ABN AMRO Funds - Aia.com.hk

class financial institutions that specialise in these types of
transactions and are participants in the over-the-counter markets.
Such transactions consist of the purchase or sale of debt securities at
their current price with delivery and settlement at a specified future
date (which would typically not be longer than 12 months).
The SICAV may pay customary fees included in the price of the debt
securities to the relevant broker-dealer in order to finance the cost to
such broker-dealer of the delayed settlement.
As at April 30, 2008, there were forward settlement transactions in
the following Funds:
ARBF V300
i. Futures
The Fund may enter into futures contracts for the delayed delivery of
securities or currency, or contracts based on financial indices at a
fixed price on a future date. In entering such contracts, the Fund is
required to deposit with the broker either in cash or securities an
amount equal to a certain percentage of the contract amount.
Subsequent payments are made or received by the Fund each day,
depending on the daily fluctuations in the value of contracts, and are
recorded for financial statement purposes as unrealised gains or
losses by the Fund. Upon entering into such contracts, the Fund bears
the risk of interest or exchange rates or securities’ prices moving
unexpectedly, in which case, the Funds may not achieve the
anticipated benefits of the futures contracts and may realise a loss.
j. Forward Foreign Currency Exchange Contracts
The Fund, on behalf of each Fund, may enter into forward foreign
currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise
upon entering into these contracts from the potential inability of
counterparties to meet the terms of their contracts and from
unanticipated movements in the value of the contracts. All Funds
may enter into forward foreign currency exchange contracts for
efficient portfolio management. Certain Funds may enter into
forward foreign currency exchange contracts for investment
purposes as well. The Fund may also use contracts in a manner
intended to protect foreign currency denominated securities from
declines in value due to unfavorable exchange rate movements. The
forward foreign currency exchange contracts are adjusted by the
daily exchange rate of the underlying currency and any gains or
losses are recorded as unrealised until the contract settlement date.
On contract settlement date, the gains or losses are recorded as
realised results from forward foreign currency exchange contracts.
k. Purchased Options
The Fund may purchase call or put options for a premium.
Purchasing call options may be a hedge against an anticipated
increase in the cost of securities to be acquired or to increase the
Fund’s exposure to the underlying instrument. Purchasing put
options may hedge against a decline in the value of portfolio
securities. The premium paid is included as an investment in the
Statement of Net Assets and is subsequently adjusted to the current
value of the option. Premiums paid for purchased options which
have expired are treated as a net realised loss on option contracts in
the Statement of Operations and Changes in Net Assets. Premiums
paid for purchased options which are exercised or closed are added
to the amount paid or offset against the proceeds on the underlying
security or financial instrument to determine the realised gain or
loss. The risk of loss associated with purchased options is limited to
the premium paid.
payments, which are based on a specific financial index, or the
exchange of two distinct floating rate payments.
Credit Default Swap
The Fund may enter into credit default swaps to limit or reduce the
risk exposure of the Fund to defaults of corporate and sovereign
issuers. The Fund may also use credit default swaps to create direct
or synthetic short or long exposure to domestic or foreign corporate
debt securities or certain sovereign debt securities to which the Fund
is not otherwise exposed. In a credit default swap, one party makes a
stream of payments to another party in exchange for the right to
receive a specified return in the event of a default by a third party,
such as a corporate issuer or foreign issuer on its obligation.
3. Taxation of the SICAV
The SlCAV is not liable to any Luxembourg tax on profits or
income, nor are distributions paid by the SlCAV liable to any
Luxembourg withholding tax. The SICAV is however liable to an
annual tax in Luxembourg calculated at the rate of 0.05% per annum
of the net asset value of all classes of shares of shares of all Funds
except Class of shares I, J and S (if any), and all classes of the
Interest Growth Fund (Euro) and the Interest Growth Fund (USD),
where the rate is 0.01% of the net asset value. This tax is payable
quarterly on the basis of the value of the aggregate Net Assets of the
Funds at the end of the relevant calendar quarter. When a Fund of the
SICAV holds shares in another Undertaking for Collective
Investment domiciled in Luxembourg and is itself subject to the
payment of this tax, there is no additional tax liability to the Fund for
that portion of its assets thus invested. No stamp duty or other tax is
payable in Luxembourg on the issue of Shares. No Luxembourg tax
is payable on the realised capital appreciation of the assets of the
SlCAV. Interest, dividends and capital gains on securities may be
subject to withholding or capital gains taxes in certain countries.
4. Related party transactions
(see next page)
l. Swap Agreements
The Fund may enter into swap agreements. A swap is an exchange of
cash payments between the Fund and another party. The upfront fees
paid or received are included as ‘‘Upfront fee received on swap
contracts’’ or ‘‘Upfront fee paid on swap contracts’’ in the Statement
of Net Assets. Net cash payments are exchanged at specified
intervals and the expected income or expense is recorded on the
accrual basis. The value of the swap is adjusted daily and the change
in value is recorded as unrealised gain /(loss). Risks may arise upon
entering into these agreements from the potential inability of
counterparties to meet the terms of their contract and from
unanticipated changes in the value of the financial index on which
the swap agreement is based.
Interest Rate Swap Agreements
Interest rate swap agreements are agreements to exchange cash flows
periodically based on a notional principal amount, such as the
exchange of fixed rate interest payments for floating rate interest
185