1. EFRAG’s preliminary position on the IASB Exposure Draft Investment Entites Draft comment letter 29 September 2011

2. EFRAG preliminary position EFRAG agrees with We agree with the IASB’s proposal for an exception to the consolidation principle on the basis that the measurement of investees controlled by an investment entity at fair value produces more decision-useful information than consolidation EFRAG has a number of concerns We are not in favour of requiring a parent, which is not an investment entity itself, to consolidate the controlled entities that it holds through subsidiaries that are investment entities Whilst we agree with most of the criteria for determining whether an entity is an investment entity, we believe that the existence of an exit strategy should be placed more prominently. We would encourage the IASB to carry out an impact assessment to better understand better the practical implications of any amendments to IAS 28. EFRAG’s overall assessment

3. EFRAG preliminary position Scope exception EFRAG supports the exception to consolidation because measuring an investment entity controlled investees at fair value results in information that is more decision-useful as it is better aligned with the entity’s business model. Questions to constituents EFRAG is interested in obtaining views from constituents on whether the exclusion from consolidation should be applied at an entity level or at the level of individual investments. If you believe that the exclusion should be applied at the level of individual investments, which criteria should such investments meet to qualify for the exclusion in order to make the exception robust. Exclusion of investment entities from consolidation (Question 1)

4. EFRAG preliminary position Proposed criteria in the ED EFRAG agrees with the criteria for determining whether an entity is an investment entity. However, we believe that the existence of an exit strategy should be placed more prominently. Questions to constituents EFRAG is interested in obtaining views from constituents on whether all the criteria proposed in the ED are necessary in order to define an investment entity. In particular, do you believe the criteria in paragraphs 2(a) and 2(d) of the ED and the requirement to have an exit strategy are necessary. EFRAG would like to know whether or not you believe the criteria in the ED would prevent entities from applying the exception even though you consider them to be investment entities. Criteria for determining whether an entity is an investment entity (Question 2)

5. EFRAG preliminary position Activities other than its investing activities EFRAG believes that if an investment entity provides investment services to its own investment business then this should not affect the investment entity classification. Nature of the investment activity (Question 3)

6. EFRAG preliminary position Qualification of a single investor unrelated to the fund manager as investment entity EFRAG believes it is appropriate to require that an investment entity has more than one investor. Pooling of funds (Question 4)

7. EFRAG preliminary position Application of the fair value model of IAS 40 to investment properties held by investment entities EFRAG agrees that an investment entity that manages substantially all of its investments at fair value should measure investment properties and financial assets at fair value. Measurement guidance (Question 5)

8. EFRAG preliminary position Roll-up of fair value accounting to the parent company EFRAG is not in favour of requiring that a parent, which is not an investment entity itself, consolidate the controlled entities that it holds through subsidiaries that are investment entities. Accounting in the consolidated financial statements of a non-investment entity parent (Question 6)

9. EFRAG preliminary position Disclosure objective and application guidance EFRAG agrees with the disclosure objective as stated. However, we are concerned about the level of detailed narrative that has been included to explain the objective. Disclosure (Question 7)

10. EFRAG preliminary position Prospective application of the proposals We believe that the requirements should be applied retrospectively, unless impracticable. This would avoid inconsistencies with the transitional provisions of IFRS 10 and result in information that is more comparable. Transition (Question 8)

11. EFRAG preliminary position Replacement of the content of current scope exclusion by a reference to ‘investment entity’ We would encourage the IASB to carry out an impact assessment to understand better the implications of any amendments to IAS 28. Request for comments EFRAG is interested in receiving responses to the following questions: Are you affected by the proposed amendments to paragraph 18 of IAS 28? If so, what is the impact of those changes on your financial statements and the cost of preparing your financial statements? Do you believe the proposed amendment to paragraph 18 of IAS 28 is appropriate? Scope exclusion in IAS 28 (Question 9)