Management’s Viewpoint

Management disagreed with the auditors.Following is its rebuttal:

1. Incorporation inside the United States with U.S. shareholders. FAS 52 clearly states that the functional currency really should be determined by “the main economic environment in which that entity operates as opposed to by the technical detail of incorporation.” Similarly, nowhere does FAS 52 state that the facts that the company has U.S. shareholders and pays dividends in U.S. dollars are relevant. In fact, FAS 52 concerns itself throughout with the firm and its management rather than its shareholders
2. Financial reporting in U.S. dollars under U.S. GAAP. The auditors fail to differentiate between reporting currency and functional currency. It can be clear that the U.S. dollar ought to be the reporting currency, but that alone doesn't mean that the U.S. dollar is the functional currency.
3. Payment of certain expenses in dollars. The payment of expenses in U.S. dollars is no reason to create the dollar the functional currency. Although costs of some $8 million for calendar year  010 were incurred in U.S. dollars, revenue of over $100 million was earned in euros
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4. U.S. tax and SEC regulations. These considerations are relevant for the reporting currency, not the functional currency.

The decisive argument against identifying the dollar as the functional currency is the fact that carrying out so does not give info that is definitely, in the words of FAS 52, “generally compatible using the expected economic impact of a rate modify on an enterprise’s money flow and equity.” Specifically, the operating money flow of the Fund is located entirely in Spain once the initial transfer of funds raised by the concern of capital is created. The Fund buys and sells investments in Spain, and receives all its revenue from Spain. If the functional currency is euros, then realized currency fluctuations are recognized only when funds is repatriated to the United States. The present practice of “realizing” an exchange profit or loss when, for instance, cash in Spain is excha ged for an investment purchased in Spain is wrong and misleading.