SEB Fund 2 A LUXEMBOURG MUTUAL INVESTMENT FUND AUDITED ANNUAL REPORT. December 31, SEB Asset Management S.A

SEB Fund 2 A LUXEMBOURG MUTUAL INVESTMENT FUND AUDITED ANNUAL REPORT December 31, 2006 Subscriptions cannot be received on the basis of financial re...
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SEB Fund 2 A LUXEMBOURG MUTUAL INVESTMENT FUND

AUDITED ANNUAL REPORT December 31, 2006

Subscriptions cannot be received on the basis of financial reports. Subscriptions are valid only if made on the basis of the current prospectus, supplemented by the latest annual report and the most recent semi-annual report if published thereafter.

SEB Asset Management S.A.

Promoted by: Skandinaviska Enskilda Banken AB (publ), STOCKHOLM

4545

SEB Fund 2

TABLE OF CONTENTS

Page(s) Organisation

3-4

General Information

5

Report of the Board of Directors

6

Schedule of Investments

7-9

Statement of Operations

10

Statements of Changes in Net Assets

10

Statement of Net Assets

11

Statistical Information

11

Notes to the Financial Statements

12 - 13

Independent Auditor’s Report

14

Notes to the “EU Savings Tax Directive”

15

2

ORGANISATION

Promoter:

Skandinaviska Enskilda Banken AB (publ) Kungsträdgårdsgatan 8 S-106 40 Stockholm

Management Company and Central Administration:

SEB Asset Management S.A. 6a, circuit de la Foire Internationale L-1347 Luxembourg

Registrar and Transfer Agent:

SEB Fund Services S.A. 6a, circuit de la Foire Internationale L-1347 Luxembourg

Board of Directors of the Management Company:

Chairman Thomas Ericsson Head of SEB Asset Management Sweden COO Stockholm Vice-Chairman Thomas Nahmer, CFA Managing Director of SEB Invest GmbH Frankfurt am Main (until May 31, 2006) Executive member Rudolf Kömen Head of SEB Asset Management S.A. Luxembourg Members Pontus Bergekrans Global Head of Sales and Products of SEB Asset Management Stockholm (until May 31, 2006) Barbro Lilieholm Head of Legal of SEB Asset Management Stockholm

Management:

Rudolf Kömen, Luxembourg Renzo Sechi, Luxembourg

Investment Manager:

Schroder Investment Management Limited Gresham Street 31 UK-London EC2V 7QA

Custodian Bank:

Skandinaviska Enskilda Banken S.A. (Former SEB Private Bank S.A./ name changed on June 1, 2006) 6a, circuit de la Foire Internationale L-1347 Luxembourg

Independent Auditor of the Fund and of the Management Company:

PricewaterhouseCoopers S.à r.l. Réviseur d’entreprises 400, route d’Esch L-1471 Luxembourg

3

ORGANISATION

Distributors and Principal Paying Agents:

In Luxembourg Skandinaviska Enskilda Banken S.A. (Former SEB Private Bank S.A./ name changed on June 1, 2006) 6a, circuit de la Foire Internationale L-1347 Luxembourg In Sweden Skandinaviska Enskilda Banken AB (publ) Kungsträdgårdsgatan 8 S-106 40 Stockholm

Distributor:

In Germany SEB Asset Management AG Rotfeder-Ring 7 D-60327 Frankfurt am Main

Principal Paying Agent:

In Germany SEB AG Ulmenstraße 30 D-60325 Frankfurt am Main and all branches, subsidiaries and affiliates, acting as the distributors of the Fund’s units

Listing Agent:

Fortis Banque Luxembourg S.A. 50, avenue J. F. Kennedy L-2951 Luxembourg (until December 29, 2006)

4

GENERAL INFORMATION

SEB Fund 2 (hereafter “the Fund”) is an Undertaking for Collective Investment in Transferable Securities (“UCITS”), set up as a mutual investment fund (“Fonds Commun de Placement”) governed by part I of the Luxembourg Law on Undertakings for Collective Investment (“the Law”) of December 20, 2002. The Fund, which was set up on April 21, 1986 for an undetermined duration, is managed by SEB Asset Management S.A. (the “Management Company”) acting also as Central Administration. The current Management Regulations have been deposited with the Trade Register of the district court in Luxembourg and the relating notice has been published in the Mémorial C, “Recueil des Sociétés et Associations”, on August 28, 2006 with regards to the management regulations on January 15, 2007. The Management Company is governed by Chapter 13 of the Law and was established on July 15, 1988 with subsequent publication in the Mémorial C, taking place on August 16, 1988. The main objective of the Fund is to gain the greatest possible return observing a well balanced risk level. The Fund has long term investment horizons. In order to achieve its main objective, the Fund’s portfolio will be focused primarily on gaining return from the Asian and Pacific equity markets. At present, two Sub-Funds are at the Unitholders’ disposal: • •

SEB Fund 2 - SEB Asia ex. Japan Fund SEB Fund 2 - SEB Russia Fund (extended fiscal year / first year-end will be December 31, 2007).

For each Sub-Fund, the Management Company may decide to issue two classes of units: • •

Capitalisation units (“C” or “RC” units) Distribution units (“D” units).

The “D” units may pay a dividend. The “C” or “RC” units will capitalise income, with the result that their value will become greater than that of “D” units, in the proportion of the dividends paid to the “D” units. Currently, only “C” units are offered for SEB Fund 2 - SEB Asia ex. Japan Fund and “RC” units for SEB Fund 2 - SEB Russia Fund. The net asset value per unit as well as the issue and redemption prices, which are computed daily on bank business days in Luxembourg and in Sweden, can be obtained from the registered offices of the Management Company, the Custodian Bank and the Paying Agents. In addition, the net asset value, issue and redemption prices were published daily in the International Herald Tribune until June 30, 2006. As from July 1, 2006, the publication takes place in The Wall Street Journal Europe. Furthermore, prices are as well published in the German newspaper Börsen-Zeitung. Financial reports of the Fund are published annually and semi-annually. These reports, as well as the sales prospectus, the management regulations and all information concerning the Fund are available for the Unitholders at the registered offices of the Management Company, the Custodian Bank or every Paying Agent.

5

REPORT OF THE BOARD OF DIRECTORS TO THE UNITHOLDERS OF SEB Fund 2 - SEB Asia ex. Japan Fund

The Sub-Fund’s performance The Sub-Fund’s net asset value rose by 10.8 percent during the period, if expressed in SEK. The Sub-Fund’s benchmark index without dividend rose by 10.5 percent, while the index including dividend rose by 13.3 percent. The selection of shares in Hong Kong, China and Singapore had a positive impact on the Sub-Fund’s performance, while holdings in Korea performed less well. In Hong Kong and China, Hong Kong Exchanges made a positive contribution, as the company benefits from future stock exchange listings in China. Shangri-La Asia, which is favoured by increasing tourism, and Ping An Insurance also made a positive contribution to the Sub-Fund's performance. In Singapore, UOL Group and City Developments were positive. However, in Korea, Hyunda Motor had a detrimental effect on the Sub-Fund’s performance. The company performed poorly, mainly due to fears of falling profitability and reduced competitiveness abroad. LG Philip and Kookmin Bank also had a negative impact on the Sub-Fund. During the year, we reduced holdings in Indonesia and increased holdings in Malaysia, Singapore and Thailand. We reduced the Sub-Fund’s proportion of shares in technology and telecom shares, while increasing the proportion of consumer and financial shares. The stronger Swedish krona worked against the Sub-Fund. Present strategy The Sub-Fund focuses on stable consumer and financial companies. We have a cautious attitude to many industrial companies and cyclical shares. On the whole, the Sub-Fund has a low cyclical profile and we seek purchasing opportunities among quality companies which the market has overlooked. Future prospects The fall in US consumption represents some risk in the future. However, liquidity in the market remains good. If concerns over the US economy result in a sharp decline, this may offer some good purchasing opportunities. The Asian companies’ balance sheets are sound and company valuations are reasonable. Many of the companies have therefore carried out advantageous restructuring programmes and investment costs have been kept down. Public finances are also in order, with good currency reserves, and Asian consumers are not particularly in debt.

February 22, 2007

THE BOARD OF DIRECTORS

Note: Performances mentioned in this report are historical and are not indicative of future results.

6

SEB Fund 2 - SEB Asia ex. Japan Fund SCHEDULE OF INVESTMENTS As at December 31, 2006

Security denomination

Total holdings as at 31.12.2006

Sales during the reporting period

Purchases during the reporting period

Unit price

Market value in USD

% of net assets

Transferable securities admitted to an official stock exchange Shares China China Construction Bank China Merchants Bank China Mobile CNOCC Cosco Pacific Petrochina

6,912,000 381,500 838,500 3,451,000 1,934,000 1,916,000

9,478,000 872,000 483,000 5,648,000 516,000 1,916,000

2,566,000 490,500 90,000 2,197,000 290,000 -

HKD HKD HKD HKD HKD HKD

4.950 16.480 67.350 7.380 18.180 11.020

Total China Hong Kong ASM Pacific Technology BOC Hong Kong Holdings China Mengniu Dairy Hang Lung Group HK Exchanges and Clearing Hong Kong Land Kerry Properties Li & Fung Ping An Insurance Shangri La Asia Swire Pacific

453,500 1,048,000 906,000 1,165,000 316,000 536,000 770,500 926,000 1,353,500 1,924,000 748,500

155,000 1,048,000 906,000 392,000 536,000 334,000 344,500 678,000 69,500

80,500 352,000 570,000 103,500 988,000 707,500 400,000 67,500

HKD HKD HKD HKD HKD USD HKD HKD HKD HKD HKD

43.300 21.150 20.400 23.650 85.600 3.980 36.350 24.250 42.950 20.300 83.900

Total Hong Kong Indonesia Astra Intl Bank Rakyat Indonesia Medco Energy International

2,606,500 5,009,000 1,562,000

3,325,000 5,009,000 3,313,500

718,500 5,996,500

IDR 15,700.000 IDR 5,150.000 IDR 3,550.000

Total Indonesia Malaysia Astro All Asia Networks Bumiputra Commerce Holdings Genting IJM Corp Road Builder SP Setia Tenaga Nasional

705,400 2,546,400 211,400 648,700 1,143,500 2,100,600 1,241,675

638,200 241,000 648,700 1,143,500 1,712,700 494,775

700,200 535,100 29,600 89,800

MYR MYR MYR MYR MYR MYR MYR

5.550 7.750 33.000 7.350 3.400 5.100 10.900

Total Malaysia Philippines Ayala Land Bank of Philippine

4,200,000 1,079,000

4,200,000 1,079,000

-

Total Philippines

7

PHP PHP

15.250 63.500

4,399,294.39 808,399.14 7,261,306.42 3,274,729.39 4,520,895.26 2,714,883.48

1.72 0.32 2.85 1.28 1.77 1.06

22,979,508.08

9.00

2,524,871.52 2,850,005.84 2,376,470.68 3,542,673.81 3,478,042.97 2,133,280.00 3,601,232.45 2,887,332.68 7,474,730.26 5,021,982.58 8,074,727.26

0.99 1.12 0.93 1.39 1.36 0.84 1.41 1.13 2.93 1.97 3.16

43,965,350.05

17.23

4,550,531.96 2,868,554.12 616,615.12

1.78 1.12 0.24

8,035,701.20

3.14

1,109,685.32 5,593,707.24 1,977,380.86 1,351,458.27 1,102,012.42 3,036,581.50 3,836,240.62

0.43 2.19 0.78 0.53 0.43 1.19 1.50

18,007,066.23

7.05

1,306,882.60 1,398,017.51

0.51 0.55

2,704,900.11

1.06

SEB Fund 2 - SEB Asia ex. Japan Fund SCHEDULE OF INVESTMENTS As at December 31, 2006 Security denomination

Singapore City Development Cosco Corp Singapore Development Bank of Singapore Jardine Matheson Holdings Oversea-Chinese Banking Sembcorp Industries Singapore Telecommunications United Overseas Group

Total holdings as at 31.12.2006

906,000 1,575,000 505,000 246,000 431,000 679,220 219,650 485,000

Sales during the reporting period

Purchases during the reporting period

264,000 2,053,000 140,000 131,600 431,000 348,000 787,000 842,000

78,000 478,000 82,000 387,000 1,454,350 1,162,000

SGD SGD SGD USD SGD SGD SGD SGD

Unit price

12.700 2.300 22.600 21.400 7.700 3.840 3.280 4.340

Total Singapore South Korea Cheil Communication Hyundai Department Store Hyundai Development Company Hyundai Motor Kookmin Bank Pusan Bank Samsung Electronics Samsung Electronics PFD Samsung Fire and Marine Shinhan Financial Shinsegae DK UIL

10,370 27,642 119,348 89,500 141,533 288,050 22,960 5,860 15,251 62,490 8,954 46,372

2,870 27,642 83,898 27,630 30,400 306,790 5,150 1,150 15,251 41,350 1,900 -

27,020 18,360 18,740 6,850 480 79,530 2,520 -

KRW KRW KRW KRW KRW KRW KRW KRW KRW KRW KRW KRW

231,000 84,000 56,800 67,400 74,900 11,600 613,000 480,000 161,500 47,500 580,000 5,080

Total South Korea Thailand Airports of Thailand Public Company Bangkok Bank Electricity Generating Electricity Generating Land and House NVDR Siam Cement True Rights 2000

256,100 1,265,800 179,800 131,200 21,242,800 332,200 142,105

1,303,600 103,800 179,800 131,200 8,110,300 332,200 -

1,047,500 301,500 -

THB THB THB THB THB THB USD

58.500 115.000 97.000 95.500 6.450 242.000 0.0001

Total Thailand Taiwan Catcher Technology Cathay Financial Holding Chinatrust Financial Holding E.Sun Financial Holding Far Eastern Textile Far EasTone Telecommunications Fubon Financial Holding Hon Hai Precision Industry Novatek Microelectronics Siliconware Precision Silitech Technology Taiwan Mobile Taiwan Semiconductor

341,819 1,981,363 1,631,000 3,912,342 859,000 1,427,875 1,806,000 1,352,998 563,519 1,828,144 125,000 2,992,000 6,392,395

419,819 1,981,363 1,631,000 660,712 859,000 663,475 1,225,000 327,499 316,158 1,422,235 125,000 430,000 1,281,872

78,000 2,432,000 152,000 261,000 2,397,000 1,009,000

Total Taiwan 8

TWD TWD TWD TWD TWD TWD TWD TWD TWD TWD TWD TWD TWD

318.500 74.000 27.250 22.600 28.500 36.950 30.500 232.500 147.500 51.200 147.500 33.800 67.500

Market value in USD

% of net assets

7,499,315.43 2,361,011.46 7,438,571.11 5,264,400.00 2,163,005.86 1,699,931.38 469,563.95 1,371,895.93

2.94 0.93 2.92 2.06 0.85 0.67 0.18 0.54

28,267,695.12

11.09

2,575,848.89 2,496,769.17 7,289,422.56 6,486,532.19 11,399,063.57 3,592,985.91 15,134,288.34 3,024,603.84 2,648,503.14 3,191,786.10 5,584,376.99 253,308.16

1.01 0.98 2.86 2.54 4.47 1.41 5.93 1.19 1.04 1.25 2.19 0.10

63,677,488.86

24.97

414,436.92 4,026,761.69 482,452.34 346,601.31 3,790,220.46 2,223,862.80 14.21

0.16 1.58 0.19 0.14 1.49 0.87 0.00

11,284,349.73

4.43

3,341,091.52 4,499,647.63 1,363,964.93 2,713,488.51 751,312.75 1,619,151.06 1,690,442.18 9,653,901.18 2,550,840.60 2,872,520.25 565,828.43 3,103,566.29 13,241,894.18

1.31 1.76 0.53 1.06 0.29 0.63 0.66 3.78 1.00 1.13 0.23 1.23 5.19

47,967,649.51

18.80

SEB Fund 2 - SEB Asia ex. Japan Fund SCHEDULE OF INVESTMENTS As at December 31, 2006

Security denomination

Total holdings as at 31.12.2006

United Kingdom Standard Chartered

132,150

Purchases during the reporting period

Sales during the reporting period

132,150

- HKD

Unit price

229.800

Total United Kingdom United States of America LG.Philips LCD ADR Satyam Computer ADR

200,586 83,770

192,324 94,600

104,101 10,830

USD USD

Total United States of America

15.070 24.010

Market value in USD

% of net assets

3,904,732.51

1.53

3,904,732.51

1.53

3,022,831.02 2,011,317.70

1.18 0.79

5,034,148.72

1.97

Total shares

USD

255,828,590.12

100.27

Total transferable securities admitted to an official stock exchange

USD

255,828,590.12

100.27

Total portfolio

USD

255,828,590.12

100.27

Cash at banks Cash at banks

1,990,364.72

0.77

Total cash at banks

1,990,364.72

0.77

Other assets Dividends receivable Other receivables

99,191.94 2,846,961.72

0.03 1.13

Total other assets

2,946,153.66

1.16

Other liabilities Bank overdraft Taxe d'abonnement Other liabilities

-13,564.10 -32,467.20 -5,583,953.70

0.00 -0.01 -2.19

Total other liabilities

-5,629,985.00

-2.20

255,135,123.50

100.00

USD

Total net assets as at December 31, 2006

A list of changes in the assets held during the year under review, which are not listed in the schedule of investments, is available free of charge from SEB Asset Management S.A. The accompanying notes are an integral part of these financial statements.

9

SEB Fund 2 STATEMENT OF OPERATIONS For the period from January 1, 2006 to December 31, 2006

SEB Asia ex. Japan Fund INCOME

USD

Dividends

5,048,908.96

Bank interest

138,842.57

Total income

5,187,751.53

EXPENSES Management fee (note 2)

4,022,903.31

Taxe d'abonnement (note 3)

118,894.15

Bank interest

8,639.58

Total expenses

4,150,437.04

NET INCOME FOR THE YEAR

1,037,314.49

SEB Fund 2 STATEMENT OF CHANGES IN NET ASSETS For the period from January 1, 2006 to December 31, 2006 SEB Asia ex. Japan Fund USD NET ASSETS AT THE BEGINNING OF THE YEAR

191,299,173.68

Net income for the year

1,037,314.49

Net realised gain on: - sales of securities and foreign exchange

30,178,322.24

Total net realised gain

31,215,636.73

Change in net unrealised appreciation on: - securities

27,038,278.08

Total change in net unrealised appreciation

27,038,278.08

Increase in net assets as a result of operations

58,253,914.81

Proceeds on issue of "C" units

51,670,521.41

Payment on redemptions of "C" units

-46,088,486.40

TOTAL NET ASSETS AT THE END OF THE YEAR

255,135,123.50

The accompanying notes are an integral part of these financial statements. 10

SEB Fund 2 STATEMENT OF NET ASSETS As at December 31, 2006 SEB Asia ex. Japan Fund USD Assets Portfolio at cost Unrealised appreciation Portfolio at market value (note 1) Cash at banks Receivable interest and/or dividends Other assets Total assets

179,855,946.93 75,972,643.19 255,828,590.12 1,990,364.72 99,191.94 2,846,961.72 260,765,108.50

Bank overdraft Other liabilities Total liabilities

-13,564.10 -5,616,420.90 -5,629,985.00

TOTAL NET ASSETS

255,135,123.50

SEB Fund 2 STATISTICAL INFORMATION As at December 31, 2006 SEB Asia ex. Japan Fund USD Number of "C" units outstanding as at December 31, 2006

35,899,054.2660

Total net assets as at December 31, 2006 as at December 31, 2005 as at December 31, 2004

255,135,123.50 191,299,173.68 139,613,295.24

Net asset value per "C" unit as at December 31, 2006 as at December 31, 2005 as at December 31, 2004

7.1070 5.5129 4.4184

Dividend paid 2006

NIL

Total Expense Ratio *) (TER) in % 01.01.2006 - 31.12.2006

1.8

Portfolio Turnover Rate **) (PTR) in % 01.01.2006 - 31.12.2006

65

*) TER is calculated by the following formula:

(Total expenses / average TNA) * 100

**) PTR is calculated by the following formula:

((Total 1 - Total 2) / average TNA) * 100

TNA = Total Net Assets Total 1 = Total of securities transactions for the period under review (purchases + sales) Total 2 = Total of subscribed and redeemed units for the period under review (purchases + sales) The accompanying notes are an integral part of these financial statements. 11

SEB Fund 2 NOTES TO THE FINANCIAL STATEMENTS

As at December 31, 2006

Note 1. SIGNIFICANT ACCOUNTING POLICIES The financial statements are presented in accordance with Luxembourg regulations relating to Undertakings for Collective Investment. Investments: a) Transferable securities and money market instruments, which are officially listed on the stock exchange, are valued at the last available price; b) Transferable securities and money market instruments, which are not officially listed on a stock exchange, but which are traded on another regulated market are valued at a price no lower than the bid price and no higher than the ask price at the time of the valuation and at which the Management Company considers to be an appropriate market price; c) Transferable securities and money market instruments quoted or traded on several markets are valued on the basis of the last available price of the principal market for the transferable securities or money market instruments in question, unless these prices are not representative. d) In the event that such prices are not in line with market condition, or for securities and money market instruments other than those covered in a), b) and c) above for which there are no fixed prices, these securities and money market instruments, as well as other assets, will be valued at the current market value as determined in good faith by the Management Company, following generally accepted valuation principles verifiable by auditors. e) Liquid assets are valued at their nominal value plus accrued interest. Results on sales of securities are determined by the average cost method. Capital: The Portfolio Manager needs to perform transactions in order to uphold the desired asset allocation as a result of the flows and out of the Sub-Funds. While performing these transactions brokerage and transaction costs will occur. Trades in all/or part of the underlying instruments will be caused. Acting in the Unitholders’ interest, the net asset value will be adjusted if on any Valuation Day the aggregate transactions in units of all Classes of a Sub-Fund result in a net increase or decrease of units which exceeds a threshold set by the Board of Directors from time to time (relating to the cost of market dealing for the Sub-Fund), the net asset value per unit of the relevant Sub-Fund will be adjusted which reflects both the estimated fiscal charges and dealing costs (brokerage and transaction costs) that may be incurred by the Sub-Fund and the estimated bid/offer spread of the assets in which the respective Sub-Fund invests following the net movement of units of the Sub-Fund. The adjustment will be an addition when the net movement results in an increase of all units of the Sub-Fund and a deduction when it results in a decrease. Currency translation: All assets denominated in a different currency to the respective Fund’s currency are converted into this respective Fund’s currency at the last available average exchange rate. Separate accounts are maintained for each Sub-Fund in the currency in which the net asset value of the units to which it relates is expressed (the accounting currency). Transactions denominated in a currency other than the accounting currency are recorded on the basis of exchange rates prevailing on the date they occur or accrue to the Sub-Fund. Assets and liabilities, expressed in a currency other than the accounting currency, are translated on the basis of exchange rates ruling at the balance sheet date. The financial statements of the Fund are the aggregate of the financial statements of the different Sub-Funds which, where applicable, are translated into US dollars at the year-end exchange rate. 12

SEB Fund 2 NOTES TO THE FINANCIAL STATEMENTS

As at December 31, 2006

As at December 31, 2006, the exchange rates were as follows: 1 1 1 1 1

HKD IDR KRW MYR SGD

= = = = =

0.128580 0.000111 0.001075 0.283447 0.651763

USD USD USD USD USD

1 THB 1 TWD 1 PHP

= = =

0.027663 0.030689 0.020404

USD USD USD

Income: Interest is recognised on an accrual basis. Note 2. MANAGEMENT FEE In payment of its services, the Management Company receives a commission at an annual rate of maximum 1.75% of the Sub-Fund’s net assets. A twelfth of this rate is being payable at the end of each month and based on the average net assets of the Sub-Fund calculated daily during the relevant month. The Management Company pays accounting, administration, custodian and all other charges and fees on behalf of the Fund, except for taxes, bank and brokerage fees for transactions in securities making up the Fund’s portfolio as well as transaction fees on transfers referring to redemption of units. Note 3. TAXES The Fund is not subject to any Luxembourg taxes on income or capital gains under existing legislation. The Fund is, however, subject to the “taxe d'abonnement” which is charged at the rate of 0.05% per annum, based on the net assets of the Fund at the end of each calendar quarter. The tax is calculated daily and paid quarterly. Note 4. CHANGES IN PORTFOLIO COMPOSITION Details of purchases and sales of investments are available, free of charge, from the registered office of the Management Company of the Fund. Note 5. NEW SUB-FUND A new Sub-Fund named SEB Russia Fund was launched on December 2, 2006 with an initial net asset value per “RC (EUR)” units of EUR 10. The investment objective of the Sub-Fund is to achieve capital appreciation through investments in a portfolio consisting primarily of Russian equities and / or Commonwealth of Independent States. The Sub-Fund will have its first financial year-end as per December 31, 2007. In the interim, a first semi-annual report will be issued as of June 30, 2007.

13

INDEPENDENT AUDITOR’S REPORT

To the Unitholders of SEB Fund 2 We have audited the accompanying financial statements of SEB Fund 2, which comprise the statement of net assets and the schedule of investment and other net assets as at December 31, 2006 and the statement of operations and the statement of changes in net assets for the year then ended, and a summary of significant accounting policies and other explanatory notes to the financial statements. Board of Directors of the Management Company’s responsibility for the financial statements The Board of Directors of the Management Company is responsible for the preparation and fair presentation of these financial statements in accordance with Luxembourg legal and regulatory requirements relating to the preparation of the financial statements. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor’s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing as adopted by the “Institut des Réviseurs d’Entreprises”. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the Auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the Auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors of the Management Company, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, these financial statements give a true and fair view of the financial position of SEB Fund 2 as of December 31, 2006, and of the results of its operations and changes in its net assets for the year then ended in accordance with Luxembourg legal and regulatory requirements relating to the preparation of the financial statements. Other matters Supplementary information included in the annual report has been reviewed in the context of our mandate but has not been subject to specific audit procedures carried out in accordance with the standards described above. Consequently, we express no opinion on such information. However, we have no observation to make concerning such information in the context of the financial statements taken as a whole.

PricewaterhouseCoopers S.à r.l. Réviseur d’entreprises Represented by

Luxembourg, March 30, 2007

Jean-Robert Lentz

14

NOTES TO THE “EU SAVINGS TAX DIRECTIVE”

The Council of the European Union adopted on June 3, 2003 a Council Directive 2003/48/EC on the taxation of savings income in the form of interest payments (the "Savings Tax Directive") under which Member States of the European Union ("Member States") will be required to provide tax authorities of another Member State with details of payment of interest or other similar income paid by a person within its jurisdiction to an individual resident in that other Member State. Austria, Belgium and the Grand Duchy of Luxembourg have opted alternatively for a withholding tax system for a transitional period in relation to such payments. The Luxembourg law of June 21, 2005 implemented the Savings Directive into Luxembourg law (the "Savings Directive Law"). Pursuant to the Savings Directive Law, from July 1, 2005 until June 30, 2008, the withholding tax rate on interests will be 15% and from July 1, 2008 until June 30, 2011, the withholding tax will be 20% rising to 35% from July 2011 onwards. Article 9 of the Savings Directive Law provides that no withholding tax will be withheld if the beneficial owner expressly authorizes the paying agent to report information in accordance with the provisions of the Savings Directive Law. Dividends distributed by a Sub-Fund will be subject to the Savings Tax Directive if more than 15% of the relevant SubFund's assets are invested in debt claims as defined in the Savings Directive Law. Proceeds realised by Unitholders on the disposal of units will be subject to such reporting or withholding if more than 40% of the relevant Sub-Fund's assets are invested in debt claims as defined by the Savings Directive Law. The determination of the portion of debt claims has been carried out based on an asset test. Key dates for this asset test were 30.06.2006 and 31.12.2006. The average percentage of debt claims is as follows: SEB Fund 2 - SEB Asia ex. Japan Fund:

1.09%

Thus, for the period 01.05.2007 - 30.04.2008, SEB Fund 2 - SEB Asia ex. Japan Fund is excluded from the Savings Tax Directive.

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