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)
Date: 2004-06-07
Institutions: European Commission
Subjects: approximation of laws, company structure, financial instrument, information, investment company, securities

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Corrigendum to Commission Recommendation 2004/384/EC of 27 April 2004 on some contents of the simpli-
fied 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 Com-
munity, and in particular Article 211, second indent, thereof,

Whereas:

(1)

(2)

(3)

and of

transferable

investments

the Council (2). The

In order to enhance effective investor information, provi-
sions concerning the simplified prospectus were intro-
duced in Council Directive 85/611/EEC of 20 December
1985 on the coordination of
laws, regulations, and
administrative provisions relating to undertakings for
collective
securities
in
(UCITS) (1) by Directive 2001/107/EC of the European
Parliament
simplified
prospectus is designed to provide clear
information
about the essentials the investor should know before
investing in a fund, and be easily understood by the
average retail investor. The simplified prospectus is also
designed to facilitate the cross-border marketing of units
of UCITS, and be used as a single marketing tool
throughout
the Community. Those provisions them-
selves stress that host Member States are not permitted
to ask for any additions or modifications except transla-
tion.

it

investor protection,

In order to ensure the effectiveness of this key element
is desirable to clarify the
of
contents and presentation of some of the elements of
information which have to be included into the simpli-
fied prospectus pursuant to Schedule C of Annex I to
Directive 85/611/EEC. This is critical
to ensuring a
common reading of the contents of Schedule C, and has
to be achieved in the most appropriate and timely way
available, taking into account the recent transposition
process in the Member States and the need for appro-
priate implementation.

For that purpose, the mere clarification of definitions
relating to the contents of the relevant indents of Sche-
dule C would not be sufficient to achieve the necessary
level of harmonisation, which is, in particular, intrinsi-
cally linked to the choice and definition of some ratios

(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.

(4)

(5)

relating to economic information (i.e. costs and portfolio
turnover). Setting those ratios, which are critical
to
investor information, does not fall within the regulatory
powers conferred upon the Commission by Article 53a
of Directive 85/611/EEC. Since
implementing
powers conferred upon the Commission by the Directive
do not include the choice and structure of ratios, a
Commission recommendation is for the moment the
only available
common,
comprehensive reading of the relevant contents of Sche-
dule C.

to support

instrument

the

a

The description of
investment objectives
the UCITS'
should inform investors about the investment goal the
UCITS intends to pursue. Therefore, it is desirable that
the simplified prospectus contain, in a concise form, an
appropriate description of the outcomes sought for the
investment,
information on any third-party guarantees
which protect investors, for example against a downfall
or on a minimum level of increase of the value of their
investment and information on index-tracking objec-
tives.

the UCITS'

In conformity with the requirements set forth under
Article 24a(1) and (2) of Directive 85/611/EEC,
the
investment policy in the
description of
simplified prospectus should allow the average investor
to understand the manner and method by which the
investment goal
is expected to be achieved and draw
investors' attention on the UCITS' relevant characteris-
tics. Therefore,
simplified
is desirable
prospectus briefly make clear the main categories of
eligible instruments, the portfolio management strategy
of the UCITS, by drawing attention to possible risk-
concentration profiles where relevant, and the key char-
acteristics of the bonds in which the UCITS invests. It is
also desirable that
the simplified prospectus contain
information on the financial derivative instruments, the
management style and the strategy to achieve the index-
tracking objective in the case of index-tracking funds.

that

the

it

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(6)

(7)

(8)

(9)

(10)

In keeping with the safeguards provided for in Article
the average
24a(1) and (3) of Directive 85/611/EEC,
investor should be enabled to understand the risk profile
of a UCITS and be adequately informed of relevant risk
characteristics. It is therefore desirable that the simplified
prospectus contain a brief and easily comprehensible
description, in narrative form, of all the risks material
and relevant to the UCITS. It is also advisable to encou-
rage Member States, where they deem it relevant in the
light of customary disclosure practice and existing
investor protection standards, to require that this infor-
mation be supplemented by a quantitative risk indicator
based on the UCITS volatility, but subject to further
convergence work on such risk indicators.

To avoid misleading information for investors on histor-
ical performance and to advance the comparability of
UCITS for investors within the Community, it is neces-
sary to clarify the way past performance should be
presented.

For the sake of clarity and concision of the simplified
prospectus,
it is desirable that information on the tax
regime be limited to the tax regime applicable to the
UCITS in its home Member State. To facilitate proper
investor information, it is however appropriate that this
information be supplemented by a warning that further
taxation may apply to the individual investor taking into
account that the taxation of individual
investors will
regulation applicable in their
depend on the fiscal
personal or particular case.

To ensure effective investor protection and enhance
investor confidence in the fund industry, it is desirable
that the simplified prospectus provide for full transpar-
ency of all the costs actually borne by investors in rela-
tion to their investment. To this end, it is necessary to
disclose a total expense ratio (TER) calculated as an indi-
cator of the fund's total operating costs. It is therefore
also necessary to clarify how the TER should be calcu-
lated. Since entry and exit commissions and other
expenses directly paid by the investor are not included
in the TER, it is desirable that they be shown separately
as well as all the other costs not included in the TER,
including disclosure of transaction costs when these are
deemed to be available by the home Member State
is desirable to
competent authorities.
disclose the portfolio turnover rate calculated on a stan-
dardised basis, as an additional indicator of the relevance
of transaction costs.

In any case,

it

it

is appropriate

In view of the current differences in market practice on
fee-sharing agreements and comparable fee arrange-
these be adequately
ments,
disclosed to investors. To improve transparency for
investors,
it is therefore necessary that the simplified
prospectus indicate the existence of any such agreements
or arrangements. It is also advisable to invite investors to
consult the full prospectus for detailed information on

that

this kind of arrangement, which should enable them to
understand to whom the expenses are paid and whether
possible conflicts of interest will be resolved in their best
interest.

(11)

investors' needs

in terms of
The understanding of
product information and cross-border comparability has
to be made subject to further progress, also in the light
of consumer studies on national markets,
in order to
underpin the completion of a true,
investor-friendly,
internal market for UCITS. Member States should there-
fore carry out, in so far as possible, further testing of
measures taken in this field, in particular following this
recommendation, and to report accordingly to the
Commission. The Commission may consider in due time
whether there is a need to propose legislative measures
to leverage on experience and Member States' feedback
on the implementation of this recommendation,

HEREBY RECOMMENDS:

1. As regards the investment information referred to in
the second heading of Schedule C in Annex I to Direc-
tive 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 inter-
pret ‘a short definition of UCITS' objectives’ as meaning the
following information:

(a) a concise and appropriate description of
sought for any investment in the UCITS;

the outcomes

(b) a clear statement of any guarantees offered by third parties
to protect investors and any restrictions on those guaran-
tees;

(c) a statement, where relevant, that the UCITS is intended to
track an index/indices, and sufficient indications to enable
investors both to identify the relevant index/indices and to
understand the extent or degree of tracking pursued.

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 inter-
pret ‘the unit trust's/common fund's or the investment compa-
ny's investment policy’ as meaning the following information,
provided it is material and relevant:

(a) the main categories of eligible financial instruments which

are the object of investment;

(b) whether the UCITS has a particular strategy in relation to
any industrial, geographic or other market sectors or
specific classes of assets, e.g. investments in emerging coun-
tries' financial instruments;

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(c) where relevant, a warning that, whilst the actual portfolio
composition is required to comply with the broad legal and
statutory rules and limits, risk-concentration may occur in
regard of certain tighter asset classes, economic and
geographic sectors;

(d) if the UCITS invests in bonds, an indication of whether
they are corporate or government, their duration and the
rating requirements;

(e) if the UCITS uses financial derivative instruments, an indi-
cation of whether this is done in pursuit of the UCITS'
objectives, or for hedging purposes only;

(f) whether the UCITS' management style contemplates some
reference to a benchmark; and in particular whether the
UCITS has an ‘index tracking’ objective, with an indication
of the strategy to be pursued to achieve this;

(g) whether the UCITS' management style is based on a tactical
asset allocation with high frequency portfolio adjustments.

(a) the risk that the entire market of an asset class will decline
thus affecting the prices and values of the assets (market
risk);

(b) the risk that an issuer or a counterparty will default (credit

risk);

(c) only where strictly relevant, the risk that a settlement in a
transfer system does not take place as expected because a
counterparty does not pay or deliver on time or as expected
(settlement risk);

(d) the risk that a position can not be liquidated in a timely

manner at a reasonable price (liquidity risk);

(e) the risk that the investment's value will be affected by
changes in exchange rates (exchange or currency risk);

(f) only where strictly relevant, the risk of loss of assets held in
custody that could result from the insolvency, negligence or
fraudulent action of the custodian or of a subcustodian
(custody risk);

1.3. Joint presentation of the UCITS' objectives and invest-

ment policy

(g) risks related to a concentration of assets or markets.

Home Member States are recommended to allow the informa-
tion 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 inter-
pret ‘a brief assessment of the fund's risk profile’ as meaning
the following information:

1.4.1. Overall structure of the information provided;

(a) a statement to the effect that the value of investments may
fall as well as rise and that investors may get back less than
they put in;

(b) a statement that details of all the risks actually mentioned
in the simplified prospectus may be found in the full
prospectus;

(c) a textual description of any risk investors have to face in
relation to their investment, but only where such risk is
relevant and material, based on risk impact and probability.

1.4.2. Precisions regarding the textual description of risks

1.4.2.2. H or i z ont a l r i sk fa c tor s

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:

(a) performance risk,

including the variability of risk levels
depending on individual fund selections, and the existence,
absence of, or restrictions on any guarantees given by third
parties;

(b) risks to capital, including potential risk of erosion resulting
from withdrawals/cancellations of units and distributions in
excess of investment returns;

(c) exposure to the performance of the provider/third-party
guarantor, where investment in the product involves direct
investment in the provider, rather than assets held by the
provider;

(d) inflexibility, both within the product

(including early
surrender risk) and constraints on switching to other provi-
ders;

(e) inflation risk;

(f) lack of certainty that environmental factors, such as a tax

regime, will persist.

1.4.2.3. Possi ble p r i or i t i sa ti on of i nfor ma ti on di sc lo-

sur e

1.4.2.1. Sp e ci fi c r i sks

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:

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 priori-
tise, based on scale and materiality, the risks so as to better
highlight the individual risk profile of the UCITS.

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1.4.3. Additional disclosure of a synthetic risk indicator

1.5.3. Exclusion of subscription and redemption fees, subject

to

appropriate disclosure

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:

(a) the volatility of the UCITS' portfolio should be intended as

measuring the dispersion of the UCITS' return;

(b) the UCITS' return should be calculated taking into account
all the UCITS' net asset values (NAVs) of the period, e.g.
daily NAVs where this is the normal frequency of NAV
calculation as approved by the UCITS competent authori-
ties, computed by assessing the UCITS assets on that same
frequency.

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

In the third indent, Member States are recommended to inter-
pret 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:

(a) the UCITS' past performance, as presented using a bar chart
showing annual returns for the last 10 full consecutive
years. If the UCITS has been in existence for fewer than 10
years but at least for a period of one year,
it is recom-
mended that the annual returns, calculated net of tax and
charges, be given for as many years as are available;

(b) if a UCITS is managed according to a benchmark or if its
cost structure includes a performance fee depending on a
benchmark, the information on the past performance of
the UCITS should include a comparison with the past
performance of the benchmark according to which the
UCITS is managed or the performance fee is calculated.
Member States are recommended to require that compar-
ison to be achieved by representing the past performance
of the benchmark and that of the UCITS on the same bar-
chart and/or separately.

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 recom-
mended to require also a comparison with the cumulative
performance, or cumulative average performance (where rele-
vant) of a benchmark, when comparison to a benchmark is
required in accordance with point 1.5.1.(b).

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 calcula-
tion 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' invest-
ment 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 inter-
pret ‘tax regime’ as meaning the following information:

(a) the tax regime applicable to the UCITS in its home Member

State;

(b) a statement which recalls that the regime of taxation of the
income or capital gains received by individual
investors
depends on the tax law applicable to the personal situation
of each individual investor and/or to the place where the
capital is invested and that if investors are unclear as to
their fiscal position, they should seek professional advice or
information from local organisations, where available.

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 recom-
mended 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:

(a) disclosure of a total expense ratio (TER), calculated as indi-
cated in Annex I, except for newly created UCITS where a
TER cannot yet be calculated;

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(b) on an ex ante basis, disclosure of the expected cost struc-
ture, i.e. an indication of all costs available according to the
list set forth in Annex I so as to provide investors, insofar
as possible, with a reasonable estimate of expected costs;

(c) all entry and exit commissions and other expenses directly

paid by the investor;

(d) an indication of all the other costs not included in the TER,
including disclosure of transaction costs when these are
deemed to be available by the home Member State compe-
tent authorities;

(e) as an additional indicator of the importance of transaction
costs, the portfolio turnover rate, calculated as shown in
Annex II;

(f) an indication of the existence of fee-sharing agreements

and soft commissions.

The requirement set out in point (f) of the first paragraph
should not be interpreted as a general validation of the compli-
ance 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. Ide nti fi c a ti on of ‘ fe e -sh a r i ng a g r e e me nts’

Member States are recommended to identify and classify as fee-
sharing agreements those agreements whereby a party remun-
erated, 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:

(a) fee-sharing agreements on transaction costs between a
UCITS' management company and a broker whereby the
broker agrees to split with the management company the
transactions fees paid by the UCITS to the broker for
processing transactions for the UCITS;

(b) fee-sharing agreements in funds of funds between a UCITS
management company and another fund (or its manage-
ment company) whereby, if that UCITS invests in the fund,
part of the fees charged to that UCITS (either directly –
subscription/redemption fees – or indirectly – TER) because
of this investment will be paid by the target fund (or its
to the UCITS management
management
company.

company)

2.2.2.2. Ide nti fi ca ti on of ‘soft commi ssi ons’

Member States are recommended to identify as soft commis-
sions 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 port-
folio turnover rate to be either included in or attached to the
simplified prospectus in the same paper as information on past
performance.

3. The Member States are requested to inform the Commis-
sion, in so far as possible, by 30 September 2004 of any
measures they have taken further to this recommendation
and to inform it of the first results of its implementation, in
as far as they are able, no later than 28 February 2005.

4. This recommendation is addressed to the Member States.

Done at Brussels, 27 April 2004.

For the Commission

Frederik BOLKESTEIN

Member of the Commission

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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

2.1. The total operating costs are all the expenses which come in deduction of a UCITS' assets. These costs are usually
shown in a UCITS' statement of operations for the relevant fiscal period. They are assessed on an ‘all taxes included’
basis, which means that the gross value of expenses should be used.

2.2. They include any legitimate expenses of the UCITS, whatever their basis of calculation (e.g. flat-fee, asset-based,

transaction-based (1)), such as:

— management costs including performance fees,

— administration costs,

— fees linked to depository duties,

— audit fees,

— payments to shareholder services providers including payments to the UCITS' transfer agent and payments to
broker-dealers that are record owners of the UCITS' shares and that provide sub-accounting services for the
beneficial owners of the UCITS shares,

— payments to lawyers,

— any distribution or unit cancellation costs charged to the fund,

— registration fees, regulatory fees and similar charges,

— any additional remuneration of the management company (or any other party) corresponding to certain fee-

sharing agreements in accordance to point 4 below.

2.3. The total operating costs do not include:

— transaction costs which are costs incurred by a UCITS in connection with transactions on its portfolio. They
include brokerage fees, taxes and linked charges and the market impact of the transaction taking into account
the remuneration of the broker and the liquidity of the concerned assets,

— interest on borrowing,

— payments incurred because of financial derivative instruments,

— entry /exit commissions or any other fees paid directly by the investor,

— soft commissions in accordance with point 4.

3. Calculation method and disclosure

3.1 The TER is calculated at least once a year on an ex post basis, generally with reference to the fiscal year of the
UCITS. For specific purposes it may also be calculated for other time periods. 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 years'/periods' TER figures.

3.2 The average net assets must be calculated using figures that are based on the UCITS' net assets at each calculation
of the net asset value, e.g. daily NAVs where this is the normal frequency of NAV calculation as approved by the
UCITS competent authorities. Further circumstances or events which could lead to misleading figures have equally
to be taken into consideration.

Tax relief should not be taken into account.

The calculation method of the TER must be validated by the UCITS' auditors and/or competent authorities.

(1) 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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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:

— the remuneration of a management company through a fee-sharing agreement with a broker on transaction
costs and with other fund management companies in the case of funds of funds (if this remuneration has not
been already been taken into account in the synthetic TER or through other costs already charged to the fund
and therefore directly included into the TER) should anyway be taken into account in the TER,

— conversely, the remuneration of a management company through a fee-sharing agreement with a fund (except
when this remuneration falls under the scope of the specific fund-of-fund case covered in the previous indent)
should not be taken into account.

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:

— the UCITS' total operating costs expressed by its TER and all the costs suffered by the UCITS through holdings
in underlying funds (i.e. those expressed by the TER of the underlying funds weighted on the basis of the UCITS
investment proportion), plus the subscription and redemption fees of these underlying funds, divided by

— the average net assets of the fund.

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:

— the impossibility of calculating the synthetic TER for that fraction of the investment must be disclosed,

— the maximum proportion of management fees charged to the underlying fund(s) must be disclosed in the

simplified prospectus,

— a synthetic figure of total expected costs, by calculating:

— a truncated synthetic TER incorporating the TER of each of those underlying funds for which the TER is

calculated according to this Annex, weighted on the basis of the UCITS investment proportion, and

— by adding, for each of the other underlying funds, the subscription and redemption fees plus the best avail-
able upper-bound assessment of TER-eligible costs. This should include the maximum management fee and
the last available performance fee for that fund, weighted on the basis of the UCITS investment proportion.

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.

7.6.2004

EN

Official Journal of the European Union

L 199/37

ANNEX II

Portfolio turnover rate

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

Purchases of securities = X

Sales of securities = Y

Total 1 = Total of transactions in securities = X + Y

Issues/Subscriptions of units of the fund = S

Cancellations/redemptions of units of the fund = T

Total 2 = Total transactions in units of the fund = S + T

Reference average of total net assets = M

Turnover ¼

(cid:1)
ð

Þ
Total 1 - Total 2
M

(cid:2)

(cid:1) 100

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.