Illustrative financial statements: investment funds

Illustrative financial statements:investment fundsInternational Financial Reporting Standards

© 2005 KPMG IFRG Limited is a UK company, limited by guarantee. All rights reserved.

About this publication

ContentThe purpose of this publication is to assist you in preparing the financial statements of an investment fund inaccordance with International Financial Reporting Standards (IFRSs). It illustrates one possible format offinancial statements for fund-specific aspects, based on a fictitious off-shore investment company alreadyreporting under IFRSs.

The company illustrated in these financial statements is an open-ended fund where shareholders may purchaseand / or redeem shares at their discretion. While under some jurisdictions certain fund structures may not bepermitted to hold short positions or use external financing to leverage returns, it was assumed for the illustrativepurposes of this publication, that no such restrictions apply to this investment company.

This publication is based on IFRSs adopted by the International Accounting Standards Board (IASB) at 30 April2004, which are often referred to as the “stable platform” and are applicable for annual periods beginning on orafter 1 January 2005. Users of this publication should update themselves on the recent developments anddecisions with regard to the status of the proposed amendments and apply the new requirements as appropriate.

It should be noted that the IASB is still undertaking several projects. As a result, changes may be proposed tocertain standards including IAS 32 Financial Instruments: Disclosure and Presentation and IAS 39 FinancialInstruments: Recognition and Measurement which may have a significant impact on financial statements of aninvestment institution.

When preparing financial statements in accordance with IFRSs, an entity should have regard to its local legal andregulatory requirements. However, in financial statements that state compliance with IFRSs it is not appropriate todepart from an IFRS standard or interpretation because it differs from local requirements. These IllustrativeFinancial Statements do not consider any requirements of a particular jurisdiction.

Extensive accounting policies, which are more than required by IFRSs, have also been included in this publicationto provide a fund with greater information regarding available accounting policies and optional disclosures.

While these Illustrative Financial Statements provide a valuable demonstration of international reportingrequirements, they should not be used as a substitute for referring to the standards and interpretations themselves,particularly where a specific requirement is not addressed in this publication or where there is uncertainty regardingthe correct interpretation of an IFRS. To assist you in preparing financial statements in accordance with IFRSs, thefollowing publications are also recommended:

● Insights into IFRS, dated August 2004;● Accounting Checklist, dated June 2004;● Disclosure Checklist, dated June 2004;● Financial Instruments Accounting 2004, dated March 2004;● IFRS Illustrative Financial Statements – First-time Adoption in 2005, dated November 2004;● IFRS Illustrative Financial Statements for Investment Property Companies, dated November 2004;● IFRS Illustrative Financial Statements for Banks, dated July 2001 (electronic copy only); and● Global Accounting: various National GAAPs compared to IFRSs.

Reference may also be made to KPMG International’s electronic research tool “Accounting Research Online”http://www.aro.kpmg.com a library of accounting, auditing and financial reporting guidance and literature.


ReferencesThe Illustrative Financial Statements for Investment Funds are contained on the odd-numbered pages of thispublication. The even-numbered pages contain explanatory comments and notes that may be useful. However,these pages are not intended to be an exhaustive commentary.

To the left of each item disclosed, reference has been made to the IFRS that requires or recommends thatdisclosure. For example, the reference IAS 1.8(b) means that the disclosure is required by paragraph 8(b) of IAS 1.The references generally relate to disclosure only. However, in the accounting policies section of the financialstatements, references have also been made to relevant recognition and measurement requirements of IFRSs.

Contact KPMG member firmsOur member firms would be pleased to assist you further with the analysis and interpretation of IFRSs. Pleasespeak to your usual KPMG member firm or visit (www.kpmg.com).


Contents

Reference Page

Reporting by directors 3

IAS 1.44 Financial statements

Income statement 5Statement of changes in net assets attributable to holders of redeemable shares 7Balance sheet 9Statement of cash flows 11Notes to the financial statements 13

ISA 700 Report of the independent auditors 57

Appendices

1. Schedule of investments – unaudited 592. Statement of cash flows – indirect method 633. Income statement, statement of changes in net assets attributable to holders of redeemable

shares, balance sheet and selected illustrative notes for a fund classifying its investments asavailable-for-sale 65

4. Index and list of IFRSs and SIC interpretations at 30 June 2004 70

2 IFRS Illustrative Financial Statements for Investment FundsMarch 2005


Note Reference Explanatory note

1. In many jurisdictions, entities are required to issue a directors’ report sometimes also calledmanagement’s discussion and analysis. For further guidance refer to the requirements withinthe jurisdiction the entity is reporting under and to related publications.

In the case that the entity is a subsidiary, IAS 1.126(c) requires the disclosure of the name ofthe parent and the ultimate parent of the group.

2. The Fund may wish to provide additional information. For example, the average and / or highestand lowest net assets values of redeemable shares during the reporting period may bepresented. In our view, such information should be part of the directors’ report. Additionally, theFund may wish to disclose information on the risk and reward profile of the Fund.

IFRS Illustrative Financial Statements for Investment Funds 3March 2005


Reference Reporting by directors1

IFRSs do not prescribe information to be disclosed in a directors’ report. Local laws andregulations generally determine such requirements.

IAS 1.9(a)-(c) Entities are encouraged to present, outside the financial statements, a financial review bymanagement. This review for funds should describe and explain the main features of the fund’sfinancial performance and financial position, and the principal uncertainties it faces. Such a reportmay include a review of:

● the main factors and influences determining financial performance, including changes in theenvironment in which the fund operates, the fund’s response to those changes and theireffect, and the fund’s investment policies undertaken to maintain and enhance financialperformance, including its dividend policy; and

● the fund’s resources not recognised in the balance sheet in accordance with IFRSs.

IAS 1.10 Entities are also encouraged to present additional statements, for example, environmentalreports or value added statements, if management believes that they will assist users in makingeconomic decisions. Based on general fund practice, the following principal subjects usually areincluded in a directors’ report and financial review by management:

General Investment objectives and principal activitiesList of directors and officers, if anyChairman’s and chief executive officer’s statements or fundmanager’s statementList of service providers including, for example, the investmentmanager, administrator and share registrar, custodian, trusteeCorporate governance

Investment Market reviewmanager’s review2 Benchmark comparison

Capital structure and financial positionOperating results for the periodTables of financial data and key figures for the last five or ten yearsFuture expectationsSubstantial interestsManagement’s policy for controlling risks (e.g., financial risk,settlement risk)

Other items Events subsequent to the balance sheet dateAgenda for the annual general meeting, if anySpecific disclosures required by local laws and regulations

IAS 1.126(a)-(c) The following disclosures normally are made outside the financial statements. If they are not,IAS 1 requires that this information is disclosed in the financial statements:

● country of incorporation;● address of the registered office (or principal place of business);● description of the nature of the entity’s operations and its principal activities; and● the name of the parent and the domicile and legal form of the fund.




1. IAS 1.32 Items of income and expense shall not be offset unless required or permitted by a standardor interpretation.

IAS 1.29 Classes of similar items shall be aggregated and presented separately in the financialstatements. An entity adopts the concept of materiality to determine separate presentation onthe face of the balance sheet, income statement, statement of changes in net assetsattributable to holders of redeemable shares and cash flow statement or in the notes.

2. IAS 33 8, 66 An entity should present basic and diluted earnings per share (EPS) on the face of the incomestatement for each class of ordinary shares. The requirement to disclose EPS applies only tothose funds whose shares qualify as equity instruments.

Nevertheless, some entities may wish or may be required by local regulations to present basicand / or diluted earnings per unit (EPU). If presented the financial statements should clearlyexplain how EPU was calculated.

3. IAS 32.94(h)(i) The amount of interest income and interest expense for interest-bearing financial assets andfinancial liabilities is determined using the effective interest method.

IAS 18.30(c) Dividends are recognised when the shareholders’ right to receive payment is established.

4. IAS 1.35 Gains and losses from a group of similar transactions are reported on a net basis (e.g., foreignexchange gains and losses or gains and losses arising on financial instruments held-for-trading). Such gains and losses are, however, reported separately if they are material.

5. IAS 1.88, 91 The analysis of expenses should be presented based on either the nature of expenses, or theirfunction within the entity. The analysis of expenses in these Illustrative Financial Statements isbased on the nature of expenses, which usually would be the most appropriate way to presentexpenses for an investment fund.

6. IAS 1.81-84 This information must be presented on the face of the income statement. Additional line itemsare included on the face of the income statement and the descriptions used and ordering ofitems are amended when it is relevant to understanding the entity’s financial performance.Revenue, in the context of a fund, generally would comprise interest income, dividend income,net gains and losses on investments as well as on derivatives.

7. IAS 1.88, 91 IFRSs do not explicitly require disclosure of transaction costs incurred on acquisitions anddisposals of financial instruments. In our view, transaction costs do not form part of the fairvalue change and should be recognised as an expense. A separate line item in the incomestatement may be required, if transaction costs are material.

8. IAS 32.35 Interest, dividends and gains / losses arising on financial liabilities shall be recognised asincome or expense in profit or loss. Because redeemable shares are classified as financialliabilities, any distributions on these shares are presented as finance costs.

9. Withholding tax is usually withheld at the source of income on behalf of the income receiver.These Illustrative Financial Statements assume that the Fund is exempt from paying taxes onincome and capital gains and therefore it cannot claim withholding tax. In such cases,withholding tax can be claimed by the holders of redeemable shares and should be viewed asdistribution to holders of redeemable shares.

It should be noted that tax treatment may differ by country and therefore this illustration mayneed to be tailored to comply with the relevant country’s legislation.



Reference Income statement1, 2

For the year ended 31 December 2005

All amounts stated in euro Note 2005 2004

(restated)

IAS 32.94(h)(i) Interest income3

1 602,940 429,982IAS 18.35(b)(v) Gross dividend income

3271,801 229,159

IAS 1.29, 35 Gains on investments4

2 3,335,829 2,552,246IAS 1.29, 35 Losses on investments

42 (213,546) (134,211)

IAS 1.35 Net gain / (loss) on derivatives4

88,001 (37,022)IAS 1.35, 88, 91 Net foreign exchange loss

4(18,842) (15,985)

IAS 1.81(a) Net investment income4

4,066,183 3,024,169

IAS 1.88, 91 Investment management fees5

7 (447,877) (478,158)IAS 1.88, 91 Custodian fees

57 (112,583) (83,947)

IAS 1.88, 91 Administration fees5

(65,793) (61,635)IAS 1.88, 91 Transaction costs

5, 7(63,865) (72,875)

IAS 1.88, 91 Professional fees5

(41,617) (37,892)IAS 1.88, 91 Directors’ fees

57 (26,517) (15,443)

IAS 1.88, 91 Other operating expenses5

(50,000) (70,000)Operating expenses before finance costs (808,252) (819,950)

IAS 1.83 Net income from operations before finance costs 3,257,931 2,204,219

IAS 32.40 Distributions to holders of redeemable shares8

(177,405) (91,156)Withholding tax paid on behalf of holders of redeemable shares

8, 9(45,300) (39,775)

IAS 32.94(h)(i) Interest expense3

(75,036) (61,727)IAS 1.81(b) Total finance costs

6(297,741) (192,658)

IAS 32.IE32 Change in net assets attributable to holders of

redeemable shares 2,960,190 2,011,561




1. IAS 1.6, 8(c) A complete set of financial statements includes a separate statement showing either allchanges in equity or changes in equity other than those arising from capital transactions withowners and distributions to owners.

However, as there is no equity in the Fund, no statement of changes in equity is prepared.Instead, a statement of changes in net assets attributable to holders of redeemable shares ispresented. Although IFRSs do not require presentation of this statement, in our view, it providesusers of the financial statements with relevant and useful information.



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



(restated)

Balance at 31 December 2004 as previously reported - 18,695,377Change in accounting policy – available-for-sale financial assets - (233,936)Balance at 31 December (2004 restated) 29,978,597 18,461,441Change in net assets attributable to holders of redeemableshares for the year 2,960,190 2,011,561Issue of redeemable shares during the year 3 6,668,239 15,505,199Redemption of redeemable shares during the year 3 (6,977,669) (5,995,856)Change in the adjustment from mid-market prices tobid-market prices (4,012) (3,748)Balance at 31 December 32,625,345 29,978,597




1. IAS 1.51, 52 An entity may choose to classify its balance sheet by current and non-current assets andcurrent and non-current liabilities. Alternatively, if a classification based on liquidity isconsidered to provide information that is reliable and more relevant, an entity may discloseassets and liabilities in broad order of their liquidity. Whichever method of presentation isadopted, the notes must disclose the amount of every asset or liability that is expected to berealised or settled after more than twelve months.

Since most assets and liabilities in a fund can be realised or settled in the near future, thecurrent / non-current classification generally is not chosen as the method of balance sheetpresentation for funds. However, in jurisdictions where it is either required or is a commonpractice to distinguish current and non-current assets and liabilities, a fund may choose tomake such a distinction.

IAS 32.55 Financial instruments should be grouped into appropriate classes based on the characteristicsof the instruments and taking into account their measurement basis.

The descriptions used for categories of financial instruments in IFRSs are not required to be usedas line items on the balance sheet. Generally however, assets with different measurement basesshould not be classified together, but disclosed separately on the balance sheet.

IAS 32.42, 50 Assets and liabilities are offset only when required or permitted by IFRSs. Financial assets andliabilities are offset when a current legal right to offset exists and there is intent to realise theasset and settle the liability simultaneously or on a net basis. A master netting arrangementgenerally does not provide a basis for offsetting because the right of offset in most agreementsapplies only in the event of default.

2. IAS 1.68 This information must be presented on the face of the balance sheet, if material.

3. IAS 1.68(d), (l) IAS 1 Presentation of Financial Statements requires the face of the balance sheet to include, atminimum, line items presenting financial assets and financial liabilities however; neither IAS 1nor IAS 32 provides detailed guidance on how to present financial assets or financial liabilitiesat fair value through profit or loss. In our view, they should be shown as separate line items.Nevertheless, due to the fact that the majority of the Fund’s financial instruments are classifiedto this category and they constitute material balances, in our view, a further breakdown on theface of balance sheet into derivatives, equity investments, debt investments and securitiessold short is appropriate. However, such breakdown is not required by IFRSs.

4. IAS 39.49, In accordance with IAS 39 the best measure of fair value of a financial asset and financial39.AG72 liability is a quoted market price in an active market. The appropriate quoted market price for

an asset held is usually the current bid price and for a liability held is the asking price.Financial liabilities arising from redeemable shares are carried at the present value of theredemption amount. In accordance with the Fund’s prospectus, the redeemable shares areredeemed at mid-market prices representing the Fund’s contractual obligation. As a result,net assets attributable to holders of redeemable shares at mid-market prices are adjusted totheir bid-market prices to balance the statement.



Reference Balance sheet1

As at 31 December 2005


Assets

IAS 1.68(i) Cash and cash equivalents2

4 51,368 70,730IAS 32.55 Balances due from brokers

15 8,118,777 12,620,923

IAS 32.55 Receivables from reverse repurchase agreements1

5 4,743,460 3,990,133IAS 1.29, 32.55 Derivative financial instruments

1, 36 544,791 435,203

IAS 1.29, 32.55 Debt investments3

6 8,051,428 6,511,346IAS 1.29, 32.55 Equity investments

36 19,025,581 11,871,486

IAS 1.68(h) Interest, dividends and other receivables2

29,367 45,577Total assets 40,564,772 35,545,398

Liabilities

IAS 32.55 Balances due to brokers1

5 1,179,844 1,365,374IAS 32.55 Payables under repurchase agreements

15 2,563,267 2,234,540

IAS 32.55 Derivative financial instruments1, 3

6 2,836,820 1,234,241IAS 32.55 Securities sold short

36 783,709 212,553

IAS 1.68(j) Accounts payable2

7 341,220 314,690IAS 1.69 Accrued expenses 7 234,567 205,403

Total liabilities (excluding net assets attributable to

holders of redeemable shares) 7,939,427 5,566,801

IAS 1.6, 68(l) Net assets attributable to holders of redeemable shares

(bid-market prices)1

32,625,345 29,978,597

Represented by:● net assets attributable to holders of redeemable shares

(mid-market prices) 32,646,970 29,996,210● adjustment from mid-market prices to bid-market prices

4(21,625) (17,613)

Net assets value per share at mid-market prices, based on

259,212 (2004: 260,531) shares outstanding 125.95 115.13




1. IAS 7.18 In this statement of cash flows, the cash flows from operating activities are reported using thedirect method, whereby major classes of gross cash receipts and gross cash payments aredisclosed. As an alternative, cash flows from operating activities may be presented using theindirect method whereby the profit or loss for the year is adjusted for the effects of non-cashtransactions, changes in operating assets, and items of income or expense associated withinvesting or financing cash flows.

IAS 7.19 Entities are encouraged, but not required, to use the direct method as it provides informationthat may be useful in estimating future cash flows, which is not available under the indirectmethod. However, the indirect method is the method that is most commonly used inpractice. Appendix 2 to this publication illustrates a statement of cash flows prepared underthe indirect method.

2. IAS 7.31, 35 Interest received and paid and dividends received and paid are required to be separately disclosed.

3. IAS 7.21, 22 Major classes of gross cash receipts and gross cash payments should be disclosedseparately, except the following that are specifically allowed to be reported on a net basis:

● cash receipts and payments on behalf of customers;● cash receipts and payments for items in which the turnover is quick, the amounts are large

and maturities are short.

4. IAS 7.16 For the purposes of these Illustrative Financial Statements, the Fund considers cash receiptsfrom disposals and cash payments for acquisitions of equity and debt investments as investingactivities in the cash flow statement.



Reference Statement of cash flows1



Operating activities1

IAS 7.31, 33 Interest received2

613,733 453,982IAS 7.31, 33 Interest paid

2(67,087) (62,965)

IAS 7.31, 33 Dividends received2

274,218 227,696IAS 7.31, 33 Dividends paid

2(177,405) (91,156)

IAS 7.22(b) Net receipts / (payments) from derivative activities3

1,635,725 (3,441)IAS 7.22(b) Net payments on securities sold short (47,393) (21,248)IAS 7.22(b) Net receipts from repurchase and reverse repurchase

agreements3

415,646 299,172IAS 7.14 Operating expenses paid (796,577) (848,356)IAS 7.10 Cash flows from operating activities 1,850,860 (46,316)

Investing activities

IAS 7.16(d) Proceeds from sale of investments4

8,462,968 8,271,599IAS 7.16(c) Purchase of investments

4(10,023,023) (17,712,776)

IAS 7.10 Cash flows from investing activities (1,560,055) (9,441,177)

Financing activities

IAS 7.17(c) Proceeds from issue of redeemable shares3

6,668,239 15,505,199IAS 7.17(d) Payments on redemption of redeemable shares

3(6,977,669) (5,995,856)

IAS 7.10 Cash flows from financing activities (309,430) 9,509,343

IAS 7.45 Net (decrease) / increase in cash and cash equivalents (18,625) 21,850IAS 7.45 Cash and cash equivalents at 1 January 70,730 49,865IAS 7.28 Effect of exchange rate fluctuations on cash and cash

equivalents (737) (985)IAS 7.45 Cash and cash equivalents at 31 December 4 51,368 70,730




1. IAS 1.103 The notes to the financial statements should disclose: information about the basis of preparingthe financial statements and the specific accounting policies used; information required byIFRSs that is not presented on the face of the balance sheet, income statement, statement ofchanges in equity or cash flow statement; and additional information that is not presented onthe face of the balance sheet, income statement, statement of changes in equity or cash flowstatement, but is relevant to an understanding of any of them.

2. IAS 1.126(c) While this is not relevant for an entity such as the Fund illustrated in this publication, an entityshould also disclose the name of the parent of the entity and the ultimate parent of the groupwhere applicable. However, this disclosure is required where the Fund is consolidated intoanother entity.

3. IAS 1.108, The accounting policies should describe each specific accounting policy that is necessary for a32.60 proper understanding of the financial statements. For the purpose of these Illustrative Financial

Statements an extended list of accounting policies has been included, many of which may notbe relevant to individual entities.

4. IAS 1.14 Depending on the jurisdiction in which the entity is domiciled, it may be required to also statethat the financial statements have been prepared in accordance with requirements of specificlaws of that jurisdiction. However, it is not appropriate in financial statements that statecompliance with IFRSs to depart from IFRSs because it differs from local requirements.

The term IFRSs includes the following standards and interpretations: International AccountingStandards (IAS’s), new standards issued by the IASB described as IFRSs, StandingInterpretations Committee (SIC) interpretations and new interpretations issued by theInternational Financial Reporting Interpretations Committee (IFRIC).

5. IAS 21.53, The financial statements may be presented in a currency different from the entity’s functional55, 57 currency. If the presentation currency differs from the entity’s functional currency, that fact shall

be disclosed together with the functional currency and the reason for using a differentpresentation currency.

IAS 21.39, 42 There is a prescribed method for translating financial statements into a presentation currency.

6. IAS 1.38 When the presentation or classification of items in the financial statements is amended,comparative amounts shall be reclassified unless the reclassification is impracticable. Whencomparative amounts are reclassified, an entity shall disclose:

● nature of the reclassification;● the amount of each item or class of items that is reclassified; and● the reason for the reclassification.



Reference Notes to the financial statements1

IAS 1.8(e) Significant accounting policies2, 3

IAS 1.126(a)-(c) [Name of entity] (the “Fund”) is an open-ended investment fund incorporated as a limited liabilitycompany under the [name the relevant legislation] of [name of country] on [date]. The Fund’sredeemable shares are listed on the [name of city] stock exchange.

IAS 1.126(b) The objective of the Fund is to provide shareholders with above average returns over the mediumto long-term through both capital growth and income. The Fund aims to deliver this objective mainlyby investing in a highly diversified portfolio of Europe’s 1,000 largest listed companies, internationalderivatives and investment grade debt securities within strict risk management guidelines. In doingso, it applies techniques more fully defined in the Fund’s Offering Memorandum.

IAS 1.126(a), (b) The investment activities of the Fund are managed by XYZ Capital Limited (the “InvestmentManager”) and the administration of the Fund is delegated to ABC Fund Services Limited. Theregistered office of the Fund is [insert address of registered office].

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

(a) Statement of compliance

IAS 1.14 The financial statements have been prepared in accordance with International FinancialReporting Standards (IFRSs) and interpretations adopted by the International AccountingStandards Board (IASB).4

(b) Basis of preparation

IAS 1.46(e), (d) The financial statements are presented in euro and rounded to the nearest euro.5 They areprepared on a fair value basis for financial assets and financial liabilities at fair value through

IAS 1.108(a) profit or loss and derivative financial instruments. Other financial assets and financial liabilitiesare stated at amortised cost or redemption amount (redeemable shares).

IAS 1.113, 116 The preparation of financial statements in conformity with IFRSs requires management to makejudgements, estimates and assumptions that affect the application of policies and the reportedamounts of assets and liabilities, income and expense. The estimates and associatedassumptions are based on historical experience and various other factors that are believed to bereasonable under the circumstances, the results of which form the basis of making thejudgements about carrying values of assets and liabilities that are not readily apparent fromother sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions toaccounting estimates are recognised in the period in which the estimate is revised if the revisionaffects only that period, or in the period of the revision and future periods if the revision affectsboth current and future periods.

Judgements made by management in the application of IFRSs that have a significant effect onthe financial statements and estimates with a significant risk of material adjustment in the nextyear are discussed in note 9.

IAS 1.103(a) The accounting policies have been applied consistently by the Fund and are consistent withIAS 8.13 those used in the previous year, except for changes resulting from the amendments to IFRSs.

The comparative figures for 2004 have been adjusted or extended to conform to changes inpresentation in the 2005 financial statements as required by the amended IFRSs.6

IAS 8.14, 28 The Fund adopted the revised versions of IFRSs that were effective at 1 January 2005. Thechanges to the Fund’s accounting policies and their effect on the financial statements aredescribed in note (l) of the Significant accounting policies section.




1. As disclosed in the notes to the financial statements, the Fund is organised and operates asone segment; however, in certain circumstances funds may be required to provide segmentreporting under IFRSs (e.g., funds with separate portfolios and managers whose performanceis measured against different benchmarks).

2. IAS 21.8, 16, Monetary items include money held and assets and liabilities to be received or paid in fixed or39.AG83 determinable number of units of currency. This definition is narrower than the definition of a

financial instrument, which implies that not all financial instruments are monetary.Consequently, equity shares where the holder has no right to a fixed or determinable amount ofmoney (e.g., exchange-traded equity investments where the holder must find a buyer in themarket) are non-monetary items. Differences relating to foreign exchange movements arisingfrom reporting a monetary or non-monetary item are reported in the income statement.

IAS 21.52 The amount of foreign currency exchange differences included in net income or loss for theperiod must be disclosed except for those arising on financial instruments measured at fairvalue through profit or loss in accordance with IAS 39.

3. IAS 39.9, Financial instruments are classified into different categories for the purpose of their subsequent45-47 measurement. Financial assets can be classified into four categories depending on their

characteristics and the entity’s intentions at the date of purchase or origination:

● financial assets at fair value through profit or loss;● held-to-maturity;● loans and receivables; and● available-for-sale financial assets.

Financial liabilities are distinguished between financial liabilities at fair value through profit orloss and other liabilities.

Financial assets and financial liabilities at fair value through profit or loss comprise two sub-categories:

● instruments classified as held-for-trading; and● instruments designated by the entity at fair value through profit or loss upon initial recognition.

Derivative financial assets and liabilities are deemed always to be held-for-trading, unless theyare designated and effective hedging instruments.

IAS 39.50 Designation of a financial instrument at fair value through profit or loss is made at inception andis irrevocable. An entity shall not reclassify a financial instrument into or out of this categorywhile it is held or issued.

4. IAS 39.14, 38 All contractual rights or obligations under derivatives are recognised in the balance sheet as assetsor liabilities when an entity becomes a party to the contractual provisions of the instrument.



Reference Notes to the consolidated financial statements

Significant accounting policies (continued)(b) Basis of preparation (continued)

IAS 1.111 The Fund invests and distributes its shares on European markets. The Fund is organised andoperates as one segment (both in terms of business and geography). Consequently, no segmentreporting is provided in the Fund’s financial statements.1

IAS 1.111 (c) Foreign currency translation

IAS 21. 21, 23, Transactions in foreign currencies are translated at the foreign currency exchange rate ruling at25, 28, 30 the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are

translated to euro at the foreign currency closing exchange rate ruling at the balance sheet date.IAS 39.55(b) Foreign currency exchange differences arising on translation and realised gains and losses on

disposals or settlements of monetary assets and liabilities are recognised in the incomestatement. Non-monetary assets and liabilities denominated in foreign currencies that aremeasured at fair value are translated to euro at the foreign currency exchange rates ruling at thedates that the values were determined. Foreign currency exchange differences relating toinvestments at fair value through profit or loss and derivative financial instruments are includedin gains and losses on investments and net gain / (loss) on derivatives, respectively. All otherforeign currency exchange differences relating to monetary items, including cash and cashequivalents are presented separately in the income statement.2

IAS 1.111 (d) Financial instruments

IAS 32.60(b) (i) Classification3

IAS 39.9, 45 At 1 January 2005, the Fund adopted the amended IAS 32 and IAS 39 and designated all its debtIAS 32.60(a) and equity investments into the financial assets at fair value through profit or loss category. The

changes to the Fund’s accounting policies as a result of amendments to IAS 32 and IAS 39 and theireffect on the financial statements are described in note (l) of Significant accounting policies section.

The category of financial assets and financial liabilities at fair value through profit or loss comprises:

● Financial instruments held-for-trading. These include futures, forward contracts, options,interest rate swaps and liabilities from short sales of financial instruments. All derivatives ina net receivable position (positive fair value), as well as options purchased, are reported asfinancial assets held-for-trading. All derivatives in a net payable position (negative fair value),as well as options written, are reported as financial liabilities held-for-trading.4

● Financial instruments designated at fair value through profit or loss upon initial recognition.These include financial assets that are not held for trading purposes and which may be sold.These are investments in European exchange-traded debt and equity instruments, unlistedoff-shore open-ended investment funds, unlisted equity instruments and commercial paper.

Financial assets that are classified as loans and receivables include balances due from brokers,receivables from reverse repurchase agreements and accounts receivable.

IAS 32.60(a), 39.9 Financial liabilities that are not at fair value through profit or loss include balances due to brokers,payables under repurchase agreements, accounts payable and financial liabilities arising onredeemable shares.




1. IAS 39.38, Where financial assets are recognised at the date the entity commits to purchase the assets,39.AG53- this is referred to as trade date accounting. Where financial assets are recognised on the dateAG56 they are transferred, this is referred to as settlement date accounting.

In situations where there is a time frame established by a regulation or convention in themarket place for the delivery of financial assets, the entity may choose to use either trade dateor settlement date accounting. The method must be applied consistently for each category offinancial assets, for purchases and sales.

2. IAS 32.90, Fair values are presumed to be able to be estimated reliably for all financial instruments, with39.46, the possible exception of an unquoted equity instrument whose fair value cannot be reliably39.AG66- measured, or a derivative instrument that is linked to and must be settled by delivery of suchAG81 an unquoted equity instrument. These instruments are carried at cost, subject to review for

impairment. A number of detailed disclosures are required in such cases. It should be noted,however, that this would be rare for an investment fund to invest in assets for which it cannotdetermine a fair value.

3. IAS 32.92 The accounting policy notes should describe the methods and significant assumptions appliedin estimating fair values of financial assets and liabilities that are carried at fair value. Thisshould be disclosed separately for significant classes of financial assets and liabilities.

IAS 39.AG71, The best evidence of fair value normally is a quoted market price in an active market. ForAG72, BC100 assets held or liabilities to be issued, this is usually the current bid price. For assets to be

acquired or liabilities held, this is usually the current asking price. The use of mid-market pricesto establish the fair values for financial assets and liabilities is acceptable only when an entityhas assets and liabilities with offsetting market risks. An entity has offsetting market risks if ithas locked in its cash flows from the asset and liability and potentially could sell the matchedposition without incurring the bid-ask spread. In our view, the Fund does not have assets andliabilities with offsetting market risks.

4. IAS 39.AG74- Price / earnings ratios are only one type of calculation that can be used. Other methods includeAG82 for instance, price / cash flow ratios.




Significant accounting policies (continued)(ii) Recognition1

IAS 32.61, The Fund recognises financial assets and financial liabilities on the date it becomes a party to39.14, 38 the contractual provisions of the instrument.

A regular way purchase of financial assets is recognised using trade date accounting. From thisdate any gains and losses arising from changes in fair value of the financial assets or financialliabilities are recorded.

Financial liabilities are not recognised unless one of the parties has performed or the contract isa derivative contract not exempted from the scope of IAS 39.

(iii) Measurement

IAS 39.43, Financial instruments are measured initially at fair value (transaction price) plus, in case of a39.AG64 financial asset or financial liability not at fair value through profit or loss, transaction costs that

are directly attributable to the acquisition or issue of the financial asset or financial liability.Transaction costs on financial assets and financial liabilities at fair value through profit or loss areexpensed immediately, while on other financial instruments they are amortised.

IAS 39.46, 47, 53 Subsequent to initial recognition, all instruments classified at fair value through profit or loss aremeasured at fair value with changes in their fair value recognised in the income statement.2

IAS 39.46(a) Financial assets classified as loans and receivables are carried at amortised cost using theeffective interest rate method, less impairment losses, if any.

IAS 39.47 Financial liabilities, other than those at fair value through profit or loss, are measured atamortised cost using the effective interest rate. Financial liabilities arising from the redeemableshares issued by the Fund are carried at the redemption amount representing the investors’ rightto a residual interest in the Fund’s assets.

(iv) Fair value measurement principles3

IAS 39.AG69- The fair value of financial instruments is based on their quoted market prices at the balanceAG82 sheet date without any deduction for estimated future selling costs. Financial assets are priced

at current bid prices, while financial liabilities are priced at current asking prices.

IAS 39.AG74 If a quoted market price is not available on a recognised stock exchange or from a broker /dealer for non-exchange-traded financial instruments, the fair value of the instrument isestimated using valuation techniques, including use of recent arm’s length market transactions,reference to the current fair value of another instrument that is substantially the same,discounted cash flow techniques, option pricing models or any other valuation technique thatprovides a reliable estimate of prices obtained in actual market transactions.

IAS 39.AG74-AG82 Where discounted cash flow techniques are used, estimated future cash flows are based onmanagement’s best estimates and the discount rate used is a market rate at the balance sheetdate applicable for an instrument with similar terms and conditions. Where other pricing modelsare used, inputs are based on market data at the balance sheet date. Fair values for unquotedequity investments are estimated, if possible, using applicable price / earnings ratios for similarlisted companies adjusted to reflect the specific circumstances of the issuer.4




1. This policy is appropriate for investments in unlisted funds which are redeemable at net assetvalues as calculated by the managers of such funds. Otherwise, adjustments need to be made soas to arrive at the value acceptable under IAS 39, or a quoted price should be used, if available.

2. IAS 39.58, A review for impairment indicators will be necessary for all financial assets that are carried at63, 66 cost, amortised cost or at fair value with gains and losses recognised directly in equity. An

impairment review will not be necessary for financial instruments remeasured to fair valuewhere changes in fair value are recognised in the income statement.

IAS 39.64 Impairment is measured and recognised individually for financial assets that areindividually significant and individually or collectively for groups of similar assets that arenot individually significant.

3. IAS 39.63 The carrying amount of an asset may be reduced either directly or through the use of anallowance account. An allowance account is presented as a deduction from the carryingamount of the related asset in the balance sheet.

4. IAS 39.65, 66 The amount of the reversal of an impairment loss is limited to an amount that does not result inthe asset’s carrying amount exceeding the amortised cost at the date of reversal if the originalimpairment loss had not been recognised.

Impairment losses incurred on an unquoted equity instrument that is not carried at fair valuebecause its fair value cannot be reliably measured (or derivatives linked to and that must besettled by delivery of such an unquoted equity instrument) shall not be reversed.

5. IAS 32.60(b) While IAS 39 is silent as to the method that should be used to determine the profit or loss onderecognition of financial assets (specific identification, first-in first-out, average, or weightedaverage) it is recommended that the basis is applied consistently and disclosed in thefinancial statements.




Significant accounting policies (continued)(iv) Fair value measurement principles (continued)

The fair value of derivatives that are not exchange-traded is estimated at the amount that theFund would receive or pay to terminate the contract at the balance sheet date taking intoaccount current market conditions (volatility, appropriate yield curve) and the currentcreditworthiness of the counterparties. Specifically, the fair value of a forward contract isdetermined as a net present value of estimated future cash flows, discounted at appropriatemarket rates on the valuation date; and the fair value of an option contract is determined byapplying the Black-Scholes option valuation model.

Investments in other unlisted open-ended investment funds are recorded at the net asset valueper share as reported by the managers of such funds.1

(v) Impairment 2

IAS 39.58-66, Financial assets that are stated at cost or amortised cost are reviewed at each balance sheet39.AG84-AG92 date to determine whether there is objective evidence of impairment. If any such indication

exists, an impairment loss is recognised in the income statement as the difference between theasset’s carrying amount and the present value of estimated future cash flows discounted at thefinancial asset’s original effective interest rate.3

IAS 39.65 If in a subsequent period the amount of an impairment loss recognised on a financial assetcarried at amortised cost decreases and the decrease can be linked objectively to an eventoccurring after the write-down, the write-down is reversed through the income statement.4

IAS 39.16, 17 (vi) Derecognition

The Fund derecognises a financial asset when the contractual rights to the cash flows from thefinancial asset expire or it transfers the financial asset and the transfer qualifies for derecognitionin accordance with IAS 39.

IAS 32.60(b) The Fund uses the weighted average method to determine realised gains and losses on derecognition.5

IAS 39.39, A financial liability is derecognised when the obligation specified in the contract is discharged,39.AG57 cancelled or expired.




1. IAS 7.6, 7 In the context of an investment fund, short-term instruments such as commercial paper whichis held for investment purposes, rather than as a part of the cash management, usually will notqualify as cash equivalents.




Significant accounting policies (continued)IAS 1.111 (vii) Specific instruments

Cash and cash equivalentsIAS 7.6, 7 Cash comprises current deposits with banks. Cash equivalents are short-term highly liquid

investments that are readily convertible to known amounts of cash, are subject to aninsignificant risk of changes in value, and are held for the purpose of meeting short-term cashcommitments rather than for investment or other purposes.1

IAS 39.15-23, Repurchase and reverse repurchase transactions39.AG36-AG52 Securities sold subject to a simultaneous agreement to repurchase these securities at a certain

later date at a fixed price (repurchase agreements) are retained in the financial statements andare measured in accordance with their original measurement principles. The proceeds of the saleare reported as liabilities and are carried at amortised cost.

Securities purchased under agreements to resell (reverse repurchase agreements) are reportednot as purchases of the securities, but as receivables and are carried in the balance sheet atamortised cost.

IAS 18.30(a) Interest earned on reverse repurchase agreements and interest incurred on repurchaseagreements is recognised as interest income or interest expense, over the life of eachagreement using the effective interest method.

Securities sold short and associated securities borrowingIAS 39.AG15 Securities sold short are those positions where the Fund has sold a security that it does not own

in anticipation of a decline in the market value of the security and are classified as liabilitiesheld-for-trading. To enter a short sale, the Fund may need to borrow the security for delivery tothe buyer. On each day obligations to deliver securities borrowed by the Fund to fulfil its shortsale contracts are marked-to-market and an unrealised gain or loss is recorded in gains andlosses on investments in the income statement. While the transaction is open the Fund will alsoincur an expense for any dividends or interest that will be paid to the lender of the securities.




1. IAS 18.35(b), For interest-bearing financial instruments at fair value through profit or loss, a split between32.94(h)(i) interest income and the fair value change is not required by IFRSs. However, in our view, an

entity may choose to present interest income separately from other fair value changes, if it isthe entity’s accounting policy and the fact is disclosed in the notes to the financial statements.

2. IAS 18.30(c), Dividends received on equity instruments are reported as dividend income. Dividends are35(a) recognised when the shareholders’ right to receive payment is established. In the case of

quoted equity investments, the shareholders’ right to receive payment is normally establishedon the security’s ex-dividend date. At this date the fair value of such a security is adjusted byapproximately the dividend amount, and therefore recognition of a dividend on the ex-dividenddate will not result in double counting. In the case of unquoted equity investments, incomeshould be regarded as earned when the dividend is approved, or if approval is not required,when dividends are declared. When determining the fair value of such securities, care shouldbe taken not to include the amount of recognised dividends in the fair value estimate.

In some cases, the Fund may receive or choose to receive dividends in the form of additionalshares rather than cash. These may be referred to as scrip, stock or share dividends. In ourview, the substance of stock dividends with the cash alternative is the payment of a cashdividend, with reinvestment of the cash in additional shares. Therefore, in our view, thatdividend income should be recognised for the amount of the cash dividend alternative. Thecorresponding debit should be treated as an additional investment.

In other cases the Fund may receive bonus shares with no cash alternative. If all shareholdersreceive bonus shares in proportion to their shareholdings, the fair value of each shareholder’sinterest should be unaffected by the bonus issue.

If only certain shareholders are granted additional shares, the fair value of the interests of thoseshareholders will increase. In this case, in our view, it is most appropriate to measure theshares received at their fair value and recognise a corresponding amount of dividend income.




Significant accounting policies (continued)(e) Interest income

IAS 18.30(a), Interest income and expense is recognised in the income statement as it accrues, using the35(a)-(b) original effective interest rate of the instrument calculated at the acquisition or origination date.IAS 32.94(h)(i) Interest income includes the amortisation of any discount or premium, transaction costs or other

differences between the initial carrying amount of an interest-bearing instrument and its amountat maturity calculated on an effective interest rate basis.

Interest income on debt instruments at fair value through profit or loss is accrued using theoriginal effective interest rate and classified to the Interest income line item within the incomestatement.1 Interest income is recognised on a gross basis, including withholding tax, if any.

IAS 18.30(c), (f) Dividend income2

35(a), (b) Dividend income relating to exchange-traded equity investments is recognised in the incomestatement on the ex-dividend date.

In some cases, the Fund may receive or choose to receive dividends in the form of additionalshares rather than cash. In such cases the Fund recognises the divided income for the amountof the cash dividend alternative with the corresponding debit treated as an additional investment.

Income distributions from private equity investments and other investment funds are recognisedin the income statement as dividend income when declared.

(g) Expenses

IAS 1.78, 88 All expenses, including management fees and custodian fees, are recognised in the incomestatement on an accrual basis.

Included in other operating expenses are securities lending fees paid by the Fund, legal, advisoryand audit fees.

(h) Foreign exchange gains and losses

Foreign exchange gains and losses on financial assets and financial liabilities at fair valuethrough profit or loss are recognised together with other changes in the fair value. Included inthe profit or loss line item Net foreign exchange loss are net foreign exchange gains and losseson monetary financial assets and financial liabilities other than those classified at fair valuethrough profit or loss.

IAS 1.110 (i) Taxation

Under the current system of taxation in [inset name of the country of domicile] the Fund isexempt from paying taxes on income, profits or capital gains. The Fund has received anundertaking from [insert name of the relevant government body] of [insert name of the country ofdomicile] exempting it from tax for a period of [insert number of] years.

Dividend and interest income received by the Fund may be subject to withholding tax imposed inthe country of origin. Investment income is recorded gross of such taxes and the withholding taxis recognised as finance costs.




1. IAS 10.12, 13 Dividends proposed and approved by the board of directors subsequent to year end should notbe recognised as a liability at the balance sheet date. Dividends that are subject toshareholders’ approval also should not be recognised as liabilities. The amount of dividendsproposed or declared before the financial statements were authorised for issue but notrecognised as a distribution to holders of redeemable shares during the period should bedisclosed in accordance with IAS 1.

IAS 32.35, 36 Dividends on shares classified as liabilities (e.g., redeemable shares) are recognised in theincome statement as finance costs. Even if the legal form of the payment is a dividend, it isnot recorded directly in equity.

2. IAS 32.35 In certain jurisdictions a fund may be required to distribute all its net income from operations(before finance costs) less unrealised gains and losses to the holders of redeemable shares. Ifsuch obligation exists at the balance sheet date, distributions to holders of redeemable sharesshould be accrued at that date.

3. IAS 32.96, An entity shall apply the amended IAS 32 and IAS 39 for annual periods beginning on or after39.103, 104 1 January 2005. Earlier application is permitted. The amended IAS 32 and IAS 39 shall be

applied retrospectively with certain exceptions. The opening balance of retained earnings for theearliest prior period presented and all other comparative amounts shall be adjusted as if thestandard had always been in use, unless impracticable.

IAS 39.105- Exceptions from the retrospective application of the amended IAS 39 include:108

● an entity is permitted to designate a previously recognised financial asset or financialliability as a financial asset or financial liability at fair value through profit or loss oravailable-for-sale despite the requirement to make such designation upon initial recognition;

● an entity shall apply the derecognition requirements prospectively or retrospectively from adate of the entity’s choosing, if the information needed to apply IAS 39 to financial assetsand financial liabilities derecognised as a result of past transactions was obtained at thetime of initially accounting for those transactions; and

● an entity shall not adjust the carrying amount of non-financial assets and non-financialliabilities to exclude gains and losses related to cash flow hedges that were included inthe carrying amount before the beginning of the financial year in which the standard isfirst applied.




Significant accounting policies (continued)(j) Redeemable shares

IAS 32.16, All redeemable shares issued by the Fund provide the investors with the right to require18(b), 64 redemption for cash at the value proportionate to the investor’s share in the Fund’s net assets

at the redemption date. In accordance with IAS 32 such instruments give rise to a financialliability for the present value of the redemption amount. In accordance with the issueprospectus the Fund is contractually obliged to redeem shares at mid-market prices. Due tothe fact that in accordance with IAS 39 the best measure of fair value of a financial asset isusually the current bid price, the redeemable shares need to be adjusted to bid-market pricesto balance the balance sheet.

(k) Finance costs1 (dividends payable)2

IAS 32.35, 36 Dividends payable on redeemable shares are recognised in the income statement asfinance costs.

IAS 1.38, 8.28 (l) Changes in accounting policies3

In December 2003 and March 2004, the IASB approved amendments to a number of existingstandards as a result of the Improvements project and issued several new standards. The objectivesof the Improvements project were to reduce or eliminate alternatives, redundancies and conflictswithin the standards, to deal with some convergence issues and to make other improvements.

As part of the Improvements project IAS 32 and IAS 39 were significantly amended. As a result,the Fund changed some of its accounting policies as described below. The amendments becameeffective on 1 January 2005. Comparative information was adjusted in accordance with IAS 8Accounting Policies, Changes in Accounting Estimates and Errors to ensure the appropriateaccounting policies are applied within each period.

IAS 39.105 Reclassification of financial assets

The amended IAS 39 introduced a new category of financial instruments (i.e., financial assetsand financial liabilities at fair value through profit or loss). Under the amended IAS 39,designation of any financial assets or financial liability at fair value through profit or loss is madeupon initial recognition at the Fund’s discretion. The Fund shall not reclassify a financialinstrument into or out of the fair value through profit or loss category while it is held or issued.However, transitional provisions to IAS 39 allowed the Fund a one time opportunity to designatea previously recognised financial asset or financial liability as a financial asset or financialliability at fair value through profit or loss despite the requirement to make such designation uponinitial recognition.

At 1 January 2005, all debt and equity investments held by the Fund with the carrying amountand fair value of €18,382,832 were designated at fair value through profit or loss. In the financialstatements for the year ended 31 December 2004 these investments were classified as held-for-trading or available-for-sale (their carrying amounts and fair values amounted to €10,532,170 and€7,850,662, respectively).

At 31 December 2004, all investments classified in the available-for-sale category were carriedat fair value with fair value changes recognised directly in equity. Designation of all debt andequity investments at fair value through profit or loss at 1 January 2005 did not result in anyadjustment to their carrying amounts. However, an amount of €233,936 attributable to the netchange in the fair value of available-for-sale instruments was reclassified from the Fair valuereserve to the income statement and increased Gains on investments by €262,120 andTransaction costs by €28,184.




1. This listing of notes to the financial statements is to aid readers in finding notes andinformation. It is not required by IFRSs.

IAS 1.104 Notes to the financial statements should, as far as practicable, be presented in a systematicmanner. Usually this means in the order of items presented in the financial statements. Eachitem on the face of the balance sheet, income statement, statement of changes in net assetsattributable to holders of redeemable shares and statement of cash flows should be cross-referenced to the related notes.



Notes to the financial statements1

Page

1. Interest income 29

2. Gains and losses on debt and equity investments 29

3. Share capital 31

4. Cash and cash equivalents 33

5. Balances due from / to brokers, receivables from reverse repurchase agreements and payablesunder repurchase agreements 33

6. Financial instruments and associated risks 35

7. Related parties 51

8. Fair value information 53

9. Accounting estimates and judgements 55

10. Value at risk 55




1. IAS 1.86, 87 Neither IAS 1 nor IAS 32 requires disclosure as presented in note 2. However, when items ofincome and expense are material, their nature and amount shall be disclosed separately.Alternative methods of disclosure are possible.



Reference Notes to the financial statements

IAS 18.30(a), 1. Interest income35(b)(iii) All amounts stated in euro 2005 2004

IAS 32.94(h)(i) Interest income arises from:Cash and cash equivalents 2,106 35,315Receivables from reverse repurchase agreements 237,173 211,477Commercial paper 235,067 142,744Investments in other debt securities 128,594 40,446

602,940 429,982

Interest income on receivables from reverse repurchase agreements represents interestearned on securities purchased under agreement to sell these securities at a future date, at anagreed price.

IAS 1.35 2. Gains and losses on debt and equity investments1

All amounts stated in euro 2005 2004

Net gains and losses on debt investments 118,060 73,996Net gains and losses on equity investments 3,004,223 2,344,039Net gains and losses on debt and equity investments 3,122,283 2,418,035

Realised gains 353,455 119,716Unrealised gains 2,982,374 2,432,530Total gains on investments 3,335,829 2,552,246

Realised losses (91,379) (56,019)Unrealised losses (122,167) (78,192)Total losses on investments (213,546) (134,211)




1. The illustrative Fund does not issue equity shares as defined in IAS 32. In some jurisdictions itmay be a legal requirement for a fund to issue a certain minimum amount of equity shares.




3. Share capital1

IAS 1.76, 77 Authorised share capital

All amounts stated in euro Number of shares 2005 2004

Redeemable shares of €0.01 each 4,900,000 49,000 49,00049,000 49,000

IAS 1.76, 77 Issued and fully paid

Number of shares 2005 2004

Balance at 1 January 260,531 172,900Issue of redeemable shares during the year 56,200 141,831Redemption of redeemable shares during the year (57,519) (54,200)Balance at 31 December 259,212 260,531

IAS 1.76, 77 The rights attaching to the redeemable share are as follows:

The initial offering of redeemable shares was at a price of €100 per share.

Redeemable shares may be redeemed on the last business day of each month or such otherdate or dates as the board of directors shall from time to time determine (Valuation Day) at netasset value per share based on mid-market prices. The shareholder must request suchredemption at least 14 days prior to the last business day of each month or such other day asthe directors may determine.

Redeemable shares carry no right to receive notice of, attend or vote at any general meeting ofthe Fund. The holders are entitled to receive all dividends declared and paid by the Fund. Uponwinding up, the holders are entitled to a return of capital based on the net asset value per shareof the Fund.

Distributions

IAS 10.12, 13 An additional dividend of €54,655 was declared (2004: nil) by the board of directors on [date]2006 in respect of 2005.




1. IAS 39 IG Cash pledged as collateral is derecognised from cash and cash equivalents. The amount of theD.1.1. collateral is recognised as a receivable.

2. IAS 32.94(a) An entity may have either transferred a financial asset or entered into the type of transactiondescribed in IAS 39.19 in such a way that the arrangement does not qualify as a transfer of afinancial asset (e.g., securitisation or repurchase agreement). If the entity either continues torecognise all of the asset or continues to recognise the asset to the extent of the entity’scontinuing involvement it shall disclose for each class of financial asset:

● the nature of the assets;● the nature of the risks and rewards of ownership to which the entity remains exposed;● when the entity continues to recognise all of the asset, the carrying amounts of the asset

and of the associated liability; and● when the entity continues to recognise the asset to the extent of its continuing involvement,

the total amount of the asset, the amount of the asset that the entity continues to recogniseand the carrying amount of the associated liability.

IAS 32.94(b) An entity shall disclose the carrying amount of financial assets pledged as collateral forliabilities, contingent liabilities and any material terms and conditions relating to assets pledgedas collateral.

IAS 32.94(c) When an entity has accepted collateral that it is permitted to sell or repledge in the absence ofdefault by the owner of the collateral, it shall disclose:

● the fair value of the collateral accepted (financial and non-financial assets);● the fair value of any such collateral sold or repledged and whether the entity has an

obligation to return it; and● any material terms and conditions associated with its use of this collateral.

3. IAS 39 IG A margin account is not considered to be an initial net investment. Rather, margin accounts areB.10 funds required to be deposited as collateral with a broker in order to have transactions executed

by that broker.




IAS 7.45 4. Cash and cash equivalents1


Current deposits with banks 51,368 70,73051,368 70,730

The Fund did not have any cash equivalents at the balance sheet date.

5. Balances due from / to brokers, receivables from reverse repurchase agreementsand payables under repurchase agreements2


Balances due from brokers

IAS 39 IG D.1.1. Margin accounts1

1,849,431 2,332,332IAS 32.94(b) Cash collateral for borrowed securities

12,563,342 2,385,218

IAS 39.38 Sales awaiting settlement 3,706,004 7,903,3738,118,777 12,620,923

Balances due to brokers

IAS 39.38 Purchases awaiting settlement 1,179,844 1,365,3741,179,844 1,365,374

IAS 32.94(b) Margin accounts represent cash deposits with brokers, transferred as collateral against openfutures and forward contracts.3 The Fund also transferred cash as collateral for transactionsinvolving borrowed securities.

IAS 39.38 In accordance with the Fund’s policy of trade date accounting for regular way sale and purchasetransactions, sales / purchases awaiting settlement represent amounts receivable / payable forsecurities sold / purchased, but not yet settled.

Repurchase agreements


Receivables from reverse repurchase agreements 4,743,460 3,990,133Payables under repurchase agreements 2,563,267 2,234,540

IAS 32.94(c) Under collateralised reverse repurchase agreements the Fund obtains securities on terms whichpermit it to repledge or resell securities to others. At 31 December 2005, the Fund held securities

IAS 32.63(g) with fair value of €4,999,354 (2004: €3,353,232) on such terms. Of these €154,254 (2004:€165,786) have been pledged or otherwise transferred to satisfy commitments under short saletransactions. The Fund has an obligation to return the securities to its counterparties.

Securities sold under repurchase agreements are included in investments classified at fair valuethrough profit or loss. The fair value of these securities at 31 December 2005 was €2,585,435(2004: €2,342,564).

All repurchase and reverse repurchase agreements mature within three to six monthsfrom inception.




1. IAS 32.60(a) For each class of financial asset, financial liability and equity instrument information about theextent and nature of the financial instruments, including significant terms and conditions,should be disclosed.

IAS 32.51 The purpose of the disclosures in respect of financial instruments is to provide information that will:

● enhance an understanding of the significance of financial instruments to the entity’sfinancial performance, financial position and cash flows; and

● assist in assessing the amounts, timing and certainty of future cash flows associated withthe instruments.

2. IAS 32.53-59 The risk management disclosure requirements in IAS 32 are expressed in general terms. Thestandard does not prescribe either the format of the information required to be disclosed or itslocation in the financial statements. Disclosures may include a combination of narrativedescriptions and specific quantified data, as appropriate to the nature of the financialinstruments. Balance and judgement is required in determining the level of disclosure as towhether single contracts are individually material and require separate disclosure or whethergiving aggregate information on similar classes of financial instruments is more meaningful. Inaddition, IAS 32 requires specific disclosures with regard to transactions for which hedgeaccounting has been applied and specific quantitative information.

These Illustrative Financial Statements show the areas that should, in general, be dealt with.Each entity should expand on the level of detail illustrated in their financial statements based onthe specific risk areas in its environment and the nature of its risk management function.Information should also be provided about risk management objectives and policies forcontrolling the risks associated with financial instruments.

IAS 32.52 Disclosure requirements refer directly to market risk (including interest rate risk, foreigncurrency risk and price risk), credit risk, liquidity (funding) risk and cash flow interest rate riskdisclosures. While the standard only lists specific disclosure requirements in respect of interestrate risk and credit risk, these requirements are sufficiently broad to encompass all risks.Therefore, in our view, appropriate disclosures regarding all financial risks should be provided.

IFRS 4.A IFRS 4 Insurance Contracts provides a definition of financial risk (to distinguish financial riskfrom insurance risk). Financial risk is the risk of a possible future change in at least one of: aspecific interest rate, financial instrument price, commodity price, foreign exchange rate, indexof prices or rates, credit rating or credit index. Financial risk also includes risk of change inother variables, provided that a non-financial variable is not specific to a party to the contract.

3. IAS 32.56, 57 The risk management disclosures usually will be preceded by a general discussion of theentity’s activities, structure and financing. This discussion typically will consider the financialrisk profile of the entity as a whole describing its financial risk management objectives andpolicies. In addition, in the financial review, management generally provides additionalcommentary on the financial information included in the risk management section(e.g., explaining reasons for changes in credit risk concentrations, maturity profiles etc.).




IAS 32.60 6. Financial instruments1 and associated risks2

The Fund maintains positions in a variety of derivative and non-derivative financial instrumentsas dictated by its investment management strategy. The Fund’s investment portfolio comprisesquoted and non-quoted equity investments and debt investments, and investments in otherfunds that it intends to hold for an indefinite period of time.

The Fund’s investing activities expose it to various types of risk that are associated with thefinancial instruments and markets in which it invests. The most important types of financial riskto which the Fund is exposed are market risk, credit risk and liquidity risk.

Asset allocation is determined by the Fund’s Investment Manager who manages the distributionof the assets to achieve the investment objectives. Divergence from target asset allocations andthe composition of the portfolio is monitored by the Fund’s Investment Manager.

IAS 32.56 The nature and extent of the financial instruments outstanding at the balance sheet date and therisk management policies employed by the Fund are discussed below.

A. Market risk

Market risk embodies the potential for both loss and gains and includes currency risk, interestrate risk and price risk.

The Fund’s strategy on the management of investment risk is driven by the Fund’s investmentobjective. [Insert description of the investment objective as outlined in the Fund’s prospectus].The Fund’s market risk is managed on a daily basis by the Investment Manager in accordancewith policies and procedures in place. [Insert specific risk management policies and investmentguidelines as outlined in the Fund’s prospectus]. The Fund’s overall market positions aremonitored on a [monthly, quarterly, other] basis by the board of directors.3

Details of the Fund’s investment portfolio at the balance sheet date are disclosed in the scheduleof investments included in Appendix 1. All individual investments in debt and equity instrumentsare disclosed separately. Details of the nature and terms of derivative financial instrumentsoutstanding at the balance sheet date are set out in note 6D.




1. IAS 32.67 For each class of financial assets and liabilities the entity should disclose information about itsexposure to interest rate risk, including:

● contractual repricing or maturity dates, whichever is earlier; and● effective interest rates, when applicable.

IAS 32.71 As part of this disclosure a distinction should be made between instruments that are:

● exposed to interest rate price risk such as fixed rate instruments;● exposed to interest rate cash flow risk such as floating rate instruments or instruments with

an interest rate that is reset as market rates change; and● not directly exposed to interest rate risk, such as some investments in equity instruments.

IAS 32.72 The effective interest rate or weighted average effective interest rate is only required to bedisclosed when applicable. The effective interest rate requirement applies to debentures, notesand similar monetary financial instruments involving future payments that create a return to theholders and a cost to the issuer that reflects the time value of money. The requirement does notapply to financial instruments such as non-monetary instruments and derivatives that do notbear a determinable effective interest rate.

The effective interest rates disclosed for floating rate instruments are the rates at the balancesheet date.

IAS 32.74 For a fund with significant investments in interest-bearing assets or significant interest-bearingliabilities, the exposure to interest rate risk should be presented in tabular form showing theeffective interest rate as well as the periods in which the original asset or liability reprices.




6. Financial instruments and associated risks (continued)A. Market risk (continued)

IAS 32.52 Currency risk

The Fund may invest in financial instruments and enter into transactions denominated incurrencies other than its functional currency. Consequently, the Fund is exposed to risks that theexchange rate of its currency relative to other foreign currencies may change in a manner thathas an adverse affect on the value of that portion of the Fund’s assets or liabilities denominatedin currencies other than the euro.

The Fund’s total net exposure to fluctuations in foreign currency exchange rates at the balancesheet date was as follows:

Fair value Fair value

IAS 32.60, 63(h) All amounts stated in euro 2005 2004

Assets

Pound Sterling 1,784,474 1,439,485Danish Krone 1,249,535 949,541Norwegian Krone 885,943 772,389Swiss Franc 429,733 532,855

4,349,685 3,694,270

Liabilities

Pound Sterling 1,325,675 1,167,7651,325,675 1,167,765

IAS 32.67 Interest rate risk1

The majority of the Fund’s financial assets are non-interest-bearing. Interest-bearing financialassets and interest-bearing financial liabilities mature or reprice in the short-term, no longer thantwelve months. As a result, the Fund is subject to limited exposure to fair value interest rate riskdue to fluctuations in the prevailing levels of market interest rates. Any excess cash and cashequivalents of the Fund are invested in short-term commercial paper or reverse repurchaseagreements with the term to maturity of up to three or six months. Investments in debtsecurities are fixed rate instruments with the term to maturity of up to twelve months. Thematurity dates of the fixed income instruments correspond to their repricing dates.

The table below summarises weighted average effective interest rates for the interest-bearingfinancial instruments:

2005 2004

% %

Assets

Cash and cash equivalents 0.2 0.2Receivables from reverse repurchase agreements 3.9 3.3Investments in commercial paper 4.2 3.7Investments in other debt securities 4.9 4.1

Liabilities

Payables under repurchase agreements 3.8 3.0




1. IAS 32.83-85 Concentrations of credit risk are disclosed where they are not apparent from other disclosuresand may result in significant exposure to loss in the event of default by the other parties.

Concentrations of credit risk may arise from exposure to a single debtor or group of debtorshaving a similar characteristic. Disclosure of concentrations of credit risk include adescription of the shared characteristic that identifies each concentration and the maximumcredit risk exposure associated with all recognised and unrecognised financial assets sharingthat characteristic.

2. IAS 32.50, 81 A master netting agreement generally does not provide a basis for offsetting unless both of thecriteria in IAS 32.42 are fulfilled:

● existence of a legally enforceable right to set off; and● intention to either settle on a net basis, or to realise the asset and settle the liability simultaneously.




6. Financial instruments and associated risks (continued)A. Market risk (continued)

Price risk

Price risk is the risk that value of the instrument will fluctuate as a result of changes in marketprices, whether caused by factors specific to an individual investment, its issuer or all factorsaffecting all instruments traded in the market.

As the majority of the Fund’s financial instruments are carried at fair value with fair valuechanges recognised in the income statement, all changes in market conditions will directly affectNet investment income.

Price risk is mitigated by the Fund’s Investment Manager by constructing a diversified portfolioof instruments traded on various markets. In addition, price risk may be hedged using derivativefinancial instruments such as options or futures.

B. Credit risk1

Credit risk is the risk that a counterparty to a financial instrument will fail to discharge anobligation or commitment that it has entered into with the Fund. The Fund’s Investment Managerhas a credit policy in place and the exposure to credit risk is monitored on an ongoing basis.

At 31 December 2005, the following financial assets were exposed to credit risk: investments indebt instruments, receivables from reverse repurchase agreements, balances due from brokers,derivative financial assets and other receivables. Total carrying amount of financial assetsexposed to credit risk amounted to €21,487,823 (2004: €23,603,182).

Credit risk arising on debt instruments is mitigated by investing in rated instruments orinstruments issued by rated counterparties of credit ratings of at least “AA” or better asdetermined by Standard and Poor’s. The Fund receives a monthly rating update, which isreviewed accordingly. Credit risk arising on non-rated investments is monitored through a regularanalysis of financial statements of the respective issuers.

The Fund enters into collateralised reverse repurchase agreements that may result in creditexposure in the event that the counterparty to the transaction is unable to fulfil its contractualobligations. The Fund minimises its credit risk by monitoring counterparty creditworthiness andrequiring additional collateral to be deposited with the Fund.

IAS 32.50, 76, Transactions involving derivative financial instruments are usually with counterparties with80, 81 whom the Fund signed master netting agreements. Master netting agreements provide for the

net settlement of contracts with the same counterparty in the event of default. The impact of themaster netting agreements is to reduce credit risk from the amounts shown as derivativefinancial assets on the balance sheet by €451,355 (2004: €299,644). The credit risk associatedwith derivative financial assets subject to a master netting arrangement is eliminated only to theextent that financial liabilities due to the same counterparty will be settled after the assets arerealised. The exposure to credit risk reduced by master netting arrangements may changesignificantly within short period of time as a result of transactions subject to the arrangement.The corresponding assets and liabilities have not been offset on balance sheet.2

Credit risk arising on transactions with brokers relates to transactions awaiting settlement andcash collateral provided against open contracts. Risk relating to unsettled transactions isconsidered small due to the short settlement period involved.




1. IAS 32.63 When derivative financial instruments held or issued by the entity, either individually or as aclass, create a potentially significant exposure to risks, specific information to illustrate theterms and conditions should be disclosed. Following the guidance of IAS 32.63 in theseIllustrative Financial Statements, the following has been disclosed:

● maturities based on the remaining period at the balance sheet date to the contractualmaturity date;

● the principal / notional amount (i.e., the amount on which future payments are based); and● the fair values (i.e., the amount reflected in the balance sheet as an asset or liability).

The disclosure of average notional amounts and average fair values of financial instruments isnot required by IAS 32. Directors may wish to enhance the disclosure by including average orhighest and lowest notional amounts and fair values.




6. Financial instruments and associated risks (continued)B. Credit risk (continued)

IAS 32.76(a) The carrying amounts of financial assets best represent the maximum credit risk exposure atthe balance sheet date. This relates also to financial assets carried at amortised cost, as theyhave a short-term to maturity.

IAS 32.76(b) There were no significant concentrations of credit risk to counterparties at 31 December 2005.No individual investment exceeded five percent of the net assets attributable to the holders ofredeemable shares either at 31 December 2005 or 31 December 2004.

IAS 32.84 The Fund’s financial assets exposed to credit risk were concentrated in the following industries:

2005 2004

% %

Banks / financial services 71.8 77.5Automotive manufacturing 5.1 4.3Information technology 4.5 4.0Pharmaceutical 3.2 3.1Biotechnology 2.7 2.2Healthcare - 1.2Other 12.7 7.7

100.0 100.0

IAS 32.52, 60(a) C. Liquidity risk

The Fund’s constitution provides for the [daily / monthly / quarterly] creation and cancellation ofshares and it is therefore exposed to the liquidity risk of meeting shareholder redemptions atany time.

The Fund’s financial instruments include investments in unlisted equity investments andderivative contracts traded over-the-counter, which are not traded in an organised public marketand which generally may be illiquid. As a result, the Fund may not be able to liquidate quicklysome of its investments in these instruments at an amount close to its fair value in order tomeet its liquidity requirements, or to respond to specific events such as a deterioration in thecredit worthiness of any particular issuer.

The Fund’s listed securities are considered to be readily realisable as they are all listed on majorEuropean stock exchanges.

D. Specific instruments

IAS 32.52, 60(a) (i) Securities sold short and associated securities borrowing

When the Fund sells securities which it does not possess it has to cover this short position byacquiring the securities at a later date and is therefore exposed to price risk of those securitiessold short. The sales agreement is usually settled by delivering borrowed securities. However,the Fund is required to return those borrowed securities at a later date.

IAS 32.60(a), (ii) Derivatives

63, 86 At 31 December 2005 and 2004, the Fund’s holdings in derivatives translated into euro were asspecified in the tables on the following pages.1



This page has been intentionally left blank.



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6. Financial instruments and associated risks (continued)D. Specific instruments (continued)

Futures and forward contracts

Futures and forward contracts are commitments either to purchase or sell a designated financialinstrument, currency, commodity or an index at a specified future date for a specified price andmay be settled in cash or another financial asset. Futures are standardised exchange-tradedcontracts whereas forwards are individually traded over-the-counter contracts. Initial marginrequirements for futures are met in cash or other instruments, and changes in the future contractvalues are settled daily. Futures contracts have little credit risk because the counterparties arefutures exchanges. Forward contracts result in credit exposure to the counterparty.

Futures and forward contracts both result in exposure to market risk based on changes in marketprices relative to contracted amounts. Market risks arise due to the possible movement inforeign currency exchange rates, indices, and securities’ values underlying these instruments. Inaddition, because of the low margin deposits normally required in relation to notional contractsizes, a high degree of leverage may be typical of a futures or forward trading account. As aresult, a relatively small price movement in an underlying of a futures or forward contract mayresult in substantial losses to the Fund. While forward contracts are generally subject to liquidityrisk, futures trading may also be illiquid. Certain futures exchanges do not permit trading inparticular futures contracts at prices that represent a fluctuation in price during a single day’strading beyond certain set limits. If prices fluctuate during a single day’s trading beyond thoselimits, the Fund could be prevented from promptly liquidating unfavourable positions and thuscould be subject to substantial losses.

Notional amounts are the underlying reference amounts to stock exchange indices, equities andforeign currencies upon which the fair value of the futures, and forward contracts traded by theFund are based. While notional amounts do not represent the current fair value and are notnecessarily indicative of the future cash flows of the Fund’s futures and forward contracts, theunderlying price changes in relation to the variables specified by the notional amounts affect thefair value of these derivative financial instruments.







6. Financial instruments and associated risks (continued)D. Specific instruments (continued)

Options

Options are derivative financial instruments that give the buyer, in exchange for a premiumpayment, the right, but not the obligation, to either purchase from (call option) or sell to (putoption) the writer a specified underlying instrument at a specified price on or before a specifieddate. The Fund enters into exchange-traded and over-the-counter option contracts to meet therequirements of its risk management and trading activities.

The Fund monitors its positions to reduce the risk of potential loss due to changes in marketvalue or failure of counterparties to perform. For exchange-traded option contracts, the stockexchange acts as the counterparty to specific transactions and therefore, bears the risk ofdelivery to and from counterparties of specific positions. Over-the-counter option contracts arenot guaranteed by any regulated stock exchange. The Fund, as a buyer of over-the-counteroptions, is subject to credit risk since the counterparty is obliged to make payments under theterms of the contract if the Fund exercises the option. As the writer of over-the-counteroptions, the Fund is subject to market risk only in so far as it is obliged to make payments ifthe option is exercised.

The risk in writing a call option is that the Fund may incur a loss if the market price of thesecurity increases and the option is exercised. The risk in writing a put option is that the Fundmay incur a loss if the market price of the security decreases and the option is exercised. Therisk in buying an option is that the Fund pays a premium whether or not the option is exercised.The Fund also has the additional risk of not being able to enter into a closing transaction if aliquid secondary market does not exist.

The Fund’s risk of loss is not represented by the notional contract amounts. Contract or notionalamounts reflect the involvement of the Fund in the financial instruments, risks arise frompossible adverse movements in foreign currency exchange rates and the prices of the underlyingsecurities.




1. IAS 24.9, 11 A party is related to an entity if:

(a) directly, or indirectly through one or more intermediaries, the party:● controls, is controlled by, or is under common control with, the entity (this includes

parents, subsidiaries and fellow subsidiaries):● has an interest in the entity that gives it significant influence over the entity; or● has joint control over the entity;

(b) the party is an associate of the entity;(c) the party is a joint venture in which the entity is a venturer;(d) the party is a member of the key management personnel of the entity or its parent;(e) the party is a close member of the family of any individual referred to in (a) or (d);(f) the party is an entity that is controlled, jointly controlled or significantly influenced by, or for

which significant voting power in such entity resides with, directly or indirectly, anyindividual referred to in (d) or (e); or

(g) the party is a post-employment benefit plan for the benefit of employees of the entity or ofany entity that is a related party of the entity.

IAS 24.12 Relationships between parents and subsidiaries shall be disclosed irrespective of whether therehave been transactions between those related parties.

IAS 24.17, 18 If there have been transactions, an entity shall disclose the nature of the relationship as well asinformation about the transactions including: the amount of the transactions and the amount ofthe outstanding balances; terms and conditions; details of any guarantees given or received;provisions for doubtful debts related to the amount of outstanding balances; and the expenserecognised during the period in respect of bad or doubtful debts.

These disclosures shall be made separately for each of the following categories:

● the parent;● entities with joint control or significant influence over the entity;● subsidiaries;● associates;● joint ventures in which the entity is a venturer;● key management personnel of the fund or its parent; and● other related parties.

IAS 24.9, 16 In addition, to the disclosures required above, an entity should disclose key managementpersonnel compensation in total for each of the following categories:

● short-term employee benefits;● post-employment benefits;● other long-term benefits;● termination benefits; and● share-based payments.

Key management personnel are those persons having the authority and responsibility for planning,directing and controlling the activities of the entity, directly or indirectly, including non-executive directors.

Usually the fund’s prospectus will specify a broad investment strategy; however, the day-to-day investment decisions are made by the investment manager, who, therefore, is considereda related party. Other related parties include the fund administrator and custodian ofinvestments (these entities are sometimes related to the investment manager), and directors.

2. IAS 24.17(a) IAS 24 Related Party Disclosures requirement to disclose the amounts of the transactionsbetween related parties is satisfied by the disclosure on the face of the income statement.




IAS 24.9, 11, 7. Related parties1, 2

12, 16-18 Investment manager

The Fund appointed [name of entity], an investment management company incorporated in[name of country], to implement the investment strategy as specified in the prospectus and toprovide administrative services. Under the Investment Management Agreement, the InvestmentManager receives a management fee monthly in arrears at an annual rate of 1.5 percent of thenet assets attributable to holders of redeemable shares on each valuation day as defined in theOffering Memorandum. Included in accounts payable and accrued expenses at 31 December2005 are investment management fees payable of €48,962 (2004: €46,955). The Fund paid theadministration fee to the Investment Manager as disclosed in the income statement.

Custodian

[Name of custodian bank], a subsidiary of the Investment Manager, provides custodian servicesfor a fee as disclosed in the income statement.

Directors’ fee

The total directors’ fee is disclosed in the income statement. The listing of the members of theboard of directors is shown on page [page number] of the annual report.

Shareholding of related parties

Parties related to the Investment Manager held 20,000 redeemable shares at 31 December 2005(2004: 20,000 shares).




1. IAS 32.86, For each class of financial assets and liabilities an entity shall disclose the fair value of the90, 91A class in a way that permits it to be compared with the corresponding carrying amount in the

balance sheet except:

● investments in unquoted equity instruments or derivatives linked to such equity instrumentswhich are measured at cost because their fair value cannot be measured reliably; and

● financial assets and financial liabilities containing a discretionary participation feature, if anentity cannot reliably measure the fair value of that feature.

If the fair value is not disclosed in the financial statements because it cannot be reliablymeasured, IAS 32 requires disclosures of the information to assist users of the financialstatements in making their own judgements about the extent of possible differences betweencarrying amount and the fair value. The disclosures required include:

● the fact that fair value cannot be reliably measured together with a description of thefinancial instrument or contract;

● the carrying amount; and● an explanation of why fair value cannot be measured reliably and, if possible, the range of

estimates within which fair value is highly likely to lie.

2. IAS 32.92 An entity shall disclose:

● the methods and significant assumptions applied in determining fair values for significantclasses of financial instruments;

● whether fair values of financial instruments are determined directly, in full or in part, by referenceto published price quotations in an active market or are estimates using valuation techniques;

● whether the financial statements include financial instruments measured at fair value thatare determined in full or in part using a valuation technique based on assumptions that arenot supported by observable market prices or rates, and if changing any such assumption toa reasonably possible alternative would result in a significantly different fair value, togetherwith the effect on the fair value of a range of possible alternative assumptions; and

● the total amount of the change in fair value estimated using a valuation technique that wasrecognised in profit or loss during the period.




8. Fair value informationMany of the Fund’s financial instruments are carried at fair value on the balance sheet. Usuallythe fair value of the financial instruments can be reliably determined within a reasonable range ofestimates. For certain other financial instruments, including amounts due from / to brokers,receivables from reverse repurchase agreements and payables under repurchase agreements,accounts payable and accrued expenses, the carrying amounts approximate fair value due tothe immediate or short-term nature of these financial instruments.

During the year ended 31 December 2005, the Fund acquired 2.5 percent of the outstandingcommon 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 Fundpaid €500,000 for its investments. As [name of entity] is not listed on any stock exchange, aquoted market price is not available. The Investment Manager estimates acquisition cost toapproximate fair value at 31 December 2005 as the investment was acquired in the final quarterof 2005.1, 2

The carrying amounts of all the Fund’s financial assets and financial liabilities at the balancesheet date approximated their fair values.

IAS 32.92 Estimation of fair values

IAS 32.92(a) The major methods and assumptions used in estimating the fair values of financial instrumentswere disclosed in note (d) of the Significant accounting policies section.

IAS 32.92(b), (c) At 31 December 2005, the carrying amounts of debt and equity investments which fair valueswere determined directly, in full or in part, by reference to published price quotations amounted to€20,594,635 (2004: €17,257,885). The carrying amounts of debt and equity investments for whichfair values were determined using valuation techniques amounted to €6,482,374 (2004:€1,124,947).

At 31 December 2005, the carrying amounts of derivative financial assets and derivativefinancial liabilities for which fair values were determined directly, in full or in part, by reference topublished price quotations amounted to €76,949 and €nil, respectively (2004: €28,935 and€8,315, respectively). The carrying amounts of derivative financial assets and derivative financialliabilities for which fair values were determined using valuation techniques amounted to €467,842and €2,836,820, respectively (2004: €406,268 and €1,225,926, respectively).

Interest rates used for determining fair value

The Fund used the government yield curve plus an adequate constant credit spread todiscount financial instruments to determine fair value. At balance sheet date the interestrates used were as follows:

2005 2004

Debt instruments 3.6% - 5.5% 3.0% - 4.4%Derivatives 2.5% - 4.5% 2.8% - 4.0%Receivables 3.5% - 4.3% 3.0% - 4.1%

IAS 32.92(d) The total amount of the change in fair value estimated using a valuation technique that wasrecognised in profit or loss for the year ended 31 December 2005 amounted to a €523,317 netgain (2004: €51,982 net gain).




1. IAS 8.32 An accounting estimate may be considered critical if:

● the estimate requires management to make assumptions about matters that were highlyuncertain at the time the estimate was made;

● different estimates reasonably could have been used; or● changes in the estimate that would have a material impact on the entity’s financial condition

or results of operations are reasonably likely to occur from period to period.

The following are examples of areas where additionally critical accounting estimates andassumptions may be required:

● bad debts; or● fair value of financial instruments.

2. Value at risk (VAR) is the risk of loss arising from adverse changes in market rates and prices,such as interest rates, foreign currency exchange rates, commodity prices, and other relevantmarket or price changes. If VAR is considered useful information for users of financialstatements, it could be presented within the information contained in note 6 of these IllustrativeFinancial Statements; however, as it is not required disclosure under IFRSs, it has beenpresented as the last note.

3. As an alternative to average VAR amounts, highest and lowest VAR amounts might be disclosed.




9. Accounting estimates and judgements1

IAS 1.116 Key sources of estimation uncertainty

Fair values of financial instruments

As indicated in note 8 many of the Fund’s financial instruments are measured at fair value on thebalance sheet and it is usually possible to determine their fair values within a reasonable rangeof estimates.

For the majority of the Fund’s financial instruments, quoted market prices are readily available.However, certain financial instruments, for example, over-the-counter derivatives or unquotedsecurities are fair valued using valuation techniques, including reference to the current fair valuesof other instruments that are substantially the same (subject to the appropriate adjustments).

Fair value estimates are made at a specific point in time, based on market conditions andinformation about the financial instrument. These estimates are subjective in nature and involveuncertainties and matters of significant judgement (e.g., interest rates, volatility, estimated cashflows etc.) and therefore, cannot be determined with precision.

10. Value at risk2

The market risk of the Fund’s financial asset and liability positions is monitored by theInvestment Manager using value at risk (VAR) analysis and other methods. VAR represents thepotential losses from adverse changes in market factors for a specified time period andconfidence level. The Investment Manager estimates VAR using simulations of a large number ofpossible market scenarios. The overall market risk for any activity which the Fund can thenengage in must be approved by a senior risk management committee through a VAR limit.

The table below indicates the VAR of the Fund’s financial instruments, measured as the potentialone-day loss in value from adverse changes in equity prices, interest rates and foreign currencyexchange rates, with a 97.5 percent confidence level. Calculated on this basis, the tableindicates that the net value of the Fund’s financial assets and liabilities could be expected tochange by more than the stated amount on only five days out of 200, in response to either equityprice, interest rate or foreign currency exchange rate changes.

2005 2005 2004 2004

All amounts stated in euro Year end Average3

Year end Average3

Equity portfolio VAR XX XX XX XXInterest rate VAR XX XX XX XXForeign currency exchange rate VAR XX XX XX XX

At 31 December 2005, the Fund’s overall market VAR was €XX thousand (2004: €XX thousand).These amounts are less than the totals of the separate VAR, due to correlations between theinstruments. During the year ended 31 December 2005, the average daily change in the net valueof the Fund’s financial assets and liabilities was €XX thousand (2004: €XX thousand). Actualdaily changes in that net value exceeded the previous day’s VAR amount only XX times duringthe year, which is consistent with the confidence level used by the Investment Manager incalculating VAR.




1. ISA 700.7 Address the audit report as appropriate in the circumstances of the engagement andlocal regulations.

This audit report relates to the Fund’s financial statements only. The report should be amendedappropriately if it relates to the consolidated financial statements.

2. Alternatively, when required in a jurisdiction, a reference to the page numbers where theaudited financial statements have been included may also be provided, as follows:

“We have audited the balance sheet of [name] as of 31 December 2005 and the relatedfinancial statements of income, changes in net assets attributable to holders of redeemableshares and cash flows for the year then ended, set out on pages [ ] to [ ]. These…”

3. ISA 700.9 This part of the audit report states that the financial statements are the responsibility of theFund’s management (or other appropriate responsible body) and that the auditor’s responsibilityis to express an opinion on the financial statement based on the audit.

4. ISA 700.20 The opinion may also refer to whether the financial statements comply with other requirementsspecified by local laws and regulations where appropriate.



Reference Report of the independent auditors to the shareholders of [name]1

ISA 700.8 We have audited the accompanying2 balance sheet of [name of fund] (the “Fund”) as of [balancesheet date], and the related statements of income, statement of changes in net assetsattributable to holders of redeemable shares and cash flows for the year then ended.

ISA 700.9 These financial statements are the responsibility of the Fund’s management. Our responsibility isto express an opinion on these financial statements based on our audit.3

ISA 700.12-15 We conducted our audit in accordance with International Standards on Auditing. Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An audit includes examining, on a testbasis, evidence supporting the amounts and disclosures in the financial statements. An auditalso includes assessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation. We believe thatour audit provides a reasonable basis for our opinion.

ISA 700.17 In our opinion, the financial statements give a true and fair view of (or “present fairly, in allmaterial respects,”) the financial position of the Fund as of [balance sheet date], and of theresults of its operations and its cash flows for the year then ended in accordance withInternational Financial Reporting Standards.4

(signed) KPMG member firm

ISA 700.23, 26 [Date of report]

ISA 700.25 [City]




1. IAS 1.9, 10 A schedule of investments is not a required statement under IFRSs. Entities may provide suchstatements outside the financial statements. If a fund is listed on a stock exchange it is oftenrequired to include a schedule of investments within the audited financial statements to complywith the listing requirements of the exchange.

However, these Illustrative Financial Statements are based on the assumption that a scheduleof investments is not included within the audited financial statements. Reports and statementspresented outside the financial statements are outside the scope of IFRSs. If a fund presentsits schedule of investments outside the financial statements, it should provide sufficientinformation within the financial statements on the nature and amounts of the investments tomeet the requirement in IAS 32.60(a).



Reference Appendix 1Schedule of investments – unaudited1


Percentage

Fair value of net assets


Assets

Derivative financial assets

Listed equity index options 248,914 0.8%Foreign currency and equity indices futures contracts 76,949 0.2%Foreign currency forward contracts 218,928 0.7%Total derivative financial assets 544,791 1.7%

Equity investments

European exchange-traded equity investments:25,000 shares of [name of entity] 1,161,372 3.6%15,000 shares of [name of entity] 935,682 2.9%18,000 shares of [name of entity] 1,102,652 3.4%17,000 shares of [name of entity] 1,145,724 3.5%10,000 shares of [name of entity] 759,842 2.3%30,000 shares of [name of entity] 950,937 2.9%38,000 shares of [name of entity] 1,002,643 3.1%40,000 shares of [name of entity] 1,032,871 3.2%28,000 shares of [name of entity] 1,092,081 3.3%32,000 shares of [name of entity] 995,793 3.1%21,000 shares of [name of entity] 990,245 3.0%44,000 shares of [name of entity] 1,200,290 3.7%25,000 shares of [name of entity] 1,169,873 3.6%31,000 shares of [name of entity] 1,092,635 3.3%45,000 shares of [name of entity] 702,447 2.2%33,000 shares of [name of entity] 836,488 2.6%23,000 shares of [name of entity] 721,836 2.2%Total 16,893,411 51.8%

Unlisted off-shore open-ended investment funds: 23,046 units [name of entity] 460,915 1.4%25,615 units [name of entity] 640,376 2.0%29,493 units [name of entity] 530,879 1.6%Total 1,632,170 5.0%

Unlisted equity investments: [Name of entity] 500,000 1.5%Total equity investments 19,025,581 58.3%






Reference Appendix 1Schedule of investments – unaudited (continued)For the year ended 31 December 2005

Percentage

Fair value of net assets


Assets (continued)

Debt investments

Commercial paper:[Name of entity] 4.9% 15/03/2006 1,091,089 3.3%[Name of entity] 4.8% 1/02/2006 981,765 3.0%[Name of entity] 5.0% 10/02/2006 826,347 2.5%[Name of entity] 4.8% 15/01/2006 805,944 2.5%[Name of entity] 4.9% 31/03/2006 796,456 2.4%[Name of entity] 5.0% 1/02/2006 750,223 2.3%[Name of entity] 4.9% 10/03/2006 730,550 2.2%Total 5,982,374 18.3%

European exchange-traded debt investments:[Name of entity] 5.8% 10/04/2006 1,045,732 3.2%[Name of entity] 6.3% 26/10/2006 1,023,322 3.1%Total 2,069,054 6.3%

Total debt investments 8,051,428 24.7%

Total derivative financial assets and debt and equity investments 27,621,800 84.7%

Liabilities

Derivative financial liabilities

Listed equity index options (1,551,090) (4.8%)Interest rate swaps (463,890) (1.4%)Foreign currency forward contracts (821,840) (2.5%)Total derivative financial liabilities (2,836,820) (8.7%)

Trading securities sold short

European exchange-traded equity investments:5,000 shares of [name of entity] (50,220) (0.2%)17,000 shares of [name of entity] (64,924) (0.2%)9,000 shares of [name of entity] (88,474) (0.3%)23,000 shares of [name of entity] (127,465) (0.4%)20,000 shares of [name of entity] (183,208) (0.6%)26,000 shares of [name of entity] (269,418) (0.8%)Total trading securities sold short (783,709) (2.4%)

Total derivative financial liabilities and trading securities sold short (3,620,529) (11.1%)

Total net investments (assets less liabilities) 24,001,271 73.6%Cash and cash equivalents 51,368 0.2%Other assets in excess of other liabilities 8,572,706 26.3%Total net assets 32,625,345 100.0%




1. IAS 7.18, 19 Entities are encouraged, but not required, to use the direct method. The direct method isillustrated in the main body of this publication.

IAS 7.20 In this statement of cash flows, cash flows from operating activities are presented using theindirect method whereby the net profit or loss for the year is adjusted for the effects of non-cash transactions, changes in operating assets, and items of income or expense associatedwith investing or financing activities.



Reference Appendix 2Statement of cash flows – indirect method1



Operating activities

IAS 7.20 Change in net assets attributable to holders of redeemable shares 2,960,190 2,011,561

IAS 7.20 Adjustments for:

Net unrealised (gain) / loss on:Derivative financial instruments (315,649) (194,852)Debt and equity investments (2,860,207) (2,354,338)

IAS 7.22(b) Foreign exchange losses 5,842 6,985Change in the adjustment from mid-market prices tobid-market prices (4,012) (3,748)

IAS 7.22(b) Net realised gain on investments (262,076) (63,697)

IAS 7.20 Changes in operating assets and liabilities

Balances due from brokers 299,672 789,258Net payments from repurchase and reverse repurchase agreements (424,600) (324,856)Derivative financial instruments 1,808,640 211,740Interest, dividends and other receivables 16,210 22,221Securities sold short 571,156 (385,223)Accounts payable 26,530 74,678Accrued expenses 29,164 163,955

IAS 7.10 Cash flows from operating activities 1,850,860 (46,316)

Investing activities

IAS 7.16(d) Proceeds from sale of investments 8,462,968 8,271,599IAS 7.16(c) Purchase of investments (10,023,023) (17,712,776)IAS 7.10 Cash flows from investing activities (1,560,055) (9,441,177)

Financing activities

IAS 7.17(c) Proceeds from issue of redeemable shares 6,668,239 15,505,199IAS 7.17(d) Payments on redemption of redeemable shares (6,977,669) (5,995,856)IAS 7.10 Cash flows from financing activities (309,430) 9,509,343

IAS 7.45 Net (decrease) / increase in cash and cash equivalents (18,625) 21,850IAS 7.45 Cash and cash equivalents at 1 January 70,730 49,865IAS 7.28 Effect of exchange rate fluctuations on cash and cash equivalents (737) (985)IAS 7.45 Cash and cash equivalents at 31 December 51,368 70,730

Cash flows from operating activities include:

IAS 7.31, 33 Interest received 613,733 453,982IAS 7.31, 33 Interest paid (67,087) (62,965)IAS 7.31, 33 Dividends received 274,218 227,696IAS 7.31, 33 Dividends paid (177,405) (91,156)




1. IAS 39 allows financial assets to be classified as available-for-sale with the fair value changesrecognised directly in equity. For various reasons certain funds may wish to classify theirinvestments as available-for-sale. However, due to the fact that the redeemable shares areclassified as financial liabilities in accordance with IAS 32 and the holders have the right totheir share of the revaluation reserve resulting from the fair value changes of investmentsclassified as available-for-sale, the change in the fair value of available-for-sale financial assetsshall be recognised directly in net assets attributable to holders of redeemable shares.Consequently, the Fund will still have no equity.

In Appendix 3 to these Illustrative Financial Statements an income statement, statement ofchanges in net assets attributable to holders of redeemable shares, balance sheet andcertain selected illustrative notes for a fund classifying all its investments as available-for-sale are presented.

Please note that the explanatory notes to the income statement, statement of changes in netassets attributable to holders of redeemable shares, balance sheet and certain selected illustrativenotes to the financial statements are relevant, but were not duplicated in this Appendix.

2. IAS 39.55(b), Foreign exchange gains and losses arising on monetary available-for-sale financial assets are39.AG83 recognised in profit or loss.



Reference Appendix 3Income statement1



(restated)

IAS 32.94(h)(i) Interest income 602,940 429,982IAS 18.35(b)(v) Dividend income 271,801 229,159IAS 1.29, 35 Realised gain on investments 353,455 119,716IAS 1.29, 35 Realised loss on investments (91,379) (56,019)IAS 1.35 Net gain / (loss) on derivatives 88,001 (37,022)IAS 1.35, 88, 91 Net foreign exchange loss

2(18,842) (15,985)

IAS 1.81(a) Net investment income 1,205,976 669,831

IAS 1.88, 91 Investment management fees (447,877) (478,158)IAS 1.88, 91 Custodian fees (112,583) (83,947)IAS 1.88, 91 Administration fees (65,793) (61,635)IAS 1.88, 91 Professional fees (41,617) (37,892)IAS 1.88, 91 Directors’ fees (26,517) (15,443)IAS 1.88, 91 Other operating expenses (50,000) (70,000)

Operating expenses before finance costs (744,387) (747,075)

IAS 1.83 Net income from operations before finance costs 461,589 (77,244)

IAS 32.40 Distributions to holders of redeemable shares (177,405) (91,156)Withholding tax paid on behalf of holders of redeemable shares (45,300) (39,775)

IAS 32.94(h)(i) Interest expense (75,036) (61,727)IAS 1.81(b) Total finance costs (297,741) (192,658)

IAS 32.IE32 Change in net assets attributable to holders of

redeemable shares 163,848 (269,902)



Reference Appendix 3Statement of changes in net assets attributable to holders ofredeemable sharesFor the year ended 31 December 2005


(restated)

Balance at 31 December 2004 as previously reported - 16,413,914Change in accounting policy – financial assets at fair valuethrough profit or loss - 2,047,527Balance at 31 December (2004 restated) 29,978,597 18,461,441Change in net assets attributable to holders of redeemableshares for the year 163,848 (269,902)Issue of redeemable shares during the year 6,668,239 15,505,199Redemption of redeemable shares during the year (6,977,669) (5,995,856)Revaluation of available-for-sale financial assets 3,058,418 2,345,160Disposal of available-for-sale financial assets (262,076) (63,697)Change in the adjustment from mid-market prices tobid-market prices (4,012) (3,748)Balance at 31 December 32,625,345 29,978,597



Reference Appendix 3Balance sheetAs at 31 December 2005


(restated)

Assets

IAS 1.68(i) Cash and cash equivalents 51,368 70,730IAS 32.55 Balances due from brokers 8,118,777 12,620,923IAS 32.55 Receivables from reverse repurchase agreements 4,743,460 3,990,133IAS 1.29, 32.55 Derivative financial instruments 544,791 435,203IAS 1.29, 32.55 Debt investments 8,051,428 6,511,346IAS 1.29, 32.55 Equity investments 19,025,581 11,871,486IAS 1.68(h) Interest, dividends and other receivables 29,367 45,577

Total assets 40,564,772 35,545,398

Liabilities

IAS 32.55 Balances due to brokers 1,179,844 1,365,374IAS 32.55 Payables under repurchase agreements 2,563,267 2,234,540IAS 32.55 Derivative financial instruments 2,836,820 1,234,241IAS 32.55 Securities sold short 783,709 212,553IAS 1.68(j) Accounts payable 341,220 314,690IAS 1.69 Accrued expenses 234,567 205,403

Total liabilities (excluding net assets attributable to

holders of redeemable shares) 7,939,427 5,566,801

IAS 1.6, 68(l) Net assets attributable to holders of redeemable shares

(bid-market prices) 32,625,345 29,978,597

Represented by:● net proceeds from issue and redemption of redeemable shares 25,954,393 26,263,823● fair value reserve (available-for-sale) 6,822,063 4,025,721● cumulative change in net assets attributable to holders of

redeemable shares (129,486) (293,334)● adjustment from mid-market prices to bid-market prices (21,625) (17,613)

Net asset value per share at mid-market prices, based on

259,212 (2004: 260,531) shares outstanding 125.95 115.13



Reference Appendix 3Significant accounting policies (continued)

IAS 1.111 (d) Financial instruments

IAS 32.60(b) (i) Classification

IAS 32.60(a), At 1 January 2005, the Fund adopted the amended IAS 32 and IAS 39 and designated all its debt39.9, 45 and equity investments as available-for-sale financial assets. The changes to the Fund’s

accounting policies as a result of amendments to IAS 32 and IAS 39 and their effect on thefinancial statements are described in note (l) of the Significant accounting policies section.

The category of financial assets and financial liabilities at fair value through profit or losscomprises financial instruments held-for-trading. These include futures, forward contracts,options, interest rate swaps and liabilities from short sales of financial instruments. Allderivatives in a net receivable position (positive fair value), as well as options purchased, arereported as financial assets held-for-trading. All derivatives in a net payable position (negative fairvalue), as well as options written, are reported as financial liabilities held-for-trading.

Available-for-sale financial assets include the following debt and equity instruments:

● commercial paper;● European exchange-traded debt and equity instruments;● unlisted off-shore open-ended investment funds; and● unlisted equity instruments.

Financial assets that are classified as loans and receivables include balances due from brokers,receivables from reverse repurchase agreements and accounts receivable.

IAS 32.60(a), Financial liabilities that are not at fair value through profit or loss include balances due to brokers,39.9 payables under repurchase agreements, accounts payable and financial liabilities arising on

redeemable shares.

(iii) Measurement

IAS 39.43, Financial instruments are measured initially at fair value (transaction price) plus, in case of a39.AG64 financial asset or financial liability not at fair value through profit or loss, transaction costs that

are directly attributable to the acquisition or issue of the financial asset or financial liability.Transaction costs on financial assets and financial liabilities at fair value through profit or loss areexpensed immediately, while on other financial instruments they are amortised or recogniseddirectly in net assets attributable to holders of redeemable shares.

IAS 39.46, 47, 53, Subsequent to initial recognition, all instruments classified at fair value through profit or loss are39.AG69-AG82 measured at fair value with fair value changes recognised in the income statement. Financial

assets classified as available-for-sale are measured at fair value with fair value changesrecognised directly in net assets attributable to holders of redeemable shares.

IAS 39.46(a) Financial assets classified as loans and receivables are carried at amortised cost using theeffective interest rate method, less impairment losses, if any.

IAS 39.47 Financial liabilities, other than those at fair value through profit or loss, are measured atamortised cost using the effective interest rate. Financial liabilities arising from the redeemableshares issued by the Fund are carried at the redemption amount representing the investors’ rightto a residual interest in the Fund’s assets.



Reference Appendix 3Significant accounting policies (continued)

(v) Impairment

IAS 39.58-70, Financial assets that are carried at cost, amortised cost or at fair value, with fair value changes39.AG84-AG92 recognised directly in net assets attributable to holders of redeemable shares are reviewed at

each balance sheet date to determine whether there is objective evidence of impairment. If anysuch indication exists, an impairment loss is recognised in the income statement:

(a) as the difference between the asset’s carrying amount and the present value of estimatedfuture cash flows discounted at the financial asset’s original effective interest rate, forfinancial assets carried at cost or amortised cost; and

(b) as the cumulative loss that had been recognised directly in net assets attributable to holders ofredeemable shares, for available-for-sale financial assets. The amount of the cumulative lossthat is removed from net assets attributable to holders of redeemable shares and recognised inprofit or loss is the difference between the acquisition cost (net of principal repayment andamortisation) and current fair value, less any impairment loss previously recognised.

IAS 39.69, 70 Impairment losses recognised in profit or loss for equity instruments classified as available-for-sale are not reversed through profit or loss. Impairment losses recognised for debt investmentsclassified as available-for-sale are reversed, if the fair value of such investments increases in asubsequent period and the increase can be objectively related to an event occurring afterimpairment loss was recognised.

IAS 39.65 If in a subsequent period the amount of an impairment loss recognised on a financial assetcarried at amortised cost decreases and the decrease can be linked objectively to an eventoccurring after the write-down, the write-down is reversed through the income statement.



Name Appendix 4Index and list of IFRSs and SIC interpretations at 30 June 2004Below is a list of IFRSs and related SIC interpretations followed by a cross-reference to thestatements of these Illustrative Financial Statements. The following legend is used:

IS: Income statement;SC: Statement of changes in net assets attributable to holders of redeemable shares;BS: Balance sheet;CF: Statement of cash flows;AP: Accounting policies; andN: Notes.

IFRS 1 First-time Adoption of International Financial Reporting Standards

Status: Revised 2004Related interpretations: NilCross-reference: Not illustrated

IFRS 2 Share-based Payment

Status: 2004Related interpretations: NilCross-reference: Not illustrated

IFRS 3 Business Combinations

Status: Revised 2004Related interpretations: SIC–32 Intangible Assets – Web Site Costs (revised 2003)Cross-reference: Not illustrated

IFRS 4 Insurance Contracts

Status: 2004Related interpretations: SIC–27 Evaluating the Substance of Transactions in the Legal Form ofa Lease (revised 2003)Cross-reference: Not illustrated

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

Status: 2004Related interpretations: NilCross-reference: Not illustrated

IAS 1 Presentation of Financial Statements

Status: Revised 2004Related interpretations: SIC–27 Evaluating the Substance of Transactions in the Legal Form ofa Lease (revised 2003) and SIC–29 Disclosure – Service Concession Arrangements (revised2003), SIC–32 Intangible Assets – Web Site Costs (revised 2003)Cross-reference: IS, SC, BS, AP, N2, N3, N9

IAS 2 Inventories




Name Appendix 4Index and list of IFRSs and SIC interpretations at 30 June 2004 (continued)

IAS 7 Cash Flow Statements

Status: Revised 2003Related interpretations: NilCross-reference: CF, AP(d), N4

IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors

Status: Revised 2003Related interpretations: SIC–12 Consolidation – Special Purpose Entities (revised 2003)Cross-reference: AP(b), AP(l)

IAS 10 Events After the Balance Sheet Date

Status: Revised 2004Related interpretations: SIC–7 Introduction of the Euro (revised 2003)Cross-reference: AP, N3

IAS 11 Construction Contracts


IAS 12 Income Taxes

Status: Revised 2004Related interpretations: SIC–21 Income Taxes – Recovery of Revalued Non-DepreciableAssets (revised 2003) and SIC–25 Income Taxes – Change in the Tax Status of an Enterprise orits Shareholders (revised 2003)Cross-reference: Not illustrated

IAS 14 Segment Reporting


IAS 16 Property, Plant and Equipment


IAS 17 Leases

Status: Revised 2004Related interpretations: SIC–15 Operating Leases – Incentives (revised 2003), SIC–27Evaluating the Substance of Transactions in the Legal Form of a Lease (revised 2003) and SIC–32Intangible Assets – Web Site Costs (revised 2003)Cross-reference: Not illustrated

IAS 18 Revenue

Status: Revised 2004Related interpretations: SIC–13 Jointly Controlled Entities – Non-monetary Contributions byVenturers (revised 2003), SIC–27 Evaluating the Substance of Transactions in the Legal Form of aLease (revised 2003) and SIC–31 Revenue – Barter Transactions Involving Advertising Services(revised 2003)Cross-reference: IS, AP(d), AP(e), AP(f), N1




IAS 19 Employee Benefits


IAS 20 Accounting for Government Grants and Disclosure of Government Assistance

Status: Revised 2003Related interpretations: SIC–10 Government Assistance – No Specific Relation to OperatingActivities (1998)Cross-reference: Not illustrated

IAS 21 The Effects of Changes in Foreign Exchange Rates

Status: Revised 2003Related interpretations: SIC–7 Introduction of the Euro (revised 2003)Cross-reference: AP(c)

IAS 23 Borrowing Costs


IAS 24 Related Party Disclosures

Status: Revised 2003Related interpretations: NilCross-reference: N7

IAS 26 Accounting and Reporting by Retirement Benefit Plans

Status: Reformatted 1994Related interpretations: NilCross-reference: Not illustrated

IAS 27 Consolidated and Separate Financial Statements

Status: Revised 2004Related interpretations: SIC–12 Consolidation – Special Purpose Entities (revised 2003)Cross-reference: Not illustrated

IAS 28 Investments in Associates


IAS 29 Financial Reporting in Hyperinflationary Economies


IAS 30 Disclosures in the Financial Statements of Banks and Similar Financial Institutions





IAS 31 Interests in Joint Ventures

Status: Revised 2004Related interpretations: SIC–13 Jointly Controlled Entities – Non-monetary Contributions byVenturers (revised 2003)Cross-reference: Not illustrated

IAS 32 Financial Instruments: Disclosure and Presentation

Status: Revised 2004Related interpretations: NilCross-reference: IS, BS, AP(d), AP(e), AP(j), AP(k), N1, N5, N6, N8

IAS 33 Earnings Per Share


IAS 34 Interim Financial Reporting


IAS 36 Impairment of Assets


IAS 37 Provisions, Contingent Liabilities and Contingent Assets


IAS 38 Intangible Assets


IAS 39 Financial Instruments: Recognition and Measurement

Status: Revised 2004Related interpretations: NilCross-reference: AP(c), AP(d), AP(l), N5

IAS 40 Investment Property


IAS 41 Agriculture


The information contained herein is of a general nature and is not intended to address the circumstances of anyparticular individual or entity. Although we endeavour to provide accurate and timely information, there can be noguarantee that such information is accurate as of the date it is received or that it will continue to be accurate in thefuture. No one should act on such information without appropriate professional advice after a thorough examinationof the particular situation.KPMG International Financial Reporting Group is a part of KPMG IFRG Limited.KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent memberfirms. KPMG International provides no audit or other client services. Such services are provided solely by memberfirms in their respective geographic areas. KPMG International and its member firms are legally distinct and separateentities. They are not and nothing contained herein shall be construed to place these entities in the relationship ofparents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, impliedor otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever or vice versa.© 2005 International Accounting Standards Committee Foundation (IASCF), including its International AccountingStandards Board (IASB). All rights reserved. Various limited extracts from International Accounting Standards arereproduced in this publication with permission from IASCF. For copyright enquiries, and in order to obtain copies ofthe full text of the International Accounting Standards and other IASB publications, please contact: IASCFPublications Department, 1st Floor, 30 Cannon Street, London EC4M 6XH, United Kingdom. Telephone:+44(020)7246-6410, Fax:+44(020)7332-2749, E-mail: [email protected], Internet: http://www.iasb.org. The IASBlogo,“Hexagon Device“, “IAS“,“IFRS“, “IASB“, “IASC“ , “IASCF“, “SIC“, “International Financial ReportingStandards“ and “International Accounting Standards“ are trademarks of the International Accounting StandardsCommittee Foundation and should not be used without the prior written approval of the IASCF.

© 2005 KPMG IFRG Limited is a UK company, limitedby guarantee. All rights reserved. Printed in the UK.KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. Cover design: Mytton Williams Ltd Publication no: 211757Publication name: Illustrative financial statements:investment funds Publication date: March 2005

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Illustrative financial statements: investment funds