares).




1. In these illustrative financial statements the administrator is not a related party. However, details of the terms of the contract with the administrator have been disclosed by virtue of the administrator being a key service provider to the Fund. In some instances, the administrator may be a related party of the Fund and this should be disclosed accordingly.

2. IAS 10.21, For each material category of non-adjusting event after the end of the reporting period, an 22 entity discloses the nature of the event and an estimate of its financial effect, or a statement

that such an estimate cannot be made. Paragraph 22 of IAS 10 Events after the Reporting Period provides examples of non-adjusting events that normally would require disclosure. For an example of the subsequent events disclosures, see our publication Illustrative financial statements.




IAS 24.9, 11, 15. Related parties and other key contracts (continued)12, 16-18 (a) Relatedparties (continued) Transactionswithkeymanagementpersonnel The total directors’ fees paid for the year was €26 thousand (2009: €15 thousand). This

amount has been fully settled during the year. The listing of the members of the board of directors is shown on page [state page number] of the annual report.

The directors did not hold any shares in the Fund during or as at the end of the financial year.

(b) Otherkeycontracts Administrator1

The Fund appointed ABC Fund Services Limited, a fund administration company incorporated in [name of country], to provide administrative services including financial accounting services to the Fund. Under the Fund Administration Agreement, the administrator receives an administration fee monthly in arrears at an annual rate of 0.22 percent of the net assets value attributable to holders of redeemable shares on each valuation day as defined in the prospectus. The administration fees paid during the year amounted to €66 thousand (2009: €62 thousand). Included in other payables at 31 December 2010 are administration fees payable of €6 thousand (2009: €6 thousand). The Fund Administration Agreement can be terminated by the Fund at any time.

IAS 24.9, 11 16. Subsequent events2

[Disclose subsequent events, if any].




1. The auditors’ report illustrated in these financial statements is based on International Standard on Auditing (ISA) 700 The Independent Auditor’s Report on a Complete Set of General Purpose Financial Statements.

If the audit is carried out under local laws and standards, then the form of the report will conform to those laws and standards.



Independent auditors’ report1

[Appropriate Addressee] [Name of Fund]

We have audited the accompanying financial statements of [name of entity] (the “Fund”), which comprise the statement of financial position as at 31 December 2010, and the statements of comprehensive income, changes in net assets attributable to holders of redeemable shares and cash flows for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’sresponsibilityforthefinancialstatementsManagement is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’responsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we 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 our judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation 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.

OpinionIn our opinion, the financial statements give a true and fair view of the financial position of the Fund as at 31 December 2010, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

[Name of firm signing][Date of report][Address]




1. ‖ The purpose of this appendix is to assist in the preparation of disclosures in annual financial ‖ statements for early adoption of IFRS 9 (2009). The example assumes the same fact pattern ‖ as in the main illustrative financial statements and it illustrates one possible format for the ‖ disclosures; other formats are possible. ‖ ‖ The appendix illustrates the key changes to the financial statements. In addition, ‖ consequential changes may be required to other parts of the financial statements that refer to ‖ the financial assets classifications.

2. IFRS 9. ‖ If an entity adopts IFRS 9 (2009) for reporting periods beginning before 1 January 2012, then 8.2.12 ‖ it can elect not to restate prior periods. In this Appendix, the Fund has elected to apply the ‖ new standard from the start of an annual reporting period without restatement of ‖ comparatives. Given that different accounting policies will apply to financial assets during the ‖ periods presented, both the pre- and post-adoption accounting policies for financial assets are ‖ disclosed. Other presentations are possible. ‖ IFRS 9. ‖ If an entity elects to apply the standard at a date that is not the beginning of an annual 8.2.3 ‖ reporting period, then the entity discloses that fact and the reasons for applying the standard ‖ from that date.



Appendix I

‖ Example disclosures for entities that early adopt IFRS 9 (2009)1

‖

Reference ‖ Notes to the financial statements ‖ 2. Basis of preparation (x) Changeinaccountingpolicy2

IAS 8.28 ‖ The Fund has early adopted IFRS 9 Financial Instruments issued in November 2009 (IFRS 9 IFRS 9.8.2.1 ‖ (2009)) with a date of initial application of 1 January 2010. IFRS 9 (2009) requires that an entity ‖ classifies its financial assets as subsequently measured at either amortised cost or fair value ‖ depending on the entity’s business model for managing the financial assets and the contractual ‖ cash flow characteristics of the financial assets. These changes in accounting policy are applied ‖ on a retrospective basis, except as described below, from 1 January 2010 without restatement ‖ of prior periods. ‖ ‖ In accordance with the transitional provisions of IFRS 9 (2009), the Fund classified financial ‖ assets held at the date of initial application based on the facts and circumstances of the ‖ business model in which the financial assets were held at that date. This classification resulted ‖ in the Fund continuing to account for financial assets as at fair value through profit or loss or ‖ amortised cost and did not require reclassification between these two categories on the date ‖ of initial application. ‖ ‖ The adoption of IFRS 9 (2009) had no impact on the statement of comprehensive income ‖ or statement of changes in net assets attributable to holders of redeemable shares as the ‖ measurement basis for financial assets remained the same. ‖ ‖ The adoption of IFRS 9 (2009) did not impact the Fund’s accounting policy for financial liabilities. ‖ ‖ For further details see note x. IAS 1.112(a), 3. Significant accounting policies117(a), (b) ‖ The accounting policies set out below have been applied consistently to all periods presented ‖ in these financial statements, except for the impact of early adoption of IFRS 9 (2009). The 2009 ‖comparatives related to financial assets have been prepared in accordance with IAS 39 as ‖ permitted by the transition provisions of IFRS 9 (2009). IFRS 9 (2009) was not applied to ‖ financial assets that have been derecognised at the date of initial application. ‖IFRS 7.21 (h) Financialassetsandfinancialliabilities (ii) Classification ‖Policyapplicablepriorto1January2010IAS 39.9 ‖The Fund has classified financial assets and financial liabilities into the following categories: ‖ ‖ Financial assets at fair value through profit or loss: ‖ ‖l Held for trading – derivative financial instruments ‖l Designated as at fair value through profit or loss – debt securities and equity investments. ‖ ‖ Financial assets at amortised cost: ‖ ‖ l Loans and receivables – cash and cash equivalents, balances due from brokers, receivables ‖ from reverse repurchase agreements and other receivables.






Example disclosures for entities that early adopt IFRS 9 (2009) (continued)


3. Significant accounting policies (continued) (h) Financialassetsandfinancialliabilities(continued) (ii) Classification(continued) ‖Policyapplicablepriorto1January2010(continued) ‖ Financial liabilities at fair value through profit or loss: ‖ ‖ Held for trading – securities sold short and derivative financial instruments. ‖ ‖ Financial liabilities at amortised cost: ‖ ‖l Other liabilities – balances due to brokers, payables under repurchase agreements, ‖ redeemable shares and other payables. ‖ IAS 39.9, AG15 ‖A financial instrument is classified as held for trading, if: ‖ ‖l it is acquired or incurred principally for the purpose of selling or repurchasing in the near term; ‖ l on initial recognition it is part of a portfolio that is managed together and for which there is ‖ evidence of a recent pattern of short-term profit taking; or ‖ l it is a derivative, other than a designated and effective hedging instrument. ‖IAS 39.AG4B ‖The Fund has designated certain financial assets at fair value through profit or loss when the ‖ assets are managed, evaluated and reported internally on a fair value basis. ‖ ‖ A non-derivative financial asset with fixed or determinable payments may be classified as ‖ a loan and receivable unless it is quoted in an active market, or it is an asset for which ‖ the holder may not recover substantially all of its initial investment, other than because of ‖ credit deterioration. ‖ ‖ Note 6 provides a reconciliation of line items in the statement of financial position to the ‖ categories of financial instruments, as defined by IAS 39. ‖ ‖Policyapplicablefrom1January2010 ‖ The Fund has classified financial assets and financial liabilities into the following categories: ‖ IFRS 9.4.1 ‖ Financial assets: ‖ ‖ l Measured at fair value through profit or loss – derivative financial instruments, debt ‖ securities and equity investments ‖ l Measured at amortised cost – cash and cash equivalents, balances due from brokers, ‖ receivables from reverse repurchase agreements and other receivables. ‖ IAS 39.9 ‖ Financial liabilities at fair value through profit or loss: ‖ ‖l Held for trading – securities sold short and derivative financial instruments. ‖ ‖ Financial liabilities at amortised cost: ‖ ‖ l Other liabilities – balances due to brokers, payables under repurchase agreements, ‖ redeemable shares and other payables.




1. IFRS 9.4.5 ‖ At initial recognition, entities have the option to designate a financial asset that meets the ‖ amortised cost criteria at fair value through profit or loss if doing so eliminates or significantly ‖ reduces an accounting mismatch. Many available-for-sale debt investments that currently are ‖ measured at fair value will qualify for amortised cost accounting, for example, simple debt ‖ instruments that are quoted in an active market (such as vanilla government and corporate ‖ bonds). However, those that do not qualify will be measured at fair value through profit or loss ‖ rather than through other comprehensive income. This is further discussed in our publication ‖ Insights into IFRS (3.6A.40.20 – 30, 3.6A.200, 3.6A.400.10).

2. IFRS 7.44I ‖ When an entity first applies IFRS 9 (2009), it discloses (in tabular format unless another ‖ format is more appropriate) for each class of financial assets at the date of initial application: ‖

‖ l the original measurement category and carrying amount determined in accordance with ‖ IAS 39; ‖ l the new measurement category and carrying amount determined in accordance with ‖ IFRS 9 (2009); and ‖ l the amount of any financial assets in the statement of financial position that were ‖ previously designated as measured at fair value through profit or loss but are no longer so ‖ designated, distinguishing between those that IFRS 9 (2009) requires an entity to reclassify ‖ and those that an entity elects to reclassify.

‖ IFRS 7.44J ‖ When an entity first applies IFRS 9 (2009), it discloses qualitative information to enable users ‖ to understand: ‖

‖ l how it applied the classification requirements in IFRS 9 (2009) to those financial assets ‖ whose classification has changed as a result of applying IFRS 9 (2009); and ‖ l the reasons for any designation or de-designation of financial assets or financial liabilities ‖ as measured at fair value through profit or loss.





3. Significant accounting policies (continued) (h) Financialassetsandfinancialliabilities(continued) (ii) Classification(continued) ‖Policyapplicablefrom1January2010(continued)IFRS 9.5.2 ‖ A financial asset is classified as measured at amortised cost, if it is held within a business ‖ model whose objective is to hold assets in order to collect contractual cash flows and the ‖ contractual terms of the financial asset give rise, on specified dates, to cash flows that are ‖ solely payments of principal and interest.1 ‖ ‖ Financial assets other than those qualifying for amortised cost measurement are classified as ‖ measured at fair value with all changes in fair value recognised in profit or loss. ‖ IAS 39.9, AG15 ‖A financial liability is classified as held for trading, if: ‖ ‖l it is acquired or incurred principally for the purpose of selling or repurchasing in the near term; ‖l on initial recognition it is part of a portfolio that is managed together and for which there is ‖ evidence of a recent pattern of short-term profit taking; or ‖ l it is a derivative, other than a designated and effective hedging instrument. ‖ ‖ Note 6 provides a reconciliation of line items in the statement of financial position to the ‖ categories of financial instruments, as defined by IFRS 9 (2009). X. Classification of financial assets on the date of initial application of IFRS 9 (2009)2

IFRS 7.44I ‖ The following table summarises the transitional classification and measurement adjustments ‖ to the Fund’s financial assets on 1 January 2010, the Fund’s date of initial application of IFRS 9 ‖ (2009): ‖ ‖ Original New Originalcarrying Newcarrying

‖ classification classification amount amount

‖ In thousands of euro underIAS39 underIFRS9 underIAS39 underIFRS9

‖ ‖ Designated as ‖ at fair value Fair value ‖ through through ‖Debt and equity investments profit or loss profit or loss 26,382 26,382 ‖ ‖ Fair value ‖ Held for through ‖ Derivative financial instruments trading profit or loss 435 435 ‖ ‖ Balances due from brokers, ‖ receivables from reverse ‖ repurchase agreements and Loans and Amortised ‖other receivables receivables cost 7,157 7,157 ‖ ‖ Loans and Amortised ‖Cash and cash equivalents receivables cost 71 71

‖IFRS 7.44I(c) ‖Financial assets of €26,382 thousand were previously designated at fair value through profit ‖ or loss; these assets now meet the criteria for mandatory measurement at fair value through ‖ profit or loss as they are managed on a fair value basis.








6. Classifications and fair values of financial assets and liabilitiesIFRS 7.6, 8, 25 ‖ The table below provides reconciliation of the line items in the Fund’s statement of financial ‖ position to the categories of financial instruments. ‖ ‖ Fairvalue

‖ through Total

‖ profitorloss Amortised carrying

‖In thousands of euro Note –mandatory cost amount

‖ ‖ 31December2010 ‖Cash and cash equivalents - 51 51 ‖Balances due from brokers 10 - 4,619 4,619 ‖Receivables from reverse repurchase agreements 11 - 4,744 4,744 ‖Other receivables - 29 29 ‖Non-pledged financial assets at ‖fair value through profit or loss 12 26,931 - 26,931 ‖Pledged financial assets at ‖fair value through profit or loss 12 2,691 - 2,691 ‖ 29,622 9,443 39,065 ‖ ‖Balances due to brokers 10 - 143 143 ‖Payables under repurchase agreements 11 - 2,563 2,563 ‖Other payables - 103 103 ‖Financial liabilities at fair value ‖through profit or loss 12 3,621 - 3,621 ‖Net assets attributable to ‖holders of redeemable shares 14 - 32,625 32,625 ‖ 3,621 35,434 39,055




1. IFRS 7.12B ‖An entity discloses if it has reclassified any financial assets: ‖ ‖l the date of reclassification; ‖l a detailed explanation of the change in business model and a qualitative description of its ‖ effect on the entity’s financial statements; and ‖ l the cumulative amount reclassified into and out of each category.

‖ IFRS 7.12C ‖For each reporting period following reclassification until derecognition, an entity discloses for ‖ assets reclassified so that they are measured at amortised cost: ‖ ‖ l the effective interest rate determined on the date of reclassification; and ‖l the interest income or expense recognised.

‖ IFRS 7.12D ‖If an entity has reclassified financial assets so that they are measured at amortised cost since ‖ its last annual reporting date, it discloses: ‖

‖l the fair value of the financial assets at the end of the reporting period; and ‖ l the fair value gain or loss that would have been recognised in profit or loss during the ‖ reporting period if the financial assets had not been reclassified.





6. Classifications and fair values of financial assets and liabilities (continued) ‖ Designated

‖ atfairvalue

‖ through Loans Total

‖ Heldfor profitor and Other carrying

‖In thousands of euro Note trading lossreceivables liabilities amount

‖ ‖31December2009 ‖Cash and cash equivalents - - 71 - 71 ‖Balances due from brokers 10 - - 3,121 - 3,121 ‖Receivables from reverse ‖repurchase agreements 11 - - 3,990 - 3,990 ‖Other receivables - - 46 - 46 ‖Non-pledged financial assets at ‖fair value through profit or loss 12 435 24,036 - - 24,471 ‖Pledged financial assets at ‖fair value through profit or loss 12 - 2,346 - - 2,346 ‖ 435 26,382 7,228 - 34,045 ‖Balances due to brokers 10 - - - 275 275 ‖Payables under repurchase agreements 11 - - - 2,234 2,234 ‖Other payables - - - 101 101 ‖Financial liabilities at fair value ‖through profit or loss 12 1,446 - - - 1,446 ‖Net assets attributable to ‖ holders of redeemable shares 14 - - - 29,979 29,979 ‖ 1,446 - - 32,589 34,035 ‖IFRS 7.25, 29 ‖The financial instruments not accounted for at fair value through profit or loss are short-term ‖financial assets and liabilities whose carrying amounts approximate fair value. (X) Reclassifications1

IFRS 7.12B ‖There were no reclassifications of financial assets during the year ended 31 December 2010 ‖ (2009: nil).




1. This Appendix provides examples of the disclosures required for a multiple-segment fund that falls within the scope of IFRS 8.

2. IFRS 8.2, 3 An entity is required to present segment information if its securities are publicly traded, or if it is in the process of issuing equity or debt securities in public securities markets. Other entities may choose to present segment information, but such entities should not describe information as segment information unless this information complies fully with IFRS 8.



Appendix II

Example disclosures of segment reporting – multiple-segment fund1, 2


3. Significant accounting policies (x) SegmentreportingIFRS 8.5 An operating segment is a component of the Fund that engages in business activities from

which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Fund’s other components. All operating segments’ operating results are reviewed regularly by the board of directors (being the chief operating decision maker) to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available.

IFRS 8.25 Segment results that are reported to the board of directors include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly audit, directors’ and legal fees and other operating expenses.

X. Operating segmentsIFRS 8.20-22 The Fund has two reportable segments, being the equity sub-portfolio and the debt sub-

portfolio. Each of the sub-portfolios is managed separately as they entail different investment objectives and strategies and contain investments in different products.

For each of the sub-portfolios, the board of directors reviews internal management reports on a quarterly basis. The objectives and principal investment products of the respective reportable segments are as follows:

Segment Investment objectives and principal investment products

Equity sub-portfolio To achieve capital appreciation through investing in a diversified portfolio of equity securities issued by European and NYSE listed and European unlisted companies. Debt sub-portfolio To achieve the highest possible yield from investments in the European debt market within the parameters set out in the Fund’s prospectus.

IFRS 8.20, 27(a) Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit, as included in the internal management reports that are reviewed by the board of directors. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results relative to other entities that operate within these industries. There are no transactions between reportable segments.

IFRS 8.27(b) Segment information is measured on the same basis as those used in the preparation of the Fund’s financial statements with the exception of the valuation of financial instruments. For the purpose of segment reporting financial instruments are measured in accordance with the method set out in the Fund’s prospectus, this being at the mid-price of the securities as at the valuation day. For the purpose of financial reporting, financial instruments are measured in accordance with the principles set out in IAS 39, this being at bid prices for financial assets and ask prices for financial liabilities.




1. IFRS 8.23 Entities are required to disclose the following about each reportable segment if the specified amounts are included in the measure of profit or loss reviewed by the chief operating decision maker (CODM), or are otherwise provided regularly to the CODM, even if not included in that measure of segment profit or loss:

●l revenues from external customers;●l revenues from transactions with other operating segments of the same entity;●l interest revenue;●l interest expense;●l depreciation and amortisation;●l material items of income and expense disclosed in accordance with paragraph 97 of IAS 1;●l the entity’s interest in the profit or loss of associates and joint ventures accounted for by

the equity method;●l income tax expense or income; and●l material non-cash items other than depreciation and amortisation.

2. IFRS 8.23 An entity presents interest revenue separately from interest expense for each reportable segment unless a majority of the segment’s revenues are from interest and the CODM relies primarily on net interest revenue to assess the performance of the segment and to make decisions about resources to be allocated to the segment. In that situation, an entity may report that segment’s interest revenue net of interest expense, and disclose that it has done so.

3. IFRS 8.23 The Improvements to IFRSs 2009 amended IFRS 8 so that a measure of segment assets is disclosed only if the amounts are regularly provided to the CODM, consistent with the equivalent requirement for the measure of segment liabilities.



Example disclosures of segment reporting – multiple-segment fund (continued)


X. Operating segments (continued) (x) Informationaboutoperatingsegments1

Equitysub- Debtsub-

In thousands of euro portfolio portfolio Total

2010IFRS 8.23(a) External revenues:IFRS 8.23(c) Interest income2 39 564 603 IFRS 8.23(f) Dividend income 272 - 272 IFRS 8.23(f) Net foreign exchange loss (15) (4) (19)IFRS 8.23(f) Net gain from financial instrumentsIFRS 8.23(b) at fair value through profit or loss 3,122 134 3,256 IFRS 8.32 Total segment revenue 3,418 694 4,112

Segment expenses:IFRS 8.23(f) Investment management fees (349) (129) (478)IFRS 8.23(f) Custodian fees (88) (14) (102)IFRS 8.23(f) Administration fees (51) (15) (66)IFRS 8.23(f) Transaction costs (48) (6) (54)IFRS 8.23(d) Interest expense2 (75) - (75)IFRS 8.23(f) Dividend expense (45) - (45)IFRS 8.23(h) Withholding tax expense (45) - (45) Total segment expenses (701) (164) (865)

IFRS 8.21(b) Reportable segment profit 2,717 530 3,247

IFRS 8.21(b) Reportable segment assets3 28,164 10,923 39,087

IFRS 8.21(b) Reportable segment liabilities, excluding net assets attributable to holders of redeemable shares 5,379 1,004 6,383

2009IFRS 8.23(a) External revenues:IFRS 8.23(c) Interest income2 38 391 429 IFRS 8.23(f) Dividend income 229 - 229 IFRS 8.23(f) Net foreign exchange loss (10) (6) (16)IFRS 8.23(f) Net gain from financial instrumentsIFRS 8.23(b) at fair value through profit or loss 1,596 805 2,401 IFRS 8.32 Total segment revenue 1,853 1,190 3,043








X. Operating segments (continued) (x) Informationaboutoperatingsegments(continued) Equitysub- Debtsub-

In thousands of euro portfolio portfolio Total

2009(continued) Segment expenses:IFRS 8.23(f) Investment management fees (316) (131) (447)IFRS 8.23(f) Custodian fees (56) (59) (115)IFRS 8.23(f) Administration fees (41) (21) (62)IFRS 8.23(f) Transaction costs (59) (14) (73)IFRS 8.23(d) Interest expense (62) - (62)IFRS 8.23(f) Dividend expense (19) - (19)IFRS 8.23(h) Withholding tax expense (39) - (39) Total segment expenses (592) (225) (817)

IFRS 8.21(b) Reportable segment profit 1,261 965 2,226

IFRS 8.21(b) Reportable segment assets 18,909 15,153 34,062

IFRS 8.21(b) Reportable segment liabilities, excluding net assets attributable to holders of redeemable shares 2,736 1,271 4,007

(x) Reconciliationsofreportablesegmentrevenues,profitorlossandassetsandliabilitiesIFRS 8.28(a) Revenues All segment revenues are from external sources. There are no inter-segment transactions

between the reportable segments during the year.


Reportable segment revenue 4,112 3,043 Adjustment from mid-market prices to bid/ask-market prices (5) (4) Total net revenue 4,107 3,039

IFRS 8.28(b) Profitorloss


Reportable segment profit 3,247 2,226 Unallocated amounts: Professional fees and other operating expenses (108) (123) Dividends to holders of redeemable shares (178) (91) Adjustment from mid-market prices to bid/ask-market prices (5) (4) Change in net assets attributable to holders of redeemable shares 2,956 2,008




1. IFRS 8.31-34 An entity presents entity-wide disclosures related to the following items regardless of whether the information is used by the CODM in assessing segment performance:

●l revenue from external customers for each group of similar products and services;●l revenue from external customers attributed to (i) the entity’s country of domicile and to (ii)

all foreign countries;●l non-current assets other than financial instruments, deferred tax assets, post-employment

benefit assets and rights arising under insurance contracts in (i) the entity’s country of domicile and to (ii) all foreign countries; and

●l information about major customers.

Information by geographical area is presented for the entity’s country of domicile and for each foreign country, if material. In our view, disclosing such information by region, e.g. Europe or Asia, does not meet the above requirement when the individual country is material. These disclosures apply to all entities subject to IFRS 8, including entities that have only one reportable segment. However, information required by the entity-wide disclosures need not be repeated if it is included already in the segment disclosures. This issue is discussed in our publication Insights into IFRS (5.2.230.10 – 13).





X. Operating segments (continued) (x) Reconciliationsofreportablesegmentrevenues,profitorlossandassetsandliabilities

(continued)IFRS 8.28(c) Assets


Total assets for reportable segments 39,087 34,062 Adjustment from mid-market prices to bid/ask-market prices (22) (17) Total assets 39,065 34,045

IFRS 8.28(d) Liabilities(excludingnetassetsattributabletoholdersofredeemableshares)


Total liabilities for reportable segments 6,383 4,007 Other unallocated amounts: Accrued professional fees and other operating expenses 47 49 Total liabilities (excluding net assets attributable to holders of redeemable shares) 6,430 4,056

IFRS 8.31 (x) Geographicalinformation1

In presenting information on the basis of geographical segments, segment revenue and segment assets are based on the domicile countries of the investees and counterparties to derivative transactions.

[Countryof United United Other

In thousands of euro domicile] States Kingdom Europe Total

2010IFRS 8.33(a) Externalrevenues Total revenue 50 945 1,127 1,985 4,107

2009IFRS 8.33(a) Externalrevenues Total revenue 23 699 893 1,424 3,039

IFRS 8.33(b) The Fund did not hold any non-current assets during the year (2009: Nil).

IFRS 8.34 (x) Majorcustomers1

The Fund regards the holders of redeemable shares as customers, as it relies on their funding for continuing operations and meeting its objectives. The Fund’s shareholding structure is not exposed to a significant shareholder concentration, other than shares held by employees of the investment manager who hold all the Class B shares issued. The Fund’s largest holder of redeemable shares excluding shares held by employees of the investment manager as at 31 December 2010 represents 2.32 percent (2009: 1.89 percent) of the Fund’s net asset value attributable to holders of redeemable shares.




1. IAS 32.15 This Appendix provides an example of the presentation and disclosures required for an open-ended fund whose redeemable shares are classified as equity under IAS 32. For the purpose of this Appendix, it is assumed that the redeemable shares meet all the conditions for equity classification under paragraphs 16A and 16B of IAS 32.

However, terms and conditions of the instruments issued by a fund would require careful analysis to determine whether the issued puttable instruments should be classified as equity. For example, in many cases, presence of another equity instrument (e.g. the management shares) may prevent such classification.

The example illustrates the key changes to the financial statements resulting from the classification of redeemable shares as equity. In addition, consequential changes will be required to other parts of the financial statements that discuss the redeemable shares in the context of a liability treatment, for example, references to redeemable shares in the risk management section as the redeemable shares classified as equity are excluded from the scope of IFRS 7.

2. In certain jurisdictions a collective investment scheme may be structured as an umbrella fund that operates one or more sub-funds, whereby investors purchase instruments that entitle the holder to a share of the net assets of a particular sub-fund. The umbrella fund and sub-funds together form a legal entity although the assets and the obligations of individual funds are fully or partially segregated.

Generally, we expect units issued by umbrella investment funds, which consist of several sub-funds, to fail equity classification in the separate financial statements of the umbrella fund. In our view, different contractual features that would violate the identical features test include different rates of management fees, choice on issuance by holders whether to receive income or additional units as distributions, different lock-up periods, different reference assets on which pro rata share of net assets is calculated or different currencies in which payments are denominated. This issue is discussed in our publication Insights into IFRS (3.11.54).



Appendix III

Example disclosures of open-ended fund with puttable instruments classified as equity1, 2

Reference Statement of financial position

IAS 1.10(a), 60, 113 Asat31December In thousands of euro Note 2010 2009

AssetsIAS 1.54(i) Cash and cash equivalents 51 71IAS 1.54(d) Balances due from brokers 10 4,619 3,121IAS 1.54(d) Receivables from reverse repurchase agreements 11 4,744 3,990IAS 1.54(h) Other receivables 29 46IAS 1.54(d) Non-pledged financial assets at fair value through profit or loss 12 26,931 24,471IAS 1.54(d), Pledged financial assets at fair value through profitIAS 39.37(a) or loss 12 2,691 2,346 Totalassets 39,065 34,045

EquityIAS 1.54(r) Share capital 59 59IAS 1.54(r) Share premium 25,141 25,451IAS 1.54(r) Retained earnings 7,435 4,479 Totalequity 32,635 29,989

LiabilitiesIAS 1.54(m) Balances due to brokers 10 143 275IAS 1.54(m) Payables under repurchase agreements 11 2,563 2,234IAS 1.54(k) Other payables 103 101IAS 1.54(m) Financial liabilities at fair value through profit or loss 12 3,621 1,446 Totalliabilities 6,430 4,056 Totalequityandliabilities 39,065 34,045




1. IAS 33.2, 3, 5 An entity with publicly-traded ordinary shares or potential ordinary shares, or in the process of issuing ordinary shares or potential ordinary shares that are to be publicly traded, should present basic and diluted EPS in the statement of comprehensive income. The requirements to present EPS only apply to those funds whose ordinary shares are classified as equity.

In our view, puttable instruments that qualify for equity classification instead of financial liability classification under IAS 32 are not ordinary shares for the purposes of IAS 33. We believe that it is not appropriate to apply by analogy the limited scope exemption under IAS 32 for EPS calculation purposes. Accordingly, in our view, the EPS presentation is not required for, or as a result of the existence of, such instruments. This issue is discussed in our publication Insights into IFRS (5.3.10.80).



Example disclosures of open-ended fund with puttable instruments classified as equity (continued)

Reference Statement of comprehensive income1

IAS 1.10(b), 81(a) Fortheyearended31December In thousands of euro Note 2010 2009

Interest income 7 603 429IAS 18.35(b)(v) Dividend income 272 229IAS 1.35 Net foreign exchange loss (19) (16)IFRS 7.20(a) Net gain from financial instruments at fair value through profit or loss 8 3,251 2,397IAS 1.82(a) Totalrevenue 4,107 3,039

IAS 1.99 Investment management fees (478) (447)IAS 1.99 Custodian fees (102) (115)IAS 1.99 Administration fees (66) (62)IAS 1.99 Directors’ fees (26) (15)IAS 1.99 Transaction costs (54) (73)IAS 1.99 Audit and legal fees (74) (67)IAS 1.99 Other operating expenses (8) (41)IFRS 7.20(b) Interest expense (75) (62) Dividend expense on securities sold short (45) (19) Totaloperatingexpenses (928) (901)

IAS 1.85 Profitbeforetax 3,179 2,138

IAS 1.82(d) Withholding tax expense 9 (45) (39)

IAS 1.82(f) Profitfortheperiod 3,134 2,099




1. IAS 32.33 If an entity reacquires its own equity instruments, then those instruments (treasury shares) are deducted from equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of an entity’s own equity instruments. Consideration paid or received is recognised directly in equity.

IFRS does not mandate a specific method of presenting treasury shares within equity. Laws may prescribe the allocation method. Therefore, an entity should take into account its legal environment when choosing how to present its own shares within equity. This issue is discussed, and certain possible presentation alternatives are explained, in our publication Insights into IFRS (3.11.310.10 – 340.10).

In this illustrative example we have selected the following presentation:

●l the par value of treasury shares purchased is debited to share capital;●l the par value of treasury shares sold or re-issued is credited to share capital; and●l any premium or discount to par value is shown as an adjustment to share premium.

2. IAS 1.80 ‖In cases when an entity without share capital (e.g. a partnership or trust) discloses ‖ information equivalent to that required for other entities, it discloses movements during ‖ the period in each category of equity interest, and the rights, preferences, and restrictions ‖ attaching to each category of equity interest.




Reference Statement of changes in equity1

Management Redeemable share share Share Retained In thousands of euro capital capital premium earnings Total

Balanceat1January2009 10 48 15,942 2,471 18,471

Totalcomprehensiveincome fortheyearIAS 1.106(d)(i) Profit or loss - - - 2,099 2,099

Transactionswithowners, recogniseddirectlyinequityIAS 1.106(d)(iii) Contributions, redemptions and distributions to shareholders: Issue of shares - 1 15,504 - 15,505 Redemption of shares - - (5,995) - (5,995) Dividends paid to shareholders - - - (91) (91) Totaltransactionswithowners - 1 9,509 (91) 9,419 Balanceat31December2009 10 49 25,451 4,479 29,989

Totalcomprehensiveincome fortheyearIAS 1.106(d)(i) Profit or loss - - - 3,134 3,134

Transactionswithowners, recogniseddirectlyinequityIAS 1.106(d)(iii) Contributions, redemptions and distributions to shareholders: Issue of shares - 1 6,667 - 6,668 Redemption of shares - (1) (6,977) - (6,978) Dividends paid to shareholders - - - (178) (178) Totaltransactionswithowners - - (310) (178) (488) Balanceat31December2010 10 49 25,141 7,435 32,635








X. Significant accounting policiesIFRS 7.21 (x) Sharecapital Redeemableshares The Fund classifies financial instruments issued as financial liabilities or equity instruments in

accordance with the substance of the contractual terms of the instruments.

The Fund has two classes of redeemable shares in issue: Class A and Class B. Both are the most subordinate classes of financial instruments issued by the Fund and, on liquidation of the Fund they entitle the holders to the residual net assets, after repayment of the nominal amount of equity shares. They rank pari passu in all material respects and have identical terms and conditions. The redeemable shares provide investors with the right to require redemption for cash at a value proportionate to the investor’s share in the Fund’s net assets at each monthly [daily/quarterly] redemption date and also in the event of the Fund’s liquidation.

IAS 32.16, 18(b) A puttable financial instrument that includes a contractual obligation for the Fund to repurchase or redeem that instrument for cash or another financial asset is classified as equity if it meets all of the following conditions:

●l it entitles the holder to a pro rata share of the Fund’s net assets in the event of the Fund’s liquidation;

●l it is in the class of instruments that is subordinate to all other classes of instruments;●l all financial instruments in the class of instruments that is subordinate to all other classes of

instruments have identical features;●l apart from the contractual obligation for the Fund to repurchase or redeem the instrument

for cash or another financial asset, the instrument does not include any other features that would require classification as a liability; and

●l the total expected cash flows attributable to the instrument over its life are based substantially on the profit or loss, the change in the recognised net assets or the change in the fair value of the recognised and unrecognised net assets of the Fund over the life of the instrument.

The Fund’s redeemable shares meet these conditions and are classified as equity.

Incremental costs directly attributable to the issue or redemption of redeemable shares are recognised directly in equity as a deduction from the proceeds or part of the acquisition cost.

Repurchaseofredeemableshares When redeemable shares recognised as equity are redeemed, the par value of the shares

is presented as a deduction from share capital. Any premium or discount to par value is recognised as an adjustment to share premium, or if share premium is insufficient, as an adjustment to retained earnings.








X. Financial risk managementIAS 1.134 (x) CapitalmanagementIAS 1.136A(a) At 31 December 2010 the Fund had €32,625 thousand (2009: €29,979 thousand) of

redeemable share capital classified as equity.

IAS 1.136A(b) The Fund’s objectives in managing the redeemable share capital is to ensure a stable and strong base to maximise returns to all investors, and to manage liquidity risk arising from redemptions.

The Fund utilises the following tools in the management of share redemptions:

●l regular monitoring of the level of daily subscriptions and redemptions and maintenance of liquid assets equal to 105 percent of the expected redemptions; and

●l the right to impose a redemption gate limit of 10 percent of the net assets of the Fund in any redemption period.

IAS 1.136A(c), (d) Based on historic information over the last 12 months, redemption levels are expected to approximate €600 thousand and the average monthly level of redemptions net of new subscriptions are expected to approximate €26 thousand. However, the actual level of redemptions may differ significantly from the historic experience.

IAS 1.136A(b) There were no changes in the policies and procedures during the year with respect to the Fund’s approach to its redeemable share capital management.

IAS 1.135(a)(ii) The Fund is required by the [title of legislation or regulation] to maintain authorised and paid up capital at a minimum amount of €10 thousand in the form of management shares [explain the reason for issuing the shares, if different from above]. The holders of management shares are entitled to a repayment of up to par value only upon the winding up of the Fund in priority to redeemable shares. The Fund is not subject to other externally imposed capital requirements.




1. IAS 1.9, 10 A schedule of investments is not a required statement under IFRS. However, entities may provide such a schedule on a voluntary basis within or outside the financial statements. For example, if a fund is listed on a stock exchange it may be required to include a schedule of investments within the audited financial statements to comply with the listing requirements of the exchange.

A schedule of investments, when included within the audited financial statements, is presented in the notes.

These illustrative financial statements are based on the assumption that a schedule of investments is not required to be included within the audited financial statements. Reports and statements presented outside the financial statements are outside the scope of IFRS. If a fund presents its schedule of investments outside the financial statements, it should provide sufficient information within the financial statements on the nature and amounts of the investments to meet the requirement in IFRS 7.



Appendix IV

Reference Example disclosures of schedule of investments – unaudited1

Fortheyearended31December2010 Percentage

Fairvalue ofnetassets


Assets Derivativefinancialinstruments Listed equity index options 249 0.8% Foreign currency forward contracts 219 0.6% Equity indices futures contracts 54 0.2% Foreign currency futures contracts 23 0.1% Totalderivativefinancialinstruments 545 1.7%

Equityinvestments NYSE and European exchange-traded equity investments: 44,000 shares of [name of entity] 1,200 3.7% 25,000 shares of [name of entity] 1,170 3.6% 25,000 shares of [name of entity] 1,162 3.6% 17,000 shares of [name of entity] 1,146 3.5% 18,000 shares of [name of entity] 1,103 3.4% 31,000 shares of [name of entity] 1,092 3.3% 28,000 shares of [name of entity] 1,092 3.3% 40,000 shares of [name of entity] 1,033 3.2% 38,000 shares of [name of entity] 1,003 3.1% 32,000 shares of [name of entity] 996 3.1% 21,000 shares of [name of entity] 990 3.0% 30,000 shares of [name of entity] 951 2.9% 15,000 shares of [name of entity] 936 2.9% 33,000 shares of [name of entity] 836 2.6% 10,000 shares of [name of entity] 760 2.3% 45,000 shares of [name of entity] 722 2.2% 23,000 shares of [name of entity] 702 2.1% Total 16,894 51.8%

Unlisted open-ended investment funds: 25,615 units [name of entity] 640 2.0% 29,493 units [name of entity] 531 1.6% 23,046 units [name of entity] 461 1.4% Total 1,632 5.0%

Unlisted private equity investments: 190,000 shares of [name of entity] 500 1.5% Total 500 1.5% Totalequityinvestments 19,026 58.3%






Reference Example disclosures of schedule of investments – unaudited (continued)

Fortheyearended31December2010 Percentage Fairvalue ofnetassets In thousands of euro 2010 2010

Assets(continued) Debtsecurities Commercial paper: [name of entity] 2.8% 5/01/2011 982 3.0% [name of entity] 3.0% 10/01/2011 826 2.5% [name of entity] 2.8% 15/01/2011 806 2.5% [name of entity] 2.9% 31/01/2011 796 2.5% [name of entity] 3.0% 6/01/2011 750 2.3% [name of entity] 2.9% 10/01/2011 731 2.2% Total 4,891 15.0%

European exchange-traded debt securities: [name of entity] 4.9% 15/03/2011 1,091 3.4% [name of entity] 3.8% 10/04/2011 1,046 3.2% [name of entity] 3.3% 26/10/2011 1,023 3.1% [name of entity] 3.4% 10/03/2011 1,012 3.1% [name of entity] 3.2% 26/03/2011 988 3.0% Total 5,160 15.8% Totaldebtsecurities 10,051 30.8% Totalderivativefinancialinstrumentsanddebtandequity investments 29,622 90.8%

Liabilities Derivativefinancialinstruments Listed equity index options (1,066) (3.3%) Foreign currency forward contracts (822) (2.5%) Credit default swaps (485) (1.5%) Interest rate swaps (464) (1.4%) Totalderivativefinancialinstruments (2,837) (8.7%)

Securitiessoldshort NYSE and European exchange-traded equity investments: 5,000 shares of [name of entity] (50) (0.1%) 17,000 shares of [name of entity] (66) (0.2%) 9,000 shares of [name of entity] (88) (0.3%) 23,000 shares of [name of entity] (128) (0.4%) 20,000 shares of [name of entity] (183) (0.6%) 26,000 shares of [name of entity] (269) (0.8%) Totalsecuritiessoldshort (784) (2.4%) Totalderivativefinancialinstrumentsandsecuritiessoldshort (3,621) (11.1%)

Total net investments (assets less liabilities) 26,001 79.7% Cash and cash equivalents 51 0.2% Other assets in excess of other liabilities and equity 6,573 20.1% Totalnetassets 32,625 100.0%




1. IFRS 7.41 This Appendix sets out an example of disclosures of sensitivity analysis for market risk using a Value-at-Risk methodology. When an entity presents information on this basis, it shall disclose:

●l an explanation of the method used in preparing such a sensitivity analysis and the main parameters and assumptions underlying the data provided; and

●l an explanation of the objective of the method used and of limitations that may result in the information not fully reflecting the fair value of the assets and liabilities involved.



Appendix V ‖Example disclosures of exposure to market risk – Value-at-Risk analysis ‖IFRS 7.41 ‖ The principal tool used to measure and control market risk exposure of the Fund is a Value-at- ‖ Risk analysis (VaR). The VaR of the Fund’s portfolio is the estimated loss that may arise on the ‖ portfolio over a specified period of time (holding period) from an adverse market movement ‖ within a specified probability (confidence level). The VaR model used by the Fund is based on a ‖ 99 percent confidence level and assumes a 10-day holding period. The VaR model used is based ‖ mainly on historical simulation. Taking account of market data from the previous two years and ‖ observed relationships between different markets and prices, the model generates a wide range ‖ of plausible future scenarios for market price movements. ‖ ‖ [Insert any other information on type of model, assumptions and parameters used in the VaR ‖ calculation and any limitations to the method.] ‖ ‖ Although VaR is an important tool for measuring market risk, the assumptions on which the ‖ model is based give rise to some limitations, including the following: ‖ ‖l A 10-day holding period assumes that it is possible to hedge or dispose of positions within ‖ that period. This may not be the case for certain highly illiquid assets or in situations in ‖ which there is severe general market illiquidity. ‖ l A 99 percent confidence level does not reflect losses that may occur beyond this level, ‖ meaning that within the model used there is a 1 percent probability that losses could ‖ exceed the VaR. ‖ l VaR is calculated on an end-of-day basis and does not reflect exposures that may arise on ‖ positions during the trading day. ‖ l The use of historical data as a basis for determining the possible range of future outcomes ‖ may not always cover all possible scenarios, especially those of an exceptional nature. ‖ l The VaR measure is dependent upon the Fund’s position and the volatility of market prices. ‖l The VaR of an unchanged position reduces if market price volatility declines and vice versa. ‖ ‖ The Fund uses VaR limits for total market risk and specific foreign exchange, interest rate, ‖ equity, credit spread and other price risks. VaR limits are allocated to trading portfolios. ‖ ‖The overall structure of VaR limits is subject to review and approval by the board of directors. ‖VaR is measured weekly. Weekly reports of utilisation of VaR limits are submitted to [insert ‖name] and regular summaries are submitted to the board of directors.






Example disclosures of exposure to market risk – Value-at-Risk analysis (continued) ‖A summary of the VaR position of the Fund’s portfolios at 31 December and during the period ‖is as follows: ‖ At31

IFRS 7.41 ‖In thousands of euro December Average Maximum Minimum

‖ ‖2010 ‖Foreign currency risk 12.04 10.04 15.06 7.97 ‖Interest rate risk 27.41 22.05 39.48 17.53 ‖Credit spread risk 9.07 6.97 9.52 5.66 ‖Other price risk 3.28 3.01 4.02 2.42 ‖Covariance (2.76) (3.08) - - ‖Overall 49.04 38.99 68.08 33.58 ‖ ‖2009 ‖Foreign currency risk 9.28 8.40 12.05 4.64 ‖Interest rate risk 20.43 18.05 26.52 13.72 ‖ Credit spread risk 6.08 5.11 8.83 3.50 ‖Other price risk 3.32 2.89 4.56 2.07 ‖Covariance (2.24) (2.08) - - ‖Overall 36.87 32.37 51.96 23.93 ‖ ‖The limitations of the VaR methodology are recognised by supplementing VaR limits with other ‖position and sensitivity limit structures, including limits to address potential concentration ‖risks. In addition, the Fund uses a wide range of stress tests to model the financial impact of a ‖variety of exceptional market scenarios, such as periods of prolonged market illiquidity, on the ‖ Fund’s overall position.

© 2010 KPMG IFRG Limited, a UK company, limited by guarantee. All rights reserved. Printed in the UK.

KPMG International Standards Group is part of KPMG IFRG Limited.

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Publication name: Illustrative financial statements: Investment funds

Publication no: 314486

Publication date: December 2010

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