CELEX: 32004H0384
Language: en
Date: 2004-04-27 00:00:00
Title: 2004/384/EC: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 (Text with EEA relevance) (notified under document number C(2002) 1541/2)

L 144/42           EN                  Official Journal of the European Union                      30.4.2004
                               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:
(1)      In order to enhance effective investor information, provisions concerning the
         simplified prospectus were introduced in Council Directive 85/611/EEC of 20
         December 1985 on the coordination of laws, regulations, and administrative provisions
         relating to undertakings for collective investments in transferable securities (UCITS)1
         by Directive 2001/107/EC of the European Parliament and of the Council2. The
         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 themselves stress that host Member
         States are not permitted to ask for any additions or modifications except translation.
(2)      In order to ensure the effectiveness of this key element of investor protection, it is
         desirable to clarify the contents and presentation of some of the elements of
         information which have to be included into the simplified 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 appropriate implementation.
(3)      For that purpose, the mere clarification of definitions relating to the contents of the
         relevant indents of Schedule C would not be sufficient to achieve the necessary level
         of harmonisation, which is, in particular, intrinsically linked to the choice and
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.
 ---pagebreak--- 30.4.2004        EN               Official Journal of the European Union                  L 144/43
        definition of some ratios 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 the 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 instrument to
        support a common, comprehensive reading of the relevant contents of Schedule C.
(4)     The description of the UCITS' investment objectives 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 objectives.
(5)     In conformity with the requirements set forth under Article 24a(1) and (2) of Directive
        85/611/EEC, the description of the UCITS' investment policy in the 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 characteristics. Therefore, it is desirable that the simplified
        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 characteristics 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.
(6)     In keeping with the safeguards provided for in Article 24a(1) and (3) of Directive
        85/611/EEC, the average 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 encourage Member States, where they deem it relevant in the light of
        customary disclosure practice and existing investor protection standards, to require
        that this information be supplemented by a quantitative risk indicator based on the
        UCITS volatility, but subject to further convergence work on such risk indicators.
(7)     To avoid misleading information for investors on historical performance and to
        advance the comparability of UCITS for investors within the Community, it is
        necessary to clarify the way past performance should be presented.
(8)     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 depend on the fiscal regulation applicable in their personal or particular
        case.
 ---pagebreak--- L 144/44           EN               Official Journal of the European Union                  30.4.2004
(9)      To ensure effective investor protection and enhance investor confidence in the fund
         industry, it is desirable that the simplified prospectus provide for full transparency of
         all the costs actually borne by investors in relation to their investment. To this end, it is
         necessary to disclose a total expense ratio (TER) calculated as an indicator of the
         fund's total operating costs. It is therefore also necessary to clarify how the TER
         should be calculated. 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
         competent authorities. In any case, it is desirable to disclose the portfolio turnover rate
         calculated on a standardised basis, as an additional indicator of the relevance of
         transaction costs.
(10)     In view of the current differences in market practice on fee-sharing agreements and
         comparable fee arrangements, it is appropriate that these be adequately 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 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)     The understanding of investors' needs in terms 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 therefore 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 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:
           (a)   a concise and appropriate description of the outcomes sought for any
                 investment in the UCITS;
           (b)   a clear statement of any guarantees offered by third parties to protect investors
                 and any restrictions on those guarantees;
           (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
 ---pagebreak--- 30.4.2004        EN                Official Journal of the European Union                 L 144/45
               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 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:
          (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 countries’ financial instruments;
          (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 indication 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.
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;
 ---pagebreak--- L 144/46          EN                Official Journal of the European Union                 30.4.2004
          (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
1.4.2.1. 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:
          (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);
          (g)   risks related to a concentration of assets or markets.
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:
          (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;
 ---pagebreak--- 30.4.2004         EN               Official Journal of the European Union                  L 144/47
          (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 providers;
          (e)   inflation risk;
          (f)   lack of certainty that environmental factors, such as a tax regime, will persist.
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 prioritize,
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:
          (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
                authorities, 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 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:
          (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
                recommended 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
 ---pagebreak--- L 144/48         EN               Official Journal of the European Union                 30.4.2004
                performance of the benchmark according to which the UCITS is managed or
                the performance fee is calculated. Member States are recommended to require
                that comparison 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 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:
          (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
 ---pagebreak--- 30.4.2004        EN                 Official Journal of the European Union                 L 144/49
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:
          (a)   disclosure of a total expense ratio (TER), calculated as indicated in Annex I,
                except for newly created UCITS where a TER cannot yet be calculated;
          (b)   on an ex ante basis, disclosure of the expected cost structure, 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 competent 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 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:
          (a)   fee-sharing agreements on transaction costs between a UCITS’ management
                company and a broker whereby the broker agrees to split with the management
 ---pagebreak--- L 144/50          EN               Official Journal of the European Union                 30.4.2004
                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 management 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 management company) to the
                UCITS management company.
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.
3. The Member States are requested to inform the Commission, 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
 ---pagebreak--- 30.4.2004           EN                    Official Journal of the European Union                       L 144/51
                                                        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-based3), 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
3
  This non-exhaustive typology of calculation bases reflects the diversity of recent commercial practice across
         Member States (i.e. at the end of2003) 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.
 ---pagebreak--- L 144/52         EN               Official Journal of the European Union               30.4.2004
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.
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;
 ---pagebreak--- 30.4.2004        EN                Official Journal of the European Union                L 144/53
          –     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 available 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:
 ---pagebreak--- L 144/54         EN              Official Journal of the European Union                  30.4.2004
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.
 ---pagebreak--- 30.4.2004        EN              Official Journal of the European Union              L 144/55
                                              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 = [(Total 1 - Total 2)/M]*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