COLL Appendix 1UK KII Regulation
1 COMMISSION REGULATION (EU) No 583/2010 of 1 July 2010 implementing Directive 2009/65/EC of the European Parliament and of the Council as regards key investor information and conditions to be met when providing key investor information or the prospectus in a durable medium other than paper or by means of a website (Text with EEA relevance)
THE EUROPEAN COMMISSION,
Having regard to the Treaty on the Functioning of the European Union,
Having regard to Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (OJ L 302, 17.11.2009, p. 32), and in particular Article 75(4), Article 78(7), and Article 81(2) thereof,
Whereas:
(1) Directive 2009/65/EC specifies the main principles that should be followed in preparing and providing key investor information, including requirements concerning its format and presentation, its objectives, the main elements of the information that is to be disclosed, who should deliver the information to whom, and the methods that should be used for such delivery. Details on the content and format have been left to be developed further by means of implementing measures, which should be specific enough to ensure that investors receive the information they need in respect to particular fund structures.
(2) The form of a Regulation is justified as this form alone can ensure that the exhaustive content of key investor information is harmonised. Furthermore, a key investor information document will be more efficient where requirements applicable to it are identical in all Member States. All stakeholders should benefit from a harmonised regime on the form and content of the disclosure, which will ensure that information about investment opportunities in the UCITS' market is consistent and comparable.
(3) In some cases, key investor information can be delivered more effectively when the key investor information document is provided to investors through a website, or where the key investor information document is attached to another document when it is given to the potential investor. In these cases, however, the context in which the key investor information document appears should not undermine the key investor information document, or imply that it is an item of promotional literature or that accompanying items of promotional literature are of equal or greater relevance to the retail investor.
(4) It is necessary to ensure that the content of the information is relevant, the organisation of the information is logical and the language appropriate for retail investors. To address these concerns, this Regulation should ensure that the key investor information document is able to engage investors and aid comparisons through its format, presentation and the quality and nature of the language used. This Regulation aims to ensure consistency in the format of the document, including a common running order with identical headings.
(5) This Regulation specifies the content of the information on investment objectives and the investment policy of UCITS so that investors can easily see whether or not a fund is likely to be suitable for their needs. For this reason, the information should indicate whether returns can be expected in the form of capital growth, payment of income, or a combination of both. The description of the investment policy should indicate to the investor what the overall aims of the UCITS are and how these objectives are to be achieved. With regard to the financial instruments in which investments are to be made, only those which may have a material impact on UCITS' performance need to be mentioned, rather than all possible eligible instruments.
(6) This Regulation lays down detailed rules on the presentation of the risk and reward profile of the investment, by requiring use of a synthetic indicator and specifying the content of narrative explanations of the indicator itself and risks which are not captured by the indicator, but which may have a material impact on the risk and reward profile of the UCITS. In applying the rules on the synthetic indicator account should be taken of the methodology for the calculation of the synthetic indicator as developed by competent authorities working within the Committee of European Securities Regulators. The management company should decide on a case-by-case basis which specific risks should be disclosed by analysing the particular characteristics of each fund, bearing in mind the need to avoid over-burdening the document with information that retail investors will find difficult to understand. In addition the narrative explanation of the risk and reward profile should be limited in size in terms of the amount of space it occupies within the key investor information document. It should be possible to have cross-references to the prospectus of the UCITS where full details of its risks are disclosed.
(7) Consistency should be ensured between the explanation of risks in the key investor information document and the management company's internal processes related to risk management, established in accordance with Commission Directive 2010/43/EU of 1 July 2010 implementing Directive 2009/65/EC of the European Parliament and the Council as regards organisational requirements, conflicts of interests, conduct of business, risk management and content of the agreement between a depositary and a management company (see page 42 of this Official Journal). For instance, so as to ensure consistency, the permanent risk management function should where appropriate be given the opportunity to review and comment on the risk and reward profile section of the key investor information document.
(8) This Regulation specifies the common format for the presentation and explanation of charges, including relevant warnings, so that investors are appropriately informed about the charges they will have to incur and their proportion to the amount of capital actually invested into the fund. In applying these rules, account should be taken of the work on the methodology for the calculation of charges figures as developed by competent authorities working within the Committee of European Securities Regulators.
(9) The detailed rules on the presentation of information about past performance are based on the requirements for such information in the Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC (OJ L 145, 30.4.2004, p. 1). This Regulation supplements the rules of Directive 2004/39/EC by including specific requirements necessary for harmonising the information for the purpose of facilitating comparisons between different key investor information documents. In particular, this Regulation prescribes that only net annual returns shall be shown, through a bar chart format. Certain aspects of the presentation of the bar chart should be regulated, including the limited circumstances in which simulated data might be used.
(10) It should be recognised that cross-referring to information might be useful to the investor but it is essential that the key investor information document should contain all information necessary for the investor to understand the essential elements of the UCITS. If cross-references to sources of information other than the prospectus and periodic reports are used, it should be made clear that the prospectus and periodic reports are the primary sources of additional information for investors, and the cross-references should not downplay their significance.
(11) The key investor information document should be reviewed and revised as appropriate and as frequently as is necessary to ensure that it continues to meet the requirements for key investor information specified in Articles 78(2) and 79(1) of Directive 2009/65/EC. As a matter of good practice, management companies should review the key investor information document before entering into any initiative that is likely to result in a significant number of new investors acquiring units in the fund.
(12) The form or content of key investor information may need to be adjusted to specific cases. Consequently, this Regulation tailors the general rules applicable to all UCITS so as to take into account the specific situation of certain types of UCITS, namely those having different investment compartments or share classes, those with fund of funds structures, those with master-feeder structures, and those that are structured, such as capital protected or comparable UCITS.
(13) With regard to UCITS having different share classes, there should be no obligation to produce a separate key investor information document for every such share class, so long as investors' interests are not compromised. The details of two or more classes may be combined into a single key investor information document only where this can be done without making the document too complicated or crowded. Alternatively, a representative class may be selected, but only in cases where there is sufficient similarity between the classes such that information about the representative class is fair, clear and not misleading as regards the represented class. In determining whether the use of a representative class is fair, clear and not misleading, regard should be had to the characteristics of the UCITS, the nature of the differences represented by each class, and the range of choices on offer to each investor or group of investors.
(14) In the case of a fund of funds, the right balance is kept between the information on the UCITS that the investor invests in and its underlying collectives. The key investor information document of a fund of funds should therefore be prepared on the basis that the investor does not wish or need to be informed in detail about the individual features of each of the underlying collectives, which in any case are likely to vary from time to time if the UCITS is being actively managed. However, in order for the key investor information document to deliver effective disclosure of the fund of funds' objective and investment policy, risk factors, and charging structure, the characteristics of its underlying funds should be transparent.
(15) In the case of master-feeder structures, the description of the feeder UCITS' risk and reward profile should not be materially different to that of the corresponding section in the master UCITS' key investor information document so that the feeder can copy information from the key investor information document of the master wherever it is relevant. However, this information should be supplemented by relevant statements or duly adjusted in those cases where ancillary assets held by the feeder might modify the risk profile compared to the master, addressing the risks inherent in these ancillary assets, for instance where derivatives are used. The combined costs of investing in the feeder and the master should be disclosed to investors in the feeder.
(16) With regard to structured UCITS, such as capital protected and other comparable UCITS, the provision of prospective performance scenarios in place of past performance information is required. Prospective performance scenarios involve calculating the expected return of the fund under favourable, adverse, or neutral hypotheses regarding market conditions. These scenarios should be chosen so as to effectively illustrate the full range of possible outcomes according to the formula.
(17) Where the key investor information and the prospectus are to be provided in a durable medium other than paper or by means of a website, additional safety measures are necessary for investor protection reasons, so as to ensure that investors receive information in a form relevant to their needs, and so as to maintain the integrity of the information provided, prevent alterations that undermine its comprehensibility and effectiveness, and avoid manipulation or modification by unauthorised persons. This Regulation contains a reference to rules on durable medium laid down in the Commission Directive 2006/73/EC of 10 August 2006 implementing Directive 2004/39/EC of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive (OJ L 241, 2.9.2006, p. 26) in order to ensure the equal treatment of investors and a level playing field in financial sectors.
(18) In order to allow management companies and investment companies to adapt to the new requirements contained in this Regulation in an efficient and effective manner, the starting date of application of this Regulation should be aligned with the transposition of Directive 2009/65/EC.
(19) The Committee of European Securities Regulators, established by Commission Decision 2009/77/EC (OJ L 25, 29.1.2009, p. 18), has been consulted for technical advice.
(20) The measures provided for in this Regulation are in accordance with the opinion of the European Securities Committee,
HAS ADOPTED THIS REGULATION:
CHAPTER I
SUBJECT MATTER AND GENERAL PRINCIPLES
Article 1
Subject matter
This Regulation lays down the detailed rules for the implementation of Articles 75(2), 78(2) to (5) and 81(1) of Directive 2009/65/EC.
2 Article 1A
Definitions 2
(a) ‘Collective Investment Schemes sourcebook’ means the Collective Investment Schemes sourcebook made by the Financial Conduct Authority under the Financial Services and Markets Act 2000 as in force on IP completion day.2
(b) ‘feeder UCITS’ has the meaning given in section 237(3) of the Financial Services and Markets Act 2000;2
(c) ‘management company’ has the meaning given in section 237(2) of the Financial Services and Markets Act 2000;2
(d) ‘master UCITS’ has the meaning given in section 237(3) of the Financial Services and Markets Act 2000;2
(e) ‘UCITS’ has the meaning given in section 236A of the Financial Services and Markets Act 2000; and2
(f) ‘UK UCITS’ has the meaning given in section 237(3) of the Financial Services and Markets Act 2000.2
Article 2
General principles
1. Requirements laid down in this Regulation shall apply to any management company with regard to each UK UCITS2 it manages.
2. This Regulation shall apply to any investment company which has not designated a management company that has permission under Part 4A of the Financial Services and Markets Act 2000 to carry on the regulated activity specified in article 51ZA of the Regulated Activities Order 20012.
Article 3
Principles regarding the key investor information document
1. This Regulation specifies in an exhaustive manner the form and content of the document containing key investor information (hereinafter referred to as key investor information document). No other information or statements shall be included except where this Regulation states otherwise.
2. The key investor information shall be fair, clear and not misleading.
3. The key investor information document shall be provided in such a way as to ensure that investors are able to distinguish it from other material. In particular, it shall not be presented or delivered in a way that is likely to lead investors to consider it less important than other information about the UK UCITS2 and its risks and benefits.
CHAPTER II
FORM AND PRESENTATION OF KEY INVESTOR INFORMATION
SECTION 1
Title of document, order of contents and headings of sections
Article 4
Title and content of document
1. The content of the key investor information document shall be presented in the order as set out in paragraphs 2 to 13.
2. The title 'Key investor information' shall appear prominently at the top of the first page of the key investor information document.
3. An explanatory statement shall appear directly underneath the title. It shall read:
'This document provides you with key investor information about this fund. It is not marketing material. The information is required by law to help you understand the nature and the risks of investing in this fund. You are advised to read it so you can make an informed decision about whether to invest'.
4. The identification of the UK UCITS2, including the share class or investment compartment thereof, shall be stated prominently. In the case of an investment compartment or share class, the name of the UK UCITS2 shall follow the compartment or share class name. Where a code number identifying the UK UCITS2, investment compartment or share class exists, it shall form part of the identification of the UK UCITS2.
5. The name of the management company shall be stated.
6. In addition, in cases where the management company forms part of a group of companies for legal, administrative or marketing purposes, the name of that group may be stated. Corporate branding may be included provided it does not hinder an investor in understanding the key elements of the investment or diminish his ability to compare investment products.
7. The section of the key investor information document entitled 'Objectives and investment policy' shall contain the information set out in Section 1 of Chapter III of this Regulation.
8. The section of the key investor information document entitled 'Risk and reward profile' shall contain the information set out in Section 2 of Chapter III of this Regulation.
9. The section of the key investor information document entitled 'Charges' shall contain the information set out in Section 3 of Chapter III of this Regulation.
10. The section of the key investor information document entitled 'Past performance' shall contain the information set out in Section 4 of Chapter III of this Regulation.
11. The section of the key investor information document entitled 'Practical information' shall contain the information set out in Section 5 of Chapter III of this Regulation.
12. Authorisation details shall consist of the following statement:
'This fund is authorised in the United Kingdom and regulated by the Financial Conduct Authority’. 2
13. Information on publication shall consist of the following statement:
'This key investor information is accurate as at [the date of publication]'.
SECTION 2
Language, length and presentation
Article 5
Presentation and language
1. A key investor information document shall be:
(a) presented and laid out in a way that is easy to read, using characters of readable size;
(b) clearly expressed and written in language that communicates in a way that facilitates the investor's understanding of the information being communicated, in particular where:
(i) the language used is clear, succinct and comprehensible;
(ii) the use of jargon is avoided;
(iii) technical terms are avoided when everyday words can be used instead;
(c) focused on the key information that investors need.
2. Where colours are used, they shall not diminish the comprehensibility of the information in the event that the key investor information document is printed or photocopied in black and white.
3. Where the design of the corporate branding of the management company or the group to which it belongs is used, it shall not distract the investor or obscure the text.
Article 6
Length
The key investor information document shall not exceed two pages of A4-sized paper when printed.
CHAPTER III
CONTENT OF SECTIONS OF THE KEY INVESTOR INFORMATION DOCUMENT
SECTION 1
Objectives and investment policy
Article 7
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 UK UCITS2 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 UK UCITS2 on demand, qualifying that statement with an indication as to the frequency of dealing in units;
(c) whether the UK UCITS2 has a particular target in relation to any industrial, geographic or other market sectors or specific classes of assets;
(d) whether the UK UCITS2 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 UK UCITS2 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 UK UCITS2 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 UK UCITS2 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 UK UCITS2;
(e) where the impact of portfolio transaction costs on returns is likely to be material due to the strategy adopted by the UK UCITS2, 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 UK UCITS2 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 UK UCITS2' investment strategy, where these elements are necessary to adequately describe the objectives and investment policy of the UK UCITS2.
SECTION 2
Risk and reward profile
Article 8
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 UK UCITS2 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 UK UCITS2 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 UK UCITS2;
(b) a statement that the risk and reward category shown is not guaranteed to remain unchanged and that the categorisation of the UK UCITS2 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 UK UCITS2 is in a specific category;
(e) details of the nature, timing and extent of any capital guarantee or protection offered by the UK UCITS2, 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 UK UCITS2 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 [COLL 5.2.19R]2 such as derivative contracts on the UK UCITS'2 risk profile where such techniques are used to obtain, increase or reduce exposure to underlying assets.
Article 9
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 UK UCITS’2 management company as laid down in [6.12 of COLL]2. Where a management company manages more than one UK UCITS2, the risks shall be identified and explained in a consistent fashion.
SECTION 3
Charges
Article 10
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 UK UCITS2;
(b) a single figure shall be shown for charges taken from the UK UCITS2 over a year, to be known as the 'ongoing charges,' representing all annual charges and other payments taken from the assets of the UK UCITS2 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 UK UCITS2 under certain specific conditions, the basis on which the charge is calculated, and when the charge applies.
Article 11
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 UK UCITS2, including the costs of marketing and distributing the UK UCITS2, and that these charges reduce the potential growth of the investment.
Article 12
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 UK UCITS2, 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 UK UCITS2' last financial year shall be included as a percentage figure.
Article 13
Specific cases
1. Where a new UK UCITS2 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.
Article 14
Cross-referencing
The 'Charges' section shall include, where relevant, a cross-reference to those parts of the UK UCITS2 prospectus where more detailed information on charges can be found, including information on performance fees and how they are calculated.
SECTION 4
Past performance
Article 15
Presentation of past performance
1. The information about the past performance of the UK UCITS2 shall be presented in a bar chart covering the performance of the UK UCITS2 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. UK UCITS2 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 UK UCITS2 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 UK UCITS2 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.
Article 16
Past performance calculation methodology
The calculation of past performance figures shall be based on the net asset value of the UK UCITS2, and they shall be calculated on the basis that any distributable income of the fund has been reinvested.
Article 17
Impact and treatment of material changes
1. Where a material change occurs to a UK UCITS2' objectives and investment policy during the period displayed in the bar chart referred to in Article 15, the UK UCITS2' 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.
Article 18
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 UK UCITS2' past performance.
2. For UK UCITS2 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 UK UCITS2 did not exist.
Article 19
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 UK UCITS2 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 UK UCITS2;
(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 UK UCITS2 changing its legal status shall retain its performance record only where the Financial Conduct Authority2 reasonably assesses that the change of status would not impact the UK UCITS2' performance.
4. In the case of mergers, as defined in regulation 7 of the Undertakings for Collective Investment in Transferable Securities Regulations 2011,2 only the past performance of the receiving UK UCITS2 shall be maintained in the key investor information document.
SECTION 5
Practical information and cross-references
Article 20
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 the United Kingdom2:
(a) the name of the depositary;
(b) where and how to obtain further information about the UK UCITS2, 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 position of the UK UCITS2 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 beheld 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 UK UCITS.' 2
2. Where the key investor information document is prepared for a UK UCITS2 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.
Article 21
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 UK UCITS2 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
Article 22
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.
Article 23
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 UK UCITS2 shall be made available no later than 35 business days after 31 December each year.
Article 24
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 UK UCITS2 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 UK UCITS' 2 annual report for each financial year will include detail on the exact charges made.'
CHAPTER IV
PARTICULAR UK UCITS 2 STRUCTURES
SECTION 1
Investment compartments
Article 25
Investment compartments
1. Where a UK UCITS2 consists of two or more investment compartments a separate key investor information document shall be produced for each individual compartment.
2. Each key investor information document referred to in paragraph 1 shall indicate within the 'practical information' section the following information:
(a) that the key investor information document describes a compartment of a UK UCITS2, and, if it is the case, that the prospectus and periodic reports are prepared for the entire UK UCITS2 named at the beginning of the key investor information document;
(b) whether or not the assets and liabilities of each compartment are segregated by law and how this might affect the investor;
(c) whether or not the investor has the right to exchange his investment in units in one compartment for units in another compartment, and if so, where to obtain information about how to exercise that right.
3. Where the management company sets a charge for the investor to exchange his investment in accordance with paragraph 2(c), and that charge differs from the standard charge for buying or selling units, that charge shall be stated separately in the 'Charges' section of the key investor information document.
SECTION 2
Share classes
Article 26
Key investor information document for share classes
1. Where a UK UCITS2 consists of more than one class of units or shares, the key investor information document shall be prepared for each class of units or shares.
2. The key investor information pertinent to two or more classes of the same UK UCITS2 may be combined into a single key investor information document, provided that the resulting document fully complies with all requirements as laid down in Section 2 of Chapter II, including as to length.
3. The management company may select a class to represent one or more other classes of the UK UCITS2, provided the choice is fair, clear and not misleading to potential investors in those other classes. In such cases the 'Risk and reward profile' section of the key investor information document shall contain the explanation of material risk applicable to any of the other classes being represented. A key investor information document based on the representative class may be provided to investors in the other classes.
4. Different classes shall not be combined into a composite representative class as referred to in paragraph 3.
5. The management company shall keep a record of which other classes are represented by the representative class referred to in paragraph 3 and the grounds justifying that choice.
Article 27
Practical information section
If applicable, the 'Practical information' section of the key investor information document shall be supplemented by an indication of which class has been selected as representative, using the term by which it is designated in the UK UCITS2' prospectus.
That section shall also indicate where investors can obtain information about the other classes of the UK UCITS2 that are marketed in the UK2.
SECTION 3
Fund of funds
Article 28
Objectives and investment policy section
Where the UK UCITS2 invests a substantial proportion of its assets in other UCITS or other collective investment undertakings as referred to in COLL 5.2.13R2, the description of the objectives and investment policy of that UCITS in the key investor information document shall include a brief explanation of how the other collective undertakings are to be selected on an ongoing basis.
Article 29
Risk and reward profile
The narrative explanation of risk factors referred to in Article 8(1)(b) shall take account of the risks posed by each underlying collective undertaking, to the extent that these are likely to be material to the UK UCITS2 as a whole.
Article 30
Charges section
The description of the charges shall take account of any charges that that UK UCITS2 will itself incur as an investor in the underlying collective undertakings. Specifically, any entry and exit charges and ongoing charges levied by the underlying collective undertakings shall be reflected in the UK UCITS2' calculation of its own ongoing charges figure.
SECTION 4
Feeder UCITS
Article 31
Objectives and investment policy section
1. The key investor information document for a feeder UCITS2 shall contain, in the description of objectives and investment policy, information about the proportion of the feeder UCITS' assets which is invested in the master UCITS.
2. There shall also be a description of the master UCITS' objectives and investment policy, supplemented as appropriate by either of the following:
(i) an indication that the feeder UCITS' investment returns will be very similar to those of the master UCITS; or
(ii) an explanation of how and why the investment returns of the feeder and master UCITS may differ.
Article 32
Risk and reward profile section
1. Where the risk and reward profile of the feeder UCITS differs in any material respect from that of the master, this fact and the reason for it shall be explained in the 'Risk and reward profile' section of the key investor information document.
2. Any liquidity risk and the relationship between purchase and redemption arrangements for the master and feeder UCITS shall be explained in the 'Risk and reward profile' section of the key investor information document.
Article 33
Charges section
The 'Charges' section of the key investor information document shall cover both the costs of investing in the feeder UCITS and any costs and expenses that the master UCITS may charge to the feeder UCITS.
In addition, it shall combine the costs of both the feeder and the master UCITS in the ongoing charges figure for the feeder UCITS.
Article 34
Practical information section
1. The key investor information document for a feeder UCITS shall contain in the 'Practical information' section information specific to the feeder UCITS.
2. The information referred to in paragraph 1 shall include:
(a) a statement that the master UCITS' prospectus, key investor information document, and periodic reports and accounts are available to investors of the feeder UCITS upon request, how they may be obtained, and in which language(s);
(b) whether the items listed in point (a) are available in paper copies only or in other durable media, and whether any fee is payable for items not subject to free delivery in accordance with [COLL 4.2.3R and 4.5.15R]2.
(c) where the master UCITS is established in a different Member State to the feeder UCITS, and this may affect the feeder's tax treatment, a statement to this effect.
Article 35
Past performance
1. The past performance presentation in the key investor information document of the feeder UCITS shall be specific to the feeder UCITS, and shall not reproduce the performance record of the master UCITS.
2. Paragraph 1 shall not apply:
(a) where a feeder UCITS shows the past performance of its master UCITS as a benchmark; or
(b) where the feeder was launched as a feeder UCITS at a later date than the master UCITS, and where the conditions of Article 19 are satisfied, and where a simulated performance is shown for the years before the feeder existed, based on the past performance of the master UCITS; or
(c) where the feeder UCITS has a past performance record from before the date on which it began to operate as a feeder, its own record being retained in the bar chart for the relevant years, with the material change labelled as required by Article 17(2).
SECTION 5
Structured UK UCITS 2
Article 36
Performance scenarios
1. The key investor information document for structured UK UCITS2 shall not contain the 'Past performance' section.
For the purposes of this Section, structured UK UCITS2 shall be understood as UK UCITS2 which provide investors, at certain predetermined dates, with algorithm-based payoffs that are linked to the performance, or to the realisation of price changes or other conditions, of financial assets, indices or reference portfolios or UK UCITS2 with similar features.
2. For structured UK UCITS2, the 'Objectives and investment policy' section of the key investor information document shall include an explanation of how the formula works or how the pay-off is calculated.
3. The explanation referred to in paragraph 2 shall be accompanied by an illustration, showing at least three scenarios of the UK UCITS2' potential performance. Appropriate scenarios shall be chosen to show the circumstances in which the formula may generate a low, a medium or a high return, including, where applicable, a negative return for the investor.
4. The scenarios referred to in paragraph 3 shall enable the investor to understand fully all the effects of the calculation mechanism embedded in the formula.
They shall be presented in a way that is fair, clear and not misleading, and that is likely to be understood by the average retail investor. In particular, they shall not artificially magnify the importance of the final performance of the UK UCITS2.
5. The scenarios referred to in paragraph 3 shall be based on reasonable and conservative assumptions about future market conditions and price movements.
However, whenever the formula exposes investors to the possibility of substantial losses, such as a capital guarantee that functions only under certain circumstances, these losses shall be appropriately illustrated, even if the probability of the corresponding market conditions is low.
6. The scenarios referred to in paragraph 3 shall be accompanied by a statement that they are examples that are included to illustrate the formula, and do not represent a forecast of what might happen. It shall be made clear that the scenarios shown may not have an equal probability of occurrence.
Article 37
Length
The key investor information document for structured UK UCITS2 shall not exceed three pages of A4-sized paper when printed.
CHAPTER V
DURABLE MEDIUM
Article 38
Conditions applying to the provision of a key investor information document or a prospectus in a durable medium other than paper or by means of a website
1. Where2 the key investor information document or prospectus is to be provided to investors using a durable medium other than paper the following conditions shall be met:
(a) the provision of the key investor information document or the prospectus using such a durable medium is appropriate to the context in which the business between the management company and the investor is, or is to be, carried on; and
(b) the person to whom the key investor information document or the prospectus is to be provided, when offered the choice between information on paper or in that other durable medium, specifically chooses that other medium.
2. Where the key investor information document or the prospectus is to be provided by means of a website and that information is not addressed personally to the investor, the following conditions shall also be satisfied:
(a) the provision of that information in that medium is appropriate to the context in which the business between the management company and the investor is, or is to be, carried on;
(b) the investor must specifically consent to the provision of that information in that form;
(c) the investor must be notified electronically of the address of the website, and the place on the website where the information may be accessed;
(d) the information must be up to date;
(e) the information must be accessible continuously by means of that website for such period of time as the client may reasonably need to inspect it.
3. For the purposes of this Article, the provision of information by means of electronic communications shall be treated as appropriate to the context in which the business between the management company and the investor is, or is to be, carried on if there is evidence that the investor has regular access to the Internet. The provision by the investor of an e-mail address for the purposes of the carrying on of that business shall be treated as such evidence.
CHAPTER VI
FINAL PROVISIONS
Article 39
Entry into force
1. This Regulation shall enter into force on the 20th day following its publication in the Official Journal of the European Union.
2. This Regulation shall apply from 1 July 2011.
Done at Brussels, 1 July 2010.
For the Commission
The President
José Manuel BARROSOL
ANNEX I
REQUIREMENTS RELATED TO THE PRESENTATION OF THE SYNTHETIC INDICATOR
1. The synthetic indicator shall rank the fund on a scale from 1 to 7 on the basis of its volatility record.
2. The scale shall be shown as a sequence of categories denoted by the whole numbers in ascending order from 1 to 7 running from left to right, representing levels of risk and reward, from lowest to highest.
3. It shall be made clear on the scale that lower risk entails potentially lower reward and that higher risk entails potentially higher rewards.
4. The category into which the UCITS falls shall be prominently indicated.
5. No colours shall be used for distinguishing between items on the scale.
ANNEX II
PRESENTATION OF CHARGES
|
The charges shall be presented in a table structured in the following way: One-off charges taken before or after you invest |
|
|
Entry charge Exit charge |
[ ] % [ ] % |
|
This is the maximum that might be taken out of your money [before it is invested] [before the proceeds of your investment are paid out] |
|
|
Charges taken from the fund over a year |
|
|
Ongoing charge |
[ ] % |
|
Charges taken from the fund under certain specific conditions |
|
|
Performance fee |
[ ] % a year of any returns the fund achieves above the benchmark for these fees, the [insert name of benchmark] |
- A percentage amount shall be indicated for each of these charges.
- In the case of a performance fee, the amount charged in the fund's last financial year shall be included as a percentage figure.
ANNEX III
PRESENTATION OF THE PAST PERFORMANCE INFORMATION
The bar chart presenting past performance shall comply with the following criteria:
1. the scale of the Y-axis of the bar chart shall be linear, not logarithmic;
2. the scale shall be adapted to the span of the bars shown and shall not compress the bars so as to make fluctuations in returns hard to distinguish;
3. the X-axis shall be set at the level of 0% performance;
4. a label shall be added to each bar indicating the return in percentage that was achieved;
5. past performance figures shall be rounded to one decimal place.