SECTION 1 — Objectives and investment policy
Specific contents of the description
1. The description contained in the ‘Objectives and investment policy’ section of the key investor information document shall cover those essential features of the UCITS about which an investor should be informed, even if these features do not form part of the description of objectives and investment policy in the prospectus, including:
(a)
the main categories of eligible financial instruments that are the object of investment;
(b)
the possibility that the investor may redeem units of UCITS on demand, qualifying that statement with an indication as to the frequency of dealing in units;
(c)
whether the UCITS has a particular target in relation to any industrial, geographic or other market sectors or specific classes of assets;
(d)
whether the UCITS allows for discretionary choices in regards to the particular investments that are to be made, and whether this approach includes or implies a reference to a benchmark and if so, which one;
(e)
whether dividend income is distributed or reinvested.
For the purposes of point (d), where a reference to a benchmark is implied, the degree of freedom available in relation to this benchmark shall be indicated, and where the UCITS has an index-tracking objective, this shall be stated.
2. The description referred to in paragraph 1 shall include the following information, so long as it is relevant:
(a)
where the UCITS invests in debt securities, an indication of whether they are issued by corporate bodies, governments or other entities, and, if applicable, any minimum rating requirements;
(b)
where the UCITS is a structured fund, an explanation in simple terms of all elements necessary for a correct understanding of the pay-off and the factors that are expected to determine performance, including references, if necessary, to the details on the algorithm and its workings which appear in the prospectus;
(c)
where the choice of assets is guided by specific criteria, an explanation of those criteria, such as ‘growth’, ‘value’ or ‘high dividends’;
(d)
where specific asset management techniques are used, which may include hedging, arbitrage or leverage, an explanation in simple terms of the factors that are expected to determine the performance of the UCITS;
(e)
where the impact of portfolio transaction costs on returns is likely to be material due to the strategy adopted by the UCITS, a statement that this is the case, making it also clear that portfolio transaction costs are paid from the assets of the fund in addition to the charges set out in Section 3 of this Chapter;
(f)
where a minimum recommended term for holding units in the UCITS is stated either in the prospectus or in any marketing documents, or where it is stated that a minimum holding period is an essential element of the investment strategy, a statement with the following wording:
‘Recommendation: this fund may not be appropriate for investors who plan to withdraw their money within [period of time]’.
3. Information included under paragraphs 1 and 2 shall distinguish between the broad categories of investments as specified under paragraphs 1(a), (c) and 2(a) and the approach to these investments to be adopted by a management company as specified under paragraphs 1(d) and 2 (b), (c) and (d).
4. The ‘Objectives and investment policy’ section of the key investor information document may contain elements other than those listed in paragraph 2, including the description of the UCITS’ investment strategy, where these elements are necessary to adequately describe the objectives and investment policy of the UCITS.
SECTION 2 — Risk and reward profile
Explanation of potential risks and rewards, including the use of an indicator
1. The ‘Risk and reward profile’ section of the key investor information document shall contain a synthetic indicator, supplemented by:
(a)
a narrative explanation of the indicator and its main limitations;
(b)
a narrative explanation of risks which are materially relevant to the UCITS and which are not adequately captured by the synthetic indicator.
2. The synthetic indicator referred to in paragraph 1 shall take the form of a series of categories on a numerical scale with the UCITS assigned to one of the categories. The presentation of the synthetic indicator shall comply with the requirements laid down in Annex I.
3. The computation of the synthetic indicator referred to in paragraph 1, as well as any of its subsequent revisions, shall be adequately documented.
Management companies shall keep records of these computations for a period of not less than five years. This period shall be extended to five years after maturity for the case of structured funds.
4. The narrative explanation referred to in paragraph 1(a) shall include the following information:
(a)
a statement that historical data, such as is used in calculating the synthetic indicator, may not be a reliable indication of the future risk profile of the UCITS;
(b)
a statement that the risk and reward category shown is not guaranteed to remain unchanged and that the categorisation of the UCITS may shift over time;
(c)
a statement that the lowest category does not mean a risk-free investment;
(d)
a brief explanation as to why the UCITS is in a specific category;
(e)
details of the nature, timing and extent of any capital guarantee or protection offered by the UCITS, including the potential effects of redeeming units outside of the guaranteed or protected period.
5. The narrative explanation referred to in paragraph 1(b) shall include the following categories of risks, where these are material:
(a)
credit risk, where a significant level of investment is made in debt securities;
(b)
liquidity risk, where a significant level of investment is made in financial instruments, which are by their nature sufficiently liquid, yet which may under certain circumstances have a relatively low level of liquidity, so as to have an impact on the level of liquidity risk of the UCITS as a whole;
(c)
counterparty risk, where a fund is backed by a guarantee from a third party, or where its investment exposure is obtained to a material degree through one or more contracts with a counterparty;
(d)
operational risks and risks related to safekeeping of assets;
(e)
impact of financial techniques as referred to in Article 50(1)(g) of Directive 2009/65/EC such as derivative contracts on the UCITS’ risk profile where such techniques are used to obtain, increase or reduce exposure to underlying assets.
Principles governing the identification, explanation and presentation of risks
The identification and explanation of risks referred to in Article 8(1)(b) shall be consistent with the internal process for identifying, measuring and monitoring risk adopted by the UCITS’ management company as laid down in Directive 2010/43/EU. Where a management company manages more than one UCITS, the risks shall be identified and explained in a consistent fashion.
Presentation of charges
1. The ‘Charges’ section of the key investor information document shall contain a presentation of charges in the form of a table as laid down in Annex II.
2. The table referred to in paragraph 1 shall be completed in accordance with the following requirements:
(a)
entry and exit charges shall each be the maximum percentage which might be deducted from the investor’s capital commitment to the UCITS;
(b)
a single figure shall be shown for charges taken from the UCITS over a year, to be known as the ‘ongoing charges,’ representing all annual charges and other payments taken from the assets of the UCITS over the defined period, and based on the figures for the preceding year;
(c)
the table shall list and explain any charges taken from the UCITS under certain specific conditions, the basis on which the charge is calculated, and when the charge applies.
Explanation of charges and a statement about the importance of charges
1. The ‘Charges’ section shall contain a narrative explanation of each of the charges specified in the table including the following information:
(a)
with regard to entry and exit charges:
(i)
it shall be made clear that the charges are always maximum figures, as in some cases the investor might pay less;
(ii)
a statement shall be included stating that the investor can find out the actual entry and exit charges from their financial adviser or distributor;
(b)
with regard to ‘ongoing charges’, there shall be a statement that the ongoing charges figure is based on the last year’s expenses, for the year ending [month/year], and that this figure may vary from year to year where this is the case.
2. The ‘Charges’ section shall contain a statement about the importance of charges which shall make clear that the charges an investor pays are used to pay the costs of running the UCITS, including the costs of marketing and distributing the UCITS, and that these charges reduce the potential growth of the investment.
Additional requirements
1. All of the elements of the charging structure shall be presented as clearly as possible to allow investors to consider the combined impact of the charges.
2. Where the impact of portfolio transaction costs on returns is likely to be material due to the strategy adopted by the UCITS, this shall be stated within the ‘Objectives and investment policy’ section, as indicated in Article 7(2)(e).
3. Performance fees shall be disclosed in accordance with Article 10(2)(c). The amount of the performance fee charged during the UCITS’ last financial year shall be included as a percentage figure.
Specific cases
1. Where a new UCITS cannot comply with the requirements contained in Article 10(2)(b) and Article 11(1)(b), the ongoing charges shall be estimated, based on the expected total of charges.
2. Paragraph 1 shall not apply in the following cases:
(a)
for funds which charge a fixed all-inclusive fee, where instead that figure shall be displayed;
(b)
for funds which set a cap or maximum on the amount that can be charged, where instead that figure shall be disclosed so long as the management company gives a commitment to respect the published figure and to absorb any costs that would otherwise cause it to be exceeded.
Cross-referencing
The ‘Charges’ section shall include, where relevant, a cross-reference to those parts of the UCITS prospectus where more detailed information on charges can be found, including information on performance fees and how they are calculated.
SECTION 4 — Past performance
Presentation of past performance
1. The information about the past performance of the UCITS shall be presented in a bar chart covering the performance of the UCITS for the last 10 years.
The size of the bar chart referred to in the first subparagraph shall allow for legibility, but shall under no circumstances exceed half a page in the key investor information document.
2. UCITS with performance of less than 5 complete calendar years shall use a presentation covering the last 5 years only.
3. For any years for which data is not available, the year shall be shown as blank with no annotation other than the date.
4. For a UCITS which does not yet have performance data for one complete calendar year, a statement shall be included explaining that there is insufficient data to provide a useful indication of past performance to investors.
5. The bar chart layout shall be supplemented by statements which appear prominently and which:
(a)
warn about its limited value as a guide to future performance;
(b)
indicate briefly which charges and fees have been included or excluded from the calculation of past performance;
(c)
indicate the year in which the fund came into existence;
(d)
indicate the currency in which past performance has been calculated.
The requirement laid down in point (b) shall not apply to UCITS which do not have entry or exit charges.
6. A key investor information document shall not contain any record of past performance for any part of the current calendar year.
Past performance calculation methodology
The calculation of past performance figures shall be based on the net asset value of the UCITS, and they shall be calculated on the basis that any distributable income of the fund has been reinvested.
Impact and treatment of material changes
1. Where a material change occurs to a UCITS’ objectives and investment policy during the period displayed in the bar chart referred to in Article 15, the UCITS’ past performance prior to that material change shall continue to be shown.
2. The period prior to the material change referred to in paragraph 1 shall be indicated on the bar chart and labelled with a clear warning that the performance was achieved under circumstances that no longer apply.
Use of a benchmark alongside the past performance
1. Where the ‘Objectives and investment policy’ section of the key investor information document makes reference to a benchmark, a bar showing the performance of that benchmark shall be included in the chart alongside each bar showing the UCITS’ past performance.
2. For UCITS which do not have past performance data over the required five or 10 years, the benchmark shall not be shown for years in which the UCITS did not exist.
Use of ‘simulated’ data for past performance
1. A simulated performance record for the period before data was available shall only be permitted in the following cases, provided that its use is fair, clear and not misleading:
(a)
a new share class of an existing UCITS or investment compartment may simulate its performance by taking the performance of another class, provided the two classes do not differ materially in the extent of their participation in the assets of the UCITS;
(b)
a feeder UCITS may simulate its performance by taking the performance of its master UCITS, provided that one of the following conditions are met:
(i)
the feeder’s strategy and objectives do not allow it to hold assets other than units of the master and ancillary liquid assets;
(ii)
the feeder’s characteristics do not differ materially from those of the master.
2. In all cases where performance has been simulated in accordance with paragraph 1, there shall be prominent disclosure on the bar chart that the performance has been simulated.
3. A UCITS changing its legal status but remaining established in the same Member State shall retain its performance record only where the competent authority of the Member State reasonably assesses that the change of status would not impact the UCITS’ performance.
4. In the case of mergers referred to in Article 2(1)(p)(i) and (iii) of Directive 2009/65/EC, only the past performance of the receiving UCITS shall be maintained in the key investor information document.
SECTION 5 — Practical information and cross-references
Content of ‘practical information’ section
1. The ‘Practical information’ section of the key investor information document shall contain the following information relevant to investors in every Member State in which the UCITS is marketed:
(a)
the name of the depositary;
(b)
where and how to obtain further information about the UCITS, copies of its prospectus and its latest annual report and any subsequent half-yearly report, stating in which language(s) those documents are available, and that they may be obtained free of charge;
(c)
where and how to obtain other practical information, including where to find the latest prices of units;
(d)
a statement that the tax legislation of the UCITS’ home Member State may have an impact on the personal tax position of the investor;
(e)
the following statement:
‘[Insert name of investment company or management company] may be held liable solely on the basis of any statement contained in this document that is misleading, inaccurate or inconsistent with the relevant parts of the prospectus for the UCITS.’
2. Where the key investor information document is prepared for a UCITS investment compartment, the ‘Practical information’ section shall include the information specified in Article 25(2) including on investors’ rights to switch between compartments.
3. Where applicable, the ‘Practical information’ section of the key investor information document shall state the information required about available share classes in accordance with Article 26.
Use of cross-references to other sources of information
1. Cross-references to other sources of information, including the prospectus and annual or half-yearly reports, may be included in the key investor information document, provided that all information fundamental to the investors’ understanding of the essential elements of the investment is included in the key investor information document itself.
Cross-references shall be permitted to the website of the UCITS or the management company, including a part of any such website containing the prospectus and the periodic reports.
2. Cross-references referred to in paragraph 1 shall direct the investor to the specific section of the relevant source of information. Several different cross-references may be used within the key investor information document but they shall be kept to a minimum.
SECTION 6 — Review and revision of the key investor information document
Review of key investor information
1. A management company or investment company shall ensure that a review of key investor information is carried out at least every twelve months.
2. A review shall be carried out prior to any proposed change to the prospectus, the fund rules or the instrument of incorporation of the investment company where these changes were not subject to review as referred to in paragraph 1.
3. A review shall be carried out prior to or following any changes regarded as material to the information contained in the key investor information document.
Publication of the revised version
1. Where a review referred to in Article 22 indicates that changes need to be made to the key investor information document, its revised version shall be made available promptly.
2. Where a change to the key investor information document was the expected result of a decision by the management company, including changes to the prospectus, fund rules or the instrument of incorporation of the investment company, the revised version of the key investor information document shall be made available before the change comes into effect.
3. A key investor information document with duly revised presentation of past performance of the UCITS shall be made available no later than 35 business days after 31 December each year.
Material changes to the charging structure
1. The information on charges shall properly reflect any change to the charging structure that results in an increase in the maximum permitted amount of any one-off charge payable directly by the investor.
2. Where the ‘ongoing charges’ calculated in accordance with Article 10(2)(b) are no longer reliable, the management company shall instead estimate a figure for ‘ongoing charges’ that it believes on reasonable grounds to be indicative of the amount likely to be charged to the UCITS in future.
This change of basis shall be disclosed through the following statement:
‘The ongoing charges figure shown here is an estimate of the charges. [Insert short description of why an estimate is being used rather than an ex-post figure.] The UCITS' annual report for each financial year will include detail on the exact charges made.’
Source: EUR-Lex (Publications Office of the EU), © European Union, reuse permitted under Commission Decision 2011/833/EU.
