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Corrigendum to Commission Recommendation 2004/384/EC of 27 April 2004 on some contents of the simplified prospectus as provided for in Schedule C of Annex I to Council Directive 85/611/EEC

(Official Journal of the European Union L 144 of 30 April 2004)

Recommendation 2004/384/EC should read as follows:

COMMISSION RECOMMENDATION

of 27 April 2004                     

on some contents of the simplified prospectus as provided for in Schedule C of Annex I to Council Directive 85/611/EEC

(notified under document number C(2002) 1541/2)

(Text with EEA relevance)

(2004/384/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Community, and in particular Article 211, second indent, thereof,

Whereas:

HEREBY RECOMMENDS:

1.   As regards the investment information referred to in the second heading of Schedule C in Annex I to Directive 85/611/EEC it is recommended that Member States apply the following interpretations.

1.1.   Interpretation of ‘short definition of UCITS' objectives’

In the first indent, Member States are recommended to interpret ‘a short definition of UCITS' objectives’ as meaning the following information:

1.2.   Interpretation of ‘the unit trust's/common fund's or the investment company's investment policy’

In the second indent Member States are recommended to interpret ‘the unit trust's/common fund's or the investment company's investment policy’ as meaning the following information, provided it is material and relevant:

1.3.   Joint presentation of the UCITS' objectives and investment policy

Home Member States are recommended to allow the information required under points 1.1 and 1.2 to be set out as a single item in the simplified prospectus (e.g. for the information on index tracking), provided that the information so combined does not lead to confusion of the objectives and policies of the UCITS. The order of the information items may be adapted to reflect the UCITS' specific investment objectives and policy.

1.4.   Interpretation of ‘a brief assessment of the fund's risk profile’

In the second indent, Member States are recommended to interpret ‘a brief assessment of the fund's risk profile’ as meaning the following information:

1.4.1.   Overall structure of the information provided;

1.4.2.   Precisions regarding the textual description of risks

1.4.2.1.   Specific risks

The description referred to in point 1.4.1.(c) should include a brief and understandable explanation of any specific risk arising from particular investment policies or strategies or associated with specific markets or assets relevant to the UCITS such as:

1.4.2.2.   Horizontal risk factors

The description referred to in point 1.4.1.(c) should also mention, where relevant and material, the following factors that may affect the product:

1.4.2.3.   Possible prioritisation of information disclosure

In order to avoid conveying a misleading image of the relevant risks, Member States are also recommended to consider requiring the presentation of the information items to prioritise, based on scale and materiality, the risks so as to better highlight the individual risk profile of the UCITS.

1.4.3.   Additional disclosure of a synthetic risk indicator

Where the UCITS has been set up at least one year before, home Member States are also invited to consider as a possible option requiring that the description referred to in point 1.4.1.(c) be supplemented by a synthetic indicator of risk in just one figure or word, based on the volatility of the UCITS' portfolio, in which case:

1.5.   Interpretation of ‘historical performance of the unit trust/common fund/investment company (where applicable)’

In the third indent, Member States are recommended to interpret the ‘historical performance of the unit trust/common fund/investment company (where applicable)’ with ‘a warning that this is not an indicator of future performance’ as meaning the following information:

1.5.1   Disclosure of past performance:

1.5.2.   Disclosure of cumulative (average) performance

Additionally, Member States are recommended to consider requiring disclosure, either of the cumulative performance, or the cumulative average performance of the fund over specific periods of time (such as on three, five and 10 years). In case they use either of these options, Member States are recommended to require also a comparison with the cumulative performance, or cumulative average performance (where relevant) of a benchmark, when comparison to a benchmark is required in accordance with point 1.5.1.(b).

1.5.3.   Exclusion of subscription and redemption fees, subject to appropriate disclosure

Taking into account existing regulatory standards, Member States are recommended to consider, whether or not to require subscription and redemption fees to be included in the calculation of the fund performance. However, Member States should require the exclusion of that information (where relevant) to be subject to an appropriate statement drawing attention to this fact. Member States are also recommended to encourage their competent authorities to ensure progressive convergence to standards aligned on best practice in performance calculation.

1.5.4.   Disclosure of a benchmark

Member States are also invited to consider as a possible option requiring disclosure of a benchmark for all UCITS authorised in their jurisdiction, regardless of the fact that the UCITS' investment objective does not explicitly refer to a benchmark.

2.   As regards the economic information referred to in the third heading of Schedule C in Annex I to Directive 85/611/EEC it is recommended that Member States apply the following interpretations:

2.1.   Interpretation of ‘tax regime’

In the first indent, Member States are recommended to interpret ‘tax regime’ as meaning the following information:

2.2   Interpretation of ‘entry and exit commissions’ and ‘other possible expenses or fees’

2.2.1.   Overall contents of the information provided

In the second and third indents, Member States are recommended to interpret the ‘entry and exit commissions’ of the fund and ‘other possible expenses or fees, distinguishing between those to be paid by the unit-holder and those to be paid out of the unit trust's/common fund's or the investment company's assets’ as meaning the following information:

The requirement set out in point (f) of the first paragraph should not be interpreted as a general validation of the compliance of any individual agreement or commission with Directive 85/611/EEC, and especially with Article 5f(1)(b) thereof, or with national regulations. Taking into account current market practice, Member States are therefore invited to require UCITS to consider how far existing fee-sharing agreements and comparable fee-arrangements are for the exclusive benefit of the UCITS.

Member States are recommended to provide for the simplified prospectus to make a reference to the full prospectus for detailed information on that kind of arrangements, which should allow any investor to understand to whom expenses are to be paid and how possible conflicts of interest will be resolved in his/her best interest. Member States are therefore recommended to ensure that the information provided in the simplified prospectus remains concise.

2.2.2.   Precisions on the notions of ‘fee-sharing agreements’ and ‘soft commissions’

2.2.2.1.   Identification of ‘fee-sharing agreements’

Member States are recommended to identify and classify as fee-sharing agreements those agreements whereby a party remunerated, either directly or indirectly, out of the assets of a UCITS agrees to split its remuneration with another party and which result in that other party meeting expenses through this fee-sharing agreement that should normally be met, either directly or indirectly, out of the assets of the UCITS.

Furthermore, Member States are recommended to consider the following as fee-sharing agreements within the meaning of the above paragraph:

2.2.2.2.   Identification of ‘soft commissions’

Member States are recommended to identify as soft commissions any economic benefit, other than clearing and execution services, that an asset manager receives in connection with the fund's payment of commissions on transactions that involve the fund's portfolio securities. Soft commissions are typically obtained from, or through, the executing broker.

2.2.3.   Presentation of TER and portfolio turnover rate

Member States are invited to allow both the TER and the portfolio turnover rate to be either included in or attached to the simplified prospectus in the same paper as information on past performance.

Done at Brussels, 27 April 2004.

For the Commission

Frederik BOLKESTEIN                        

Member of the Commission

ANNEX I

Total expense ratio (TER)

1.   Definition of the TER

The total expense ratio (TER) of a UCITS is equal to the ratio of the UCITS' total operating costs to its average net assets calculated as according to paragraph 3.

2.   Included/excluded costs

3.   Calculation method and disclosure

4.   Fee-sharing agreements and soft commissions

It regularly results from fee-sharing agreements on expenses that are generally not included in the TER, that the management company or another party is actually meeting, in all or in part, operating costs that should normally be included in the TER. They should therefore be taken into account when calculating the TER, by adding to the total operating costs any remuneration of the management company (or another party) that derives from such fee-sharing agreements.

There is no need to take into account fee-sharing agreements on expenses that are already in the scope of the TER. Soft commissions should also be left outside the scope of the TER.

Thus:

5.   Performance fees

Performance fees should be included in the TER and should also be disclosed separately as a percentage of the average net asset value.

6.   UCITS investing in UCITS or in non-UCITS

When a UCITS invests at least 10 % of its net asset value in other UCITS or in non-UCITS which publish a TER in accordance with this Annex, a synthetic TER corresponding to that investment should be disclosed.

The synthetic TER is equal to the ratio of:

As mentioned in the previous subparagraph, subscription fees and redemption fees of the underlying funds should be included into the TER. Subscription and redemption fees may not be charged when the underlying funds belong to the same group in accordance with Article 24(3) of Directive 85/611/EEC.

When any of the underlying non-UCITS does not publish a TER in accordance with this Annex, disclosure of costs should be adapted in the following way:

6.   Umbrella funds/multiclass funds

In the case of umbrella funds, the TER should be calculated for each subfund. If, in the case of multiclass funds, the TER differs between different share classes, a separate TER should be calculated and disclosed for each share class. Furthermore, in keeping with the principle of equality among investors, where there are differences in fees and expenses across classes, these different fees/expenses should be disclosed separately in the simplified prospectus. An additional statement should indicate that the objective criteria (e.g. the amount of subscription), on which these differences are based, are available in the full prospectus.

ANNEX II

Portfolio turnover rate

A fund's or, where relevant, a compartment's portfolio turnover rate should be calculated in the following way:

The reference average of total net assets corresponds to the average of net asset values calculated with the same frequency as under Annex I, Article 1(3). The turnover rate disclosed should correspond to the period(s) for which a TER is disclosed. The simplified prospectus should in any case include a clear reference to an information source (e.g. the fund's website) where the investor may obtain previous periods' p.

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(1)OJ L 375, 31.12.1985, p. 3; Directive as last amended by Directive 2001/108/EC of the European Parliament and of the Council (OJ L 41, 13.2.2001, p. 35).

(2)OJ L 41, 13.2.2001, p. 20.

(3)  This non-exhaustive typology of calculation bases reflects the diversity of recent commercial practice across Member States (i.e. at the end of 2003) and should not be interpreted as a general validation of the compliance of any individual agreement or commission with Directive 85/611/EEC, as last amended by Directives 2001/107/EC and 2001/108/EC, and especially with Article 5f(1)(b) thereof, regarding conflicts of interest, or with national regulations.

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