According to the UCITS rules, the fund must publish a prospectus, annual and semi-annual reports, and a Key Investor Information Document, or KIID. The KIID replaces another document known as the simplified prospectus, and all UCITS funds must have them at the latest by July 1, 2012.
The fund prospectus provides comprehensive details of the fund’s investment goals and strategies, and of the inherent risks, and may contain past performance information if applicable. It will also state how the fund is valued and the terms and conditions for buying or selling shares or units. However, the prospectus can be hard to read and understand for non-experts. The KIID has been created to fill the gap as a concise but full overview of the fund’s main features, written in plain language and produced in a standard format (mostly on two A4 pages).
The KIID informs ordinary investors about how a fund operates, what it invests in, the level of risk of its investments, a history of its performance, and details of the regular costs that will be deducted from the fund’s assets. Fund managers must produce a KIID for every UCITS fund they market (in appropriate languages for each country) and for each distinct class of shares or units. New ones must be produced in the event of significant changes to the fund, and at least every year.
The KIID should provide enough information for an investor to understand whether or not the fund in question is suitable for them. It uses a measure known as the Synthetic Risk and Reward Indicator to show its targeted risk/reward profile on a scale between 1 (the lowest level of risk and potential reward) and 7 (the highest level). The KIID should also discuss non-performance risks such as exchange rate fluctuations that might affect investor returns.
A fund’s annual report provides details of its investments and performance and includes commentary from the fund’s manager about developments over the financial year. The annual report (and a semi-annual report) provide investors with the information to help them judge whether the fund is being managed in the way they have been promised and whether it is still appropriate for their investment needs. An independent audit of the accounts provides the assurance that the published numbers are accurate.