COLL Appendix 2 Modifications to the KII Regulation for KII-compliant NURS

1[Note: the numbering of the original articles in the KII Regulation has been retained in this Appendix. References to “[deleted]” in this Appendix refer to provisions which are included in the KII Regulation, but are not included in the modified version set out below.]

CHAPTER I

SUBJECT MATTER AND GENERAL PRINCIPLES

Article 1

Subject matter

[deleted]

Article 2

General principles

1. Requirements laid down in this Regulation shall apply to any authorised fund manager with regard to each KII-compliant NURS it manages.

2. This Regulation shall apply to any ICVC which has chosen not to appoint an authorised corporate director.

Article 3

Principles regarding the NURS-KII document

1. This Regulation specifies in an exhaustive manner the form and content of the document containing key investor information (hereinafter referred to as a NURS-KII 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 NURS-KII 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 KII-compliant NURS 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 NURS-KII document shall be presented in the order as set out in paragraphs 2 to 13.

2. The title ‘Non-UCITS retail scheme Key investor information’ shall appear prominently at the top of the first page of the NURS-KII 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 KII-compliant NURS, including the class or sub-fund thereof, shall be stated prominently. In the case of a sub-fund or class, the name of the KII-compliant NURS shall follow the sub-fund or class name. Where a code number identifying the KII-compliant NURS sub-fund or class exists, it shall form part of the identification of the KII-compliant NURS.

5. The name of the authorised fund manager shall be stated.

6. In addition, in cases where the authorised fund manager 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 NURS-KII 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 NURS-KII 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 NURS-KII document entitled ‘Charges’ shall contain the information set out in Section 3 of Chapter III of this Regulation.

10. The section of the NURS-KII document entitled ‘Past performance’ shall contain the information set out in Section 4 of Chapter III of this Regulation.

11. The section of the NURS-KII 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’.

In cases where the KII-compliant NURS is managed by an authorised fund manager exercising rights under Article 33 of Directive 2011/61/EU (AIFMD), an additional statement shall be included:

‘[Name of authorised fund manager] is authorised in [name of Member State] and regulated by [identity of competent authority]’.

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 NURS-KII 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 NURS-KII document is printed or photocopied in black and white.

3. Where the design of the corporate branding of the authorised fund manager or the group to which it belongs is used, it shall not distract the investor or obscure the text.

Article 6

Length

The NURS-KII 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 NURS-KII document shall cover those essential features of the KII-compliant NURS 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 or other classes of assets that are the object of investment;

(b) the possibility that the investor may redeem units of the KII-compliant NURS on demand, qualifying that statement with an indication as to the frequency of dealing in units;

(c) whether the KII-compliant NURS has a particular target in relation to any industrial, geographic or other market sectors or specific classes of assets;

(d) whether the KII-compliant NURS 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 KII-compliant NURS 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 KII-compliant NURS 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 KII-compliant NURS 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 of 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 KII-compliant NURS;

(e) where the impact of portfolio transaction costs on returns is likely to be material due to the strategy adopted by the KII-compliant NURS, 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 KII-compliant NURS 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 an authorised fund manager as specified under paragraphs 1(d) and 2 (b), (c) and (d).

4. The ‘Objectives and investment policy’ section of the NURS-KII document may contain elements other than those listed in paragraph 2, including the description of the KII-compliant NURS' investment strategy, where these elements are necessary to adequately describe the objectives and investment policy of the KII-compliant NURS.

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 NURS-KII document shall contain a synthetic indicator (except where paragraph 6 applies), 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 KII-compliant NURS 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 KII-compliant NURS 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.

Authorised fund managers 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 KII-compliant NURS;

(b) a statement that the risk and reward category shown is not guaranteed to remain unchanged and that the categorisation of the KII-compliant NURS 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 KII-compliant NURS is in a specific category;

(e) details of the nature, timing and extent of any capital guarantee or protection offered by the KII-compliant NURS, 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 immovables, or 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 KII-compliant NURS 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 such as derivative contracts on the KII-compliant NURS' risk profile where such techniques are used to obtain, increase or reduce exposure to underlying assets.

6. A KII-compliant NURS having a significant exposure to immovables as permitted under COLL 5.6.18R (whereby significant exposure is understood as an exposure of at least 20% in value of the scheme property):

(a) shall not include a synthetic risk and reward indicator in the ‘Risk and reward profile’ section of its NURS-KII document; and

(b) must instead include a full narrative disclosure of risks that are materially relevant to the fund within that section of the NURS-KII document;

7. Paragraph 6 will also apply to a NURS-KII document for a feeder NURS whose qualifying master scheme has a significant exposure to immovables.

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 authorised fund manager. Where an authorised fund manager manages more than one KII-compliant NURS, 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 NURS-KII 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 KII-compliant NURS;

(b) a single figure shall be shown for charges taken from the KII-compliant NURS over a year, to be known as the ‘ongoing charges’, representing all annual charges and other payments taken from the assets of the KII-compliant NURS 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 KII-compliant NURS 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 KII-compliant NURS, including the costs of marketing and distributing the KII-compliant NURS, 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 KII-compliant NURS, 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 KII-compliant NURS' last financial year shall be included as a percentage figure.

Article 13

Specific cases

1. Where a new KII-compliant NURS 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 authorised fund manager 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 KII-compliant NURS 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 KII-compliant NURS shall be presented in a bar chart covering the performance of the KII-compliant NURS for the last 10 years.

The size of the bar chart referred to in the first sub-paragraph shall allow for legibility, but shall under no circumstances exceed half a page in the NURS-KII document.

2. KII-compliant NURS 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 KII-compliant NURS 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 KII-compliant NURS which do not have entry or exit charges.

6. A NURS-KII 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 KII-compliant NURS, 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 KII-compliant NURS’ objectives and investment policy during the period displayed in the bar chart referred to in Article 15, the KII-compliant NURS’ 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 NURS-KII 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 KII-compliant NURS’ past performance.

2. For KII-compliant NURS 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 KII-compliant NURS 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 class of an existing KII-compliant NURS 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 KII-compliant NURS;

(b) a feeder NURS may simulate its performance by taking the performance of its qualifying master scheme, provided that one of the following conditions are met:

(i) the feeder NURS’ strategy and objectives do not allow it to hold assets other than units of the qualifying master scheme and ancillary liquid assets;

(ii) the feeder NURS’ characteristics do not differ materially from those of the qualifying master scheme.

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 KII-compliant NURS changing its legal status but remaining established in the United Kingdom shall retain its performance record only where the FCA reasonably assesses that the change of status would not impact the KII-compliant NURS’ performance.

4. In the case of mergers whereby:

(a) one or more schemes or sub-funds thereof, on being dissolved without going into liquidation, transfer all of their assets and liabilities to another existing KII-compliant NURS or a sub-fund thereof (the ‘receiving KII-compliant NURS’), in exchange for the issue to their unitholders of units of the receiving KII-compliant NURS; or

(b) one or more schemes or sub-funds thereof, which continue to exist until the liabilities have been discharged, transfer their net assets to a KII-compliant NURS which they form or to another existing KII-compliant NURS or a sub-fund thereof (the ‘receiving KII-compliant NURS’); or

(c) one or more sub-funds of a KII-compliant NURS, which continue to exist until the liabilities have been discharged, transfer their net assets to another sub-fund of the same non-UCITS retail scheme (the ‘receiving KII-compliant NURS’);

only the past performance of the receiving KII-compliant NURS shall be maintained in the NURS-KII document.

SECTION 5

Practical information and cross-references

Article 20

Content of ‘practical information’ section

1. The ‘Practical information’ section of the NURS-KII document shall contain the following information relevant to investors in every Member State in which the KII-compliant NURS is marketed:

(a) the name of the depositary;

(b) where and how to obtain further information about the KII-compliant NURS, 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 legislation of the United Kingdom may have an impact on the personal tax position of the investor;

(e) [deleted]

2. Where the NURS-KII document is prepared for a KII-compliant NURS sub-fund, the ‘Practical information’ section shall include the information specified in Article 25(2) including on investors’ rights to switch between sub-funds.

3. Where applicable, the ‘Practical information’ section of the NURS-KII document shall state the information required about available 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 NURS-KII document, provided that all information fundamental to the investors’ understanding of the essential elements of the investment is included in the NURS-KII document itself.

Cross-references shall be permitted to the website of the KII-compliant NURS or the authorised fund manager, 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 NURS-KII document but they shall be kept to a minimum.

SECTION 6

Review and revision of the NURS-KII document

Article 22

Review of key investor information

1. An authorised fund manager or ICVC 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 or the instrument constituting the fund 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 NURS-KII 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 NURS-KII document, its revised version shall be made available promptly.

2. Where a change to the NURS-KII document was the expected result of a decision by the authorised fund manager, including changes to the prospectus or instrument constituting the fund of the ICVC, the revised version of the NURS-KII document shall be made available before the change comes into effect.

3. A NURS-KII document with duly revised presentation of past performance of the KII-compliant NURS 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 authorised fund manager 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 KII-compliant NURS 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 KII-compliant NURS’ annual report for each financial year will include detail on the exact charges made.’

CHAPTER IV

PARTICULAR KII-compliant NURS STRUCTURES

SECTION 1

Sub-funds

Article 25

Sub-funds

1. Where a KII-compliant NURS consists of two or more sub-funds a separate NURS-KII document shall be produced for each sub-fund.

2. Each NURS-KII document referred to in paragraph 1 shall indicate within the ‘practical information’ section the following information:

(a) that the NURS-KII document describes a sub-fund of a KII-compliant NURS, and, if it is the case, that the prospectus and periodic reports are prepared for the entire KII-compliant NURS named at the beginning of the NURS-KII document;

(b) whether or not the assets and liabilities of each sub-fund 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 sub-fund for units in another sub-fund, and if so, where to obtain information about how to exercise that right.

3. Where the authorised fund manager 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 NURS-KII document.

SECTION 2

Classes of units

Article 26

NURS-KII document for classes of units

1. Where a KII-compliant NURS consists of more than one class of units, the NURS-KII document shall be prepared for each class of units.

2. The key investor information pertinent to two or more classes of the same KII-compliant NURS may be combined into a single NURS-KII 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 authorised fund manager may select a class to represent one or more other classes of the KII-compliant NURS, 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 NURS-KII document shall contain the explanation of material risk applicable to any of the other classes being represented. A NURS-KII 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 authorised fund manager 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 NURS-KII 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 KII-compliant NURS' prospectus.

That section shall also indicate where investors can obtain information about the other classes of the KII-compliant NURS that are marketed.

SECTION 3

Fund of funds

Article 28

Objectives and investment policy section

Where the KII-compliant NURS invests a substantial proportion of its assets in other collective investment schemes as referred to in COLL 5.6.10R (‘second schemes’), the description of the objectives and investment policy of that KII-compliant NURS in the NURS-KII document shall include a brief explanation of how the other second schemes are to be selected on an on-going 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 ‘second scheme’ (within the meaning of COLL 5.6.10R), to the extent that these are likely to be material to the KII-compliant NURS as a whole.

Article 30

Charges section

The description of the charges shall take account of any charges that that KII-compliant NURS will itself incur as an investor in the ‘second scheme’ (within the meaning of COLL 5.6.10R). Specifically, any entry and exit charges and ongoing charges levied by the second scheme shall be reflected in the KII-compliant NURS' calculation of its own ongoing charges figure.

SECTION 4

Feeder KII- compliant NURS

Article 31

Objectives and investment policy section

1. The NURS-KII document for a feeder NURS shall contain, in the description of objectives and investment policy, information about the proportion of the feeder NURS’ assets which is invested in the qualifying master scheme.

2. There shall also be a description of the qualifying master scheme’s objectives and investment policy, supplemented as appropriate by either of the following:

(i) an indication that the feeder NURS’ investment returns will be very similar to those of the qualifying master scheme; or

(ii) an explanation of how and why the investment returns of the feeder NURS and qualifying master scheme may differ.

Article 32

Risk and reward profile section

1. Where the risk and reward profile of the feeder NURS differs in any material respect from that of the qualifying master scheme, this fact and the reason for it shall be explained in the ‘Risk and reward profile’ section of the NURS-KII document.

2. Any liquidity risk and the relationship between purchase and redemption arrangements for the qualifying master scheme and feeder NURS shall be explained in the ‘Risk and reward profile’ section of the NURS-KII document.

Article 33

Charges section

The ‘Charges’ section of the NURS-KII document shall cover both the costs of investing in the feeder NURS and any costs and expenses that the qualifying master scheme may charge to the feeder NURS.

In addition, it shall combine the costs of both the feeder NURS and the qualifying master scheme in the ongoing charges figure for the feeder NURS.

Article 34

Practical information section

1. The NURS-KII document for a feeder NURS shall contain in the ‘Practical information’ section information specific to the feeder NURS.

2. The information referred to in paragraph 1 shall include:

(a) a statement that the qualifying master scheme's prospectus, NURS-KII document, and periodic reports and accounts are available to investors of the feeder NURS 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;

(c) where the qualifying master scheme is established in a different Member State to the feeder NURS, and this may affect the feeder NURS’ tax treatment, a statement to this effect.

3. The statement referred to in paragraph 2(a) may refer to the nearest equivalent disclosure document for a qualifying master scheme which does not issue a NURS-KII document.

Article 35

Past performance

1. The past performance presentation in the NURS-KII document of the feeder NURS shall be specific to the feeder NURS, and shall not reproduce the performance record of the qualifying master scheme.

2. Paragraph 1 shall not apply:

(a) where a feeder NURS shows the past performance of its qualifying master scheme as a benchmark; or

(b) where the feeder NURS was launched at a later date than the qualifying master scheme, and where the conditions of Article 19 are satisfied, and where a simulated performance is shown for the years before the feeder NURS existed, based on the past performance of the qualifying master scheme; or

(c) where the feeder NURS has a past performance record from before the date on which it began to operate as a feeder NURS, 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 KII-compliant NURS

Article 36

Performance scenarios

1. The NURS-KII document for structured KII-compliant NURS shall not contain the ‘Past performance’ section.

For the purposes of this Section, structured KII-compliant NURS shall be understood as KII-compliant NURS 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 KII-compliant NURS with similar features.

2. For structured KII-compliant NURS, the ‘Objectives and investment policy’ section of the NURS-KII 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 KII-compliant NURS' 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 KII-compliant NURS.

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 NURS-KII document for structured KII-compliant NURS shall not exceed three pages of A4-sized paper when printed.

CHAPTER V

DURABLE MEDIUM

Article 38

Conditions applying to the provision of a NURS-KII document in a durable medium other than paper or by means of a website

1. Where, the NURS-KII document is to be provided to investors using a durable medium other than paper the following conditions shall be met:

(a) the provision of the NURS-KII document using such a durable medium is appropriate to the context in which the business between the authorised fund manager and the investor is, or is to be, carried on; and

(b) the person to whom the NURS-KII document 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 NURS-KII document 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 authorised fund manager 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 authorised fund manager 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

[deleted]

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 KII-compliant NURS 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.