(a)

PRIIPs where investors could lose more than the amount they invested;

(b)

PRIIPs that fall within one of the categories referred to in items 4 to 10 of Section C of Annex I to Directive 2014/65/EU of the European Parliament and of the Council (1);

(c)

PRIIPs or underlying investments of PRIIPs which are priced on a less regular basis than monthly, or which do not have an appropriate benchmark or proxy, or whose appropriate benchmark or proxy is priced on a less regular basis than monthly.

—

the zero moment, M0 , is the count of the number of observations in the period as under point 10 of this Annex

—

the first moment, M1 , is the mean of all the observed returns in the sample

—

the second M2 , third M3 and fourth M4 moments are defined in the standard manner:

—

,

—

,

—

,

where ri is the return measured on the ith period in the history of returns.

—	the volatility, σ, is given by .

(a)

where there has been no revision of the investment policy over the period referred to in point 10 of this Annex, the VEV that shall be used is the highest of the following VEVs

(b)

where investment policy has been revised during the period referred to in point 10 of this Annex, the VEV that shall be used is the highest of the VEVs referred to in point (a)(ii) and (iii).

(a)

calculate the return for each observed period in the past 5 years, or the years referred to in point 6 of this Annex, by taking the logarithm of the price at the end of each period divided by the price at the end of the previous period;

(b)

randomly select one observed period which corresponds to the return for all underlying contracts for each simulated period in the recommended holding period (the same observed period may be used more than once in the same simulation);

(c)

calculate the return for each contract by summing the returns from the selected periods and correcting this return to ensure that the expected return measured from the simulated distribution of returns is the risk-neutral expectation of the return over the recommended holding period. The final value of the return is given by:

Where:

(d)

calculate the price of each underlying contract by taking the exponential of the return.

(a)

The PCA is performed by:

(b)

The curve simulation is performed as follows:

(a)

the credit assessment assigned to the PRIIP by an ECAI;

(b)

the credit assessment assigned to the relevant obligor by an ECAI;

(c)

in the absence of a credit assessment under either (a) or (b) or both, a default credit assessment as set out in point 43 of this Annex.

(a)

credit quality step 3, if the obligor is regulated as a credit institution or an insurance undertaking under the applicable Union law or the legal framework deemed equivalent under Union law and if the rating of the Member State where the obligor is domiciled would be credit quality step 3;

(b)

credit quality step 5, for any other obligor.

(a)

at all times until maturity equivalent to the payment obligations of the PRIIP to its investors;

(b)

held with a third party on a segregated account under equivalent terms and conditions as those laid down in Directive 2011/61/EU of the European Parliament and of the Council (4) or Directive 2014/91/EU (5); and

(c)

not, under any circumstances, accessible to any other creditors of the manufacturer under applicable law.

(a)

at all times until maturity equivalent to the payment obligations of the PRIIP to its investors;

(b)

identified and held on accounts or registers, based on applicable law, including Articles 275 and 276 of Directive 2009/138/EC of the European Parliament and of the Council (6); and

(c)

such that the claims of retail investors have priority over the claims of other creditors of the PRIIP manufacturer or party bound to make, directly or indirectly, relevant payments to the investor.

(a)

the PRIIP is admitted to trading on a secondary market or alternative liquidity facility and there is no committed liquidity offered by market makers or the PRIIP manufacturer, so that the liquidity depends only on the availability of buyers and sellers on the secondary market or alternative liquidity facility, taking into account that regular trading of a product at one point in time does not guarantee the regular trading of the same product at any other point in time;

(b)

the average liquidity profile of the underlying investments is significantly lower than the regular reimbursement frequency for the PRIIP, when and to the extent liquidity offered by the PRIIP is conditional to the liquidation of its underlying assets;

(c)

the PRIIP manufacturer estimates that the retail investor may face significant difficulties in terms of time or costs for disinvesting during the life of the product, subject to specific market conditions.

(a)

the PRIIP is not admitted to trading on a secondary market, and no alternative liquidity facility is promoted by the PRIIP manufacturer or a third party, or the alternative liquidity facility is subject to significant limiting conditions, including significant early exit penalties or discretionary redemption prices, or where there is an absence of liquidity arrangements;

(b)

the PRIIP offers potential early exit or redemption possibilities prior to the applicable maturity, but these are subject to significant limiting conditions, including significant exist penalties or discretionary redemption prices, or to the prior consent and discretion of the PRIIP manufacturer;

(c)

the PRIIP does not offer potential early exit or redemption possibilities prior to the applicable maturity.

(a)

where the risk of the PRIIP is considered to be significantly higher if the holding period is different;

(b)

where a PRIIP is considered to have a materially relevant liquidity risk or to be illiquid, whether this is contractual in nature or not.

(a)

a warning in bold font where:

(b)

where applicable, an explanation of risks materially relevant to the PRIIP which could not be adequately captured by the SRI (Element E);

(c)

a clarification:

[Element A] The summary risk indicator is a guide to the level of risk of this product compared to other products. It shows how likely it is that the product will lose money because of movements in the markets or because we are not able to pay you.

[Element B] We have classified this product as [1/2/3/4/5/6/7] out of 7, which is [1=‘the lowest’/2=‘a low’/3=‘a medium-low’/4=‘a medium’/5=‘a medium-high’/6=‘the second-highest’/7=‘the highest’] risk class.

[In addition, insert a brief explanation of the classification of the product with a maximum of 300 characters in plain language]

[An example explanation: This rates the potential losses from future performance at a [1=‘very low’/2=‘low’/3=‘medium-low’/4=‘medium’/5=‘medium-high’/6=‘high’/7=‘very high’] level, and poor market conditions [1, 2=‘are very unlikely to’/3=‘are unlikely to’/4=‘could’/5=‘will likely’/6=‘are very likely to’] impact [our] [the] capacity [of X] to pay you].

[[Where applicable:] Element C, in bold] Be aware of currency risk. You will receive payments in a different currency, so the final return you will get depend on the exchange rate between the two currencies. This risk is not considered in the indicator shown above.

[[Where applicable:] Element D] In some circumstances you may be required to make further payments to pay for losses. (in bold) The total loss you may incur may significantly exceed the amount invested.

[Where applicable:] [Element E] [Other risks materially relevant to the PRIIP not included in the summary risk indicator to be explained with a maximum of 200 characters]

[Where applicable:] [Element F] [You are entitled to receive back at least [insert %] of your capital. Any amount over this, and any additional return, depends on future market performance and is uncertain.]

[Where applicable:] [Element G] [However, this protection against future market performance will not apply if you [..]

[Where applicable:] [Element H] [This product does not include any protection from future market performance so you could lose some or all of your investment.]

[Where applicable:] [Element I] [If (we) (are) not able to pay you what is owed, you could lose your entire investment.]

[Where applicable:] [Element J] [However, you may benefit from a consumer protection scheme (see the section ‘what happens if we are unable to pay you’). The indicator shown above does not consider this protection.]

(a)

a favourable scenario;

(b)

a moderate scenario;

(c)

an unfavourable scenario;

(d)

a stress scenario.

(a)

The unfavourable scenario:

(b)

The moderate scenario:

(c)

The favourable scenario:

where N is the number of trading periods in the recommended holding period, and where the other terms are defined in point 12 of Annex II.

(a)

Identify a sub interval of length w which corresponds to the following intervals:

(b)

Identify for each sub interval of length w the historical lognormal returns rt, where t = t0, t1, t2, …, tN.

(c)

Measure the volatility based on the formula below starting from ti = t0 rolling until ti = tN – w

Where Mw is the count of number of observations in the sub interval and

(d)

(a)

the expected return for each asset or assets shall be the return observed over the period as determined under point 6 of Annex II;

(b)

the expected performance shall be calculated at the end of the recommended holding period, and without discounting the expected performance using the expected risk-free discount factor.

(a)

(b)

Rescale historical returns rt, based on the formula set out below;

(c)

(d)

Calculate the return for each contract by summing returns from selected periods and correcting these returns to ensure that the expected return measured from the simulated return's distribution is as below

where E*[rbootstrapped] is the new simulated mean.

(a)

To produce the favourable, moderate, unfavourable and stress scenarios at an intermediate period for a Category 3 PRIIP with one underlying and whose value is known to be a increasing function of its underlying level, the manufacturer shall pick three underlying simulations as referred to in points 16 to 24 of Annex II used for the calculation of the MRM and one underlying simulation as referred to in point 13 of this Annex, leading respectively to the 90th percentile level for the favourable scenario, the 50th percentile level for the moderate scenario, the 10th percentile level for the unfavourable scenario and the percentile level that corresponds to 1 % for 1 year and to 5 % for the other holding periods for the stress scenario.

(b)

To produce the favourable, moderate, unfavourable and stress scenarios at an intermediate period for a Category 3 PRIIP with one underlying and whose value is known to be an decreasing function of its underlying level, the manufacturer shall pick three underlying simulations as referred to in points 16 to 24 of Annex II used for the calculation of the MRM and one underlying simulation as referred to in point 13 of this Annex, leading respectively to the 90 the percentile level for the unfavourable scenario, the 50th percentile level for the moderate scenario, the 10th percentile level for the favourable scenario and the percentile level that corresponds to 1 % for 1 year and to 5 % for the other holding periods for the stress scenario.

(c)

To produce the favourable, moderate, unfavourable and stress scenarios at an intermediate period for a Category 3 PRIIP other than those mentioned in points (a) and (b) the manufacturer shall choose underlying values consistent with the 90th, the 50th, and the 10th percentile levels and the percentile level that corresponds to 1 % for 1 year and to 5 % for the other holding periods of the PRIIP and use these values as the seed values for a simulation to determine the value of the PRIIP.

(a)

future profit participation shall be taken into account;

(b)

assumptions on future profit participation shall be consistent with the assumption on the annual rates of return of the underlying assets;

(c)

assumptions on how future profits are shared between the PRIIP manufacturer and the retail investor and other assumptions on future profit sharing shall be realistic and in line with the current business practice and business strategy of the PRIIP manufacturer. Where there is sufficient evidence that the undertaking will change its practices or strategy, the assumptions on future profit sharing shall be consistent with the changed practices or strategy. For life insurers within the scope of Directive 2009/138/EC, these assumptions shall be consistent with the assumptions on future management actions used for the valuation of technical provisions in the Solvency II-balance-sheet;

(d)

where a component of the performance relates to profit participation that is payable on a discretionary basis, this component shall only be assumed in the favourable performance scenarios:

(e)

the performance scenarios shall be calculated on the basis of the investment amounts set out in point 32 of this Annex.

(a)

paid directly by the retail investor; or

(b)

deducted from a payment received by or due to the retail investor.

(a)

distribution fee, to the extent that the amount is known to the management company. If the actual amount is not known to the management company, the maximum of the possible known distribution costs for the specific PRIIP shall be shown;

(b)

constitution costs (up-front part);

(c)

marketing costs (up-front part);

(d)

subscription fee including taxes.

(a)

expenses necessarily incurred in their operations;

(b)

any payments, including remunerations, to parties connected with the AIF or UCITS or providing services to them;

(c)

transaction costs.

(a)

all payments to the following persons, including any of the following persons to whom they have delegated any function:

(b)

all payments to any person providing outsourced services to any of the above, including:

(c)

registration charges, listing fees, regulatory charges and similar charges, including passporting fees;

(d)

provisioned fees for specific treatment of gain and losses;

(e)

audit fees;

(f)

payments to legal and professional advisers;

(g)

any costs of distribution or marketing, to the extent that the amount is known to the management company. If the actual amount is not known to the management company, the maximum of the possible known distribution costs for the specific PRIIP shall be shown;

(h)

financing costs, related to borrowing (provided by related parties);

(i)

costs of capital guarantee provided by a third party guarantor;

(j)

payments to third parties to meet costs necessarily incurred in connection with the acquisition or disposal of any asset in the fund's portfolio (including transaction costs as referred to in points 7 to 23 of this Annex);

(k)

the value of goods or services received by the management company or any connected person in exchange for placing of dealing orders;

(l)

where a fund invests its assets in UCITS or AIFs, its summary cost indicator shall take account of the charges incurred in the UCITS or AIFs. The following shall be included in the calculation:

(m)

where a fund invests in a PRIIP other than UCITS or AIFs, its summary cost indicator shall take account of the charges incurred in the underlying PRIIP. The following shall be included in the calculation:

(n)

where a fund invests in an investment product other than a PRIIP its summary cost indicator shall take account of the charges incurred in the underlying investment product. The PRIIP manufacturer shall either use any published information that represents a reasonable substitute for summary cost indicator or else shall make a best estimate of its maximum level based on scrutiny of the investment product's current prospectus and most recently published report and accounts;

(o)

operating costs (or any remuneration) under a fee-sharing arrangement with a third party to the extent that they have not been already included in another type of cost mentioned above;

(p)

earnings from efficient portfolio management techniques if they are not paid into the portfolio;

(q)

implicit costs incurred by structured funds as referred to in section II of this Annex, and notably points 36 to 46 of this Annex;

(r)

dividends served by the shares held in the portfolio of the funds, shall the dividends not accrue to the fund.

(a)

a performance–related fee payable to the management company or any investment adviser, including performance fees as referred to in point 24 of this Annex;

(b)

carried interests as referred to in point 25 of this Annex.

(a)

transferable securities as defined by Article 2 of Commission Directive 2007/16/EC (1);

(b)

other instruments that there are frequent opportunities to dispose of, redeem, or otherwise realise at prices that are publicly available to market participants and that are either market prices or prices made available, or validated, by valuation systems independent of the issuer.

(a)

the monetary amount of any anti-dilution levy, or other payment in connection with a transaction in the PRIIP itself, that is paid to the PRIIP may be subtracted from the total transaction costs

(b)

the benefit to the PRIIP of issuing units (or otherwise enabling investment in the PRIIP) at a price other than the mid price, or of cancelling units (or otherwise enabling redemption of funds from the PRIIP) at a price other than the mid price, provided that the PRIIP itself receives the benefit, shall be calculated as follows and may be subtracted from the total transaction costs:

(a)

for each purchase undertaken by the PRIIP, the price of the instrument at the time the purchase order is transmitted to another person for execution (the purchase ‘arrival price’) shall be subtracted from the net realised execution price of the transaction. The resulting value shall be multiplied by the number of units purchased;

(b)

for each sale undertaken by the PRIIP, the net realised execution price of the transaction shall be subtracted from the price of the instrument at the time the order to sell is transmitted to another person for execution (the sale ‘arrival price’). The resulting value shall be multiplied by the number of units sold.

(a)

for instruments that are standardised and where there is regular trading in the instrument itself (for example an index future on a major equity index), transaction costs shall be calculated with reference to the instrument itself. The arrival price shall be determined as the mid-price of the instrument;

(b)

for linear instruments that are customised, and where there is no price transparency or regular trading in the instrument itself, transaction costs shall be calculated with reference to the underlying asset(s). The arrival price shall be calculated based on the price(s) of the underlying assets, using appropriate weightings if there is more than one underlying asset. Where the cost of transacting in the instrument is materially higher than the cost of transacting in the underlying asset, this must be reflected in the transaction cost calculation;

(c)

for non-linear instruments, it is permissible to calculate the transaction costs as the difference between the price paid or received for the instruments and the fair value of the instrument, on the basis described in points 36 to 46 of this Annex.

(a)

for a sale:

(b)

for a purchase:

(a)

for the highest multiple of six months that the PRIIP has been operating, transaction costs shall be calculated on the basis described in points 12 to 18 of this Annex;

(b)

for the remaining period up to three years, transaction costs shall be estimated by multiplying an estimate of portfolio turnover in each asset class according to the methodology referred to in point (c);

(c)

the methodology to be used differs depending on the asset class and shall be determined as follows:

(a)

compute the fees on the basis of historical data covering the last 5 years. The average annual performance fees shall be computed in percentage terms,

(b)

where a full performance fees history is not available because the fund/share class is new or the fund's terms have changed due to the introduction of the performance fee or the change of one of its parameters, the abovementioned method shall be adjusted according to the following steps:

(a)

compute the fees on the basis of historical data covering the last 5 years. The average annual carried interests shall be computed in percentage terms;

(b)

where a full carried interests history is unavailable because the fund/share class is new or the fund's terms have changed due to the introduction of carried interests or the change of one of its parameters, the abovementioned method shall be adjusted according to the following steps:

(a)

sales commissions;

(b)

structuring costs, including market-making costs (spread) and settlement costs;

(c)

hedging costs (to ensure that the PRIIP manufacturer is able to replicate the performance of the derivative component of the structured product — these costs include transaction costs)

(d)

legal fees;

(e)

costs for capital guarantee;

(f)

implicit premium paid to the issuer.

(a)

proportional fees;

(b)

bid-mid spread to sell the product and any explicit costs or penalties for early exit applicable. The estimation of the bid-mid spread shall be done in relation to the availability of a secondary market, to the market conditions and the type of product. In the situation where the PRIIP manufacturer (or a related third party) is the only available counterparty to buy the product on the secondary market, it shall estimate the exit costs to be added to the fair value of the product according to its internal policies;

(c)

contract-for-difference (CFD) related costs such as:

(a)

costs related to coupon payments;

(b)

costs of the underlying, if any.

(a)

governance;

(b)

methodology for the calculation of the fair value.

(a)

complies with the applicable accounting standards, in relation to fair value;

(b)

makes sure that internal pricing models for PRIPs are consistent with the methodologies, modelling and standards used by the PRIIP manufacturer to value its own portfolio under the hypothesis that the product is available for sale or held for trading;

(c)

is consistent with the level of complexity of the product and the type of underlying;

(d)

takes into account the issuer credit risk and the uncertainty about the underlying;

(e)

sets the parameters to identify an active market in order to avoid risk mispricing that could lead in extreme cases to significantly inaccurate estimates;

(f)

maximises the use of relevant observable market inputs and minimizes the use of unobservable inputs.

(a)

market prices, where available or efficiently formed;

(b)

internal pricing models using as an input market values which are indirectly connected to the product, derived from products with similar characteristics (comparable approach);

(c)

internal pricing models based on inputs which are not derived directly from market data for which estimations and assumptions must be formulated (mark-to-model approach).

(a)

the use of recent arm's length market transactions between knowledgeable, professional counterparties;

(b)

reference to the current market price of another instrument that is substantially the same;

(c)

the use of an appropriate discounted cash-flow model where the likelihood of each cash flow is determined using an appropriate model of asset price evolution.

(a)

structuring or marketing costs;

(b)

acquisition, distribution, sales costs;

(c)

processing/operating costs (including costs for the management of the insurance cover);

(d)

cost part of biometric risk premiums referred to in point 59 of this Annex;

(e)

costs of holding required capital (up front part to be disclosed insofar as they are charged).

(a)

structuring or marketing costs;

(b)

acquisition, distribution, sales costs;

(c)

processing/operating costs (including costs for the management of insurance cover);

(d)

cost part of biometric risk premiums referred to in point 59 of this Annex;

(e)

other administrative costs;