The European Securities and Markets Authority (ESMA) published a Q&A (25 September 2012) on the Key Investor Information Document (KIID) for UCITS.
The Q&A aims to promote common supervisory approaches and practices in respect of the KIID. The Q&A covers;
- Preparation of KIID by UCITS that are no longer marketed to the public or by UCITS in liquidation; Even where a UCITS is no longer marketed to the public, an up-to-date version of the KIID should be available to the existing investors. When a UCITS is in liquidation there can be no obligation to prepare a KIID as the liquidator may have assumed many of the powers of the UCITS management company. A structured UCITS must keep its KIID up to date.
- Communication of KIID to investors; Existing investors should be provided with a KIID in the case of additional investments, on the basis that the KIID is a pre-contractual document and each additional subscription is a new contract. However, where investors invest through a regular savings plan, a KIID is not required in relation to the periodic subscriptions, unless a change is made to the subscription arrangements, for example, increases or decreases in the subscription amount, which would require a new subscription form. For switching sub-funds in the same umbrella, the investor who is switching must receive the KIID for the sub-fund they are going into. A KIID does not need to be provided to existing investors unless they are making additional subscriptions. Investors always have the right to be provided with the KIID on request. All prospective investors (including professional investors) must be provided with a KIID.
- Treatment of UCITS with share or unit classes; A separate KIID must be produced for each individual share class. However, information relevant to two or more share classes may be combined into a single KIID provided the resulting KIID complies in full with all KIID requirements (including the limit on length). Also, a UCITS may select a class to represent one or more other classes of the UCITS provided the information in the KIID is fair, clear and not misleading to prospective investors in those other classes. Where charging structures differ between classes, the share class with the highest overall charge is the most appropriate representative share class to avoid the risk of understating charges. However, it is the responsibility of the UCITS to select the most appropriate representative share class having regard to the characteristics of the UCITS, the nature of the differences between share classes in the UCITS and the range of choices on offer to each investor.
- Past performance; Where appropriate, a statement that there is insufficient data to provide a useful indication of past performance should be included in the KIID. There is no need to accompany that statement with a blank performance chart. Where a UCITS refers to an index in its investment objectives and policies as a benchmark and will measure the performance against this but does not intend to track that index, a bar showing the performance of the benchmark index must be included in the bar chart alongside each bar showing the UCITS past performance. It should be made clear in the past performance section of the KIID that the performance is not tracking the index. Where a UCITS refers to an index in its investment objectives and policies (for example as an indication of the universe from which investments may be selected) but does not intend to measure performance against that index it is not necessary to show the performance of the index in the past performance section of the KIID. When there is no data available for the bar chart, the year should be shown as blank with no annotation other than the date. Where a material change occurs to a UCITS’ objectives and investment policy during the period displayed in the bar chart, the UCITS’ past performance prior to that material change must be shown. Therefore, if the benchmark is modified, the bar chart should display the performance of the previous benchmark for the period preceding the change. A statement indicating this change should also be included in the past performance section. Past performance figures must be calculated on the basis that any distributable income of the fund has been reinvested. Therefore, where available, the performance of the benchmark with reinvestment of revenues should be used in the bar chart alongside the UCITS’ past performance. Where such a benchmark does not exist, an appropriate disclosure highlighting that the benchmark does not take into account the reinvestment of revenues should be included in the KIID.
- Clear language; The KIID can signpost to a glossary but the use of a glossary should not result in too numerous cross-references. The KIID can show the complete name of the fund when first mentioned and simply refer to it as "the Fund" thereafter in the KIID. The same approach can be taken for share classes of funds with a reference to "the share class of the fund" in the KIID.
- Identification of the UCITS; The name of the investment manager(s) of the UCITS, should not be shown in the KIID.
- Interestingly, questions on the practical application of any of the UCITS requirements may be sent to the following email address at ESMA: UCITSKIID@esma.europa.eu !