Circular 4/2011 of the National Securities Market Commission modifying Circular 4/2008 on the content of quarterly, semi-annual and annual reports of collective investment institutions

OFFICIAL STATE GAZETTE
No. 293 Tuesday, December 6, 2011 Sec. I. Page 129404
I. GENERAL PROVISIONS
NATIONAL SECURITIES MARKET COMMISSION
19174 Circular 4/2011, of November 16, of the National Securities Market Commission, partially modifying Circular 4/2008, of September 11, regarding the content of quarterly, semi-annual and annual reports of collective investment institutions and the position statement.

European Directive 2009/65/EC (UCITS IV Directive) and its implementing regulations have replaced the simplified prospectus with the KII (Key Investor Information), translated into Spanish legislation as Key Investor Information (hereinafter, KII). The KII is the new harmonized document at the European level, consisting of two pages, which seeks to provide investors with essential information for investment decision-making in a short, concise, and clear format.

In this regard, the Second Final Provision of Law 25/2011, of August 1, added a new Fourth Additional Provision to Law 35/2003, of November 4, which states that the KII will be mandatory for financial CIIs (except for free investment ones) from July 1, 2011, replacing the simplified prospectus. Thus, CIIs that comply with Directive 2009/65/EC will have a period of 1 year from July 1, 2011, to adapt their simplified prospectus to the KII. For CIIs that are newly created or whose prospectus is updated at their request, this document will be mandatory from that same date. The content of the KII must comply with what is provided in Regulation 583/2010 of Level II of the UCITS IV Directive. Subsequently, Law 31/2011, of October 4, modifying Law 35/2003, of November 4, on Collective Investment Institutions, introduced into its articles the new informational document: "the document with key investor information".

With the replacement of the simplified prospectus by the KII, it is necessary to adapt certain information currently appearing in the periodic public information so that it aligns with what is provided in the KII. Specifically, this information refers to the expense ratio (known until now as TER or Total Expense Ratio), to which a new definition is given, and the performance-based management fee, which must be reported independently. Additionally, the KII requires the publication of a graph with the historical profitability of the CII, a graph that although not part of the periodic public information (IPP) will be sent jointly with it.

Therefore, the expense ratio and the performance-based management fee of the preceding year, as well as the historical profitability graph sent in the IPP of the second semester, will be incorporated into the KII on an annual basis in order to update the information it contains.

On the other hand, based on the provisions included in Articles 5.12, letter c), 45 bis.4 letter i) and 63.5 letter b) of the Regulation of Law 35/2003, of November 4, on Collective Investment Institutions, modified by Royal Decree 749/2010, of June 7, the Circular is adapted to include the obligation for managers to report on the existence of costs derived from the analysis service, the circumstances, and other relevant information that may have motivated the creation of a CII or special purpose compartment, as well as, in the case of dissolution and liquidation of Real Estate Investment Funds (FII), the most relevant aspects of this process. Likewise, it is also established that corporate CIIs report on the existence of costs derived from the analysis service.

Additionally, given that Circular 6/2010 on derivative instruments establishes that CIIs inform in the periodic public information of the method chosen for measuring total exposure to market risk (commitment, absolute VaR or relative VaR), as well as the levels of maximum, minimum, average VaR and the leverage existing at the end of the reference period for CIIs that decide to calculate their global risk exposure using the VaR methods, the IPP Circular is adapted to include these reporting obligations.

For all the above, and under the direct authorizations conferred on the National Securities Market Commission in Article 21 of the RIIC (Regulation of Collective Investment Institutions), and after the report of the Advisory Committee, this Circular modifies Circular 4/2008, of September 11, of the National Securities Market Commission, regarding the content of quarterly, semi-annual and annual reports of collective investment institutions and the position statement.

Finally, the additional provision of this Circular modifies rules 16.4 and 18.4 of Circular 6/2010 regarding the location of certain information within periodic reports in those CIIs that apply the VaR method to measure total exposure to market risk.

In virtue thereof, the Council of the National Securities Market Commission, in agreement with the Council of State, in its meeting of November 16, 2011, has ordered:

First Rule. Adaptation of the text of Circular 4/2008.
Expense Ratio.
Rule 2, paragraph 4, of Circular 4/2008 is modified, which shall now read as follows:

"4. The reports referred to in this Circular must contain an indication of the CII's expenses expressed as a percentage of its average assets, so the Expense Ratio must be included in said reports. Direct expenses borne by the CII will be included in the numerator, except for the performance-based management fee, among which will be included: asset-based management fee, custodian fee, fees for registration with the CNMV, expenses for external services (except financing expenses), plus any other current management expense borne by the CII, excluding commissions derived from the acquisition or sale of its financial assets, nor any other expense corresponding to payments made directly by the participant or shareholder, such as subscription and redemption commissions. Real estate CIIs will include in the numerator of this ratio the expenses specific to their activity detailed in the annex of this Circular.

CIIs or compartments, where applicable, whose investment policy consists of investing more than 10% of their assets in other CIIs, will additionally include in the Expense Ratio the indirect expenses borne by the investment in the underlying CIIs as well as the subscription and redemption commissions derived from said investments that have been borne by the investing CII. In addition, the amount of commission retrocessions effectively accrued in favor of the fund will be deducted."

Second Rule. Adaptation of the Clarifying Notes of the Annexes.

1. Adaptation to the document with key investor information.
   1.1 Expense Ratio.
   Point 14 of the Clarifying Notes to Annex 1 is modified, which shall now read as follows:

"14. Expense Ratio: It will be reported as a percentage with two decimal places of the sum of operating expenses borne directly, except for the performance-based management fee and financing expenses, divided by the average assets of the fund, compartment, or class for the corresponding period. The data for the current year will refer to the accumulated total for the entire period up to the date of the report. In the case of funds/compartment whose investment policy consists of investing more than 10% of their assets in other CIIs, indirect expenses borne by the investment in the underlying CIIs will be additionally included, as well as the subscription and redemption commissions derived from said investments that have been borne by the investing CII. In addition, the amount of commission retrocessions effectively accrued in favor of the fund will be deducted."

1.2 Historical Profitability Graph.
Annex 10 is added to the Circular titled "Annex 10: Historical Profitability Graph".
A section "Clarifying Notes to Annex 10: Historical Profitability Graph" is added with the following wording:

"Clarifying Notes to Annex 10: Historical Profitability Graph.
CIIs that must complete Annexes 1, 2, 5 or 9 of this Circular must send to the CNMV together with the submission of the periodic public reports of the second semester of each fiscal year Annex 10, which will contain a bar graph with the annual profitability of the last 10 years. Those CIIs that have results for a period of five or fewer complete natural years will only include the last 5 years in their presentation. The graph will also include the profitability of the reference index."

2. Adaptation to the Regulation of Collective Investment Institutions (approved by Royal Decree 1309/2005, of November 4).
   2.1 Information on costs derived from the analysis service.
   The following letters are added in section 9. "Explanatory annex of the periodic report" of the "Clarifying Notes" of the Annexes detailed below:

In "Annex 1: Real Estate Investment Fund", letter i) is added; in Annex 3: "Real Estate Investment Fund", letter f) is added; in Annex 5 "Closed-End Investment Fund", letter i) is added; in Annex 6: "Open-End Investment Fund and Free CII Investment Fund", letter g) is added; and in "Annex 2: SICAV", a final paragraph is added with the following wording: "In the annual report of the CII, detailed qualitative information on the existence of costs derived from the analysis service, if any, must be collected."

2.2 CIIs or special purpose compartments.
The following letters are added in section 9. "Explanatory annex of the periodic report" of the "Clarifying Notes" of the affected annexes.

In Annex 1: "Real Estate Investment Fund", letter j) is added; in Annex 5 "Closed-End Investment Fund", letter j) is added; and in Annex 6 "Open-End Investment Fund and Free CII Investment Fund", letter h) is added with the following wording:

"Information on the circumstances that motivated the creation of the resulting CII or special purpose compartment, as well as information on the available net asset value, the outlook on the future evolution of the assets comprising this resulting CII or compartment, and any other information deemed interesting."

2.3. Dissolution and liquidation of Real Estate Investment Funds.
Letter g) is added in section 9. "Explanatory annex of the periodic report" of the "Clarifying Notes to Annex 3: Real Estate Investment Fund" with the following wording:

"g) A detailed reference to the process of selling the real estate investment portfolio of the CII will be included. In particular, for each period, the degree of advancement of the sales process, the sales actions carried out, the details of the properties sold, the sale prices, the investors contacted, and the offers received must be reported. Additionally, the annual report will include a summary of the sales process carried out during the entire fiscal year and a reference to the sales outlook for the following year."

3. Adaptation to Circular 6/2010, on derivative financial instruments of CIIs.
   3.1 Information on the methodology for measuring global risk.
   Section 1.3 Operations in derivative instruments of the "Clarifying Notes to Annex 1: Real Estate Investment Fund" is modified to add the second paragraph of the text presented below:

"3. Operations in derivative instruments: It will be indicated whether the CII has carried out operations in derivative instruments for the purpose of risk hedging or investment to manage the portfolio more effectively, or within the framework of management aimed at achieving a profitability objective, which, if applicable, must be specifically described in the prospectus. Additionally, the methodology applied to calculate the total exposure to market risk of the CII or compartment (commitment, relative VaR or absolute VaR) must be specified, which must coincide with that stated in the prospectus."

3.2 Specific criteria for computing exposure to market risk in operations with derivative instruments.
The following letters are added in section 9. "Explanatory annex of the periodic report" of the "Clarifying Notes" of the affected Annexes.

In Annex 1: "Real Estate Investment Fund", letter k) is added; in Annex 5: "Closed-End Investment Fund", letter k) is added; and in Annex 6: "Open-End Investment Fund and Free CII Investment Fund", letter i) is added with the following wording:

"CIIs that apply the commitment methodology will provide information on the risks that may arise from the operations carried out, which in accordance with Rule 4 of Circular 6/2010, or any other that replaces it, should not be considered for the purpose of complying with the limit according to which the total exposure to market risk associated with derivatives cannot exceed the net assets of the CII."

3.3 VaR information in periodic public information. Information on the degree of leverage at the end of the reference period in CIIs using the absolute VaR or relative VaR method.
The following letters are added in section 9 "Explanatory annex of the periodic report" of the Clarifying Notes of the affected annexes.

In Annex 1: "Real Estate Investment Fund", letter l) is added; in Annex 5: "Closed-End Investment Fund", letter l) is added; and in Annex 6: "Open-End Investment Fund and Free CII Investment Fund", letter j) is added with the following wording:

"In the event that the CII or compartment applies the absolute VaR method or the relative VaR method, information on the maximum, minimum, and average VaR levels reached during the current year must be reported, as well as the model used for the calculation (parametric, historical simulation, Montecarlo), the time horizon, and the confidence interval. Additionally, they will report the level of leverage existing at the end of the reference period."

Additionally, in Annex 1: "Real Estate Investment Fund", letter m) is added; in Annex 5: "Closed-End Investment Fund", letter m) is added; and in Annex 6: "Open-End Investment Fund and Free CII Investment Fund", letter k) is added with the following wording:

"In the event that the CII or compartment applies the relative VaR method to measure exposure to market risk, information on the reference portfolio must be provided."

Third Rule. Annexes of Circular 4/2008, of September 11, of the National Securities Market Commission, regarding the content of quarterly, semi-annual and annual reports of collective investment institutions and the position statement. This Circular replaces the annexes of Circular 4/2008 with those appearing as an annex to this rule.

Additional Rule.

1. Rule 16.4 of the aforementioned Circular 6/2010 is modified, which shall now read as follows:

"4. The informational prospectus must warn about the possibility of incurring significant leverage levels and report the expected leverage level. Additionally, in the Explanatory Annex of the periodic public information model, included in the Annexes of Circular 4/2008 of the CNMV, the level of leverage existing at the end of the reference period must be reported."

2. Rule 18.4 of Circular 6/2010, of December 21, of the National Securities Market Commission, on operations with derivative instruments of collective investment institutions, is modified, which shall now read as follows:

"4. In the Explanatory Annex of the periodic public information model, included in the Annexes of Circular 4/2008 of the CNMV, information on the VaR levels reached, specifically: the highest, the lowest, and the average during the current year, must be provided. Additionally, information on the reference portfolio must be provided in the case of Relative VaR being applied."

Final Rule.
This Circular will enter into force on December 31, 2011, with the periodic public information referred to the second semester of 2011 being the first that must be submitted in accordance with it.

Madrid, November 16, 2011.–The President of the National Securities Market Commission, Julio Segura Sánchez.

cve: BOE-A-2011-19174

OFFICIAL STATE GAZETTE
No. 293 Tuesday, December 6, 2011 Sec. I. Page 129409 ANNEXES
ANNEX 1: Real Estate Investment Fund
FUND NAME
CNMV Registration No:
Report - Type of report from - Period of Report 20 - Year of Report Manager: Custodian: Auditor:
Manager Group: Custodian Group: Custodian Rating:
Fund by compartments
A complete report, containing the detail of the investment portfolio, is available to participants and can be requested free of charge at, or via email at, and can be consulted at the CNMV Registers, and via telematic means at. The Managing Entity will attend to customer inquiries related to the CIIs managed at:
It also has a department or customer service unit in charge of resolving complaints and claims. The CNMV also makes the Investor Attention Office available to you (902 149 200, email: inversores@cnmv.es).

COMPARTMENT/FUND INFORMATION
COMPARTMENT NAME
Date of compartment registration:

1. Investment policy and denomination currency
   Category
   Type of fund. Investment vocation
   “ that invests more than in , registered in CNMV with number , managed by , and whose custodian is .
   Investors can consult the complete report, which contains the detail of the investment portfolio, and the simplified report, as well as the fund or society prospectus in which this institution primarily invests in the CNMV Registers and via telematic means at.” General description Operations in derivative instruments The methodology applied to calculate the total exposure to market risk is More detailed information on the investment policy of can be found in its informational prospectus. Denomination currency Address Email cve: BOE-A-2011-19174

No. 293 Tuesday, December 6, 2011 Sec. I. Page 129410
2. Economic Data
2.1.a) General Data. (CASE OF EXISTENCE OF CLASSES) No. of participations No. of participants Gross benefits distributed per participation CLASS participation Current Period Previous Period Current Period Previous Period Currency Current Period Previous Period Minimum investment

Assets (in thousands )
CLASS Currency At the end of the period December 20-- December 20-- December 20--

Net asset value of the participation
CLASS Currency At the end of the period December 20-- December 20-- December 20--

The net asset value and, therefore, its profitability do not reflect the effect derived from the individual charge to the participant of the performance-based management fee.

Commissions applied in the period, on average assets Management Fee % effectively charged CLASS Period Accumulated Calculation Base s/ assets s/profits Total s/ assets s/profits Total

Current Period Previous Period
Current Year Year t-1
Portfolio turnover index (%)
Average liquidity profitability (% annualized) Note: The period refers to the quarter or semester, as the case may be. In the case of CIIs whose net asset value is not determined daily, this data and the asset data refer to the last available.

Custodian Fee
CLASS % effectively charged
Period Accumulated
Calculation Base

cve: BOE-A-2011-19174

No. 293 Tuesday, December 6, 2011 Sec. I. Page 129411 2.1.b) General Data. (CASE OF NON-EXISTENCE OF CLASSES) Current Period Previous Period No. of participations No. of participants Gross benefits distributed per participation Minimum investment Date Assets end of period (thousands of ) Net asset value end of period Report Period 20-- 20-- 20-- The net asset value and, therefore, its profitability do not reflect the effect derived from the individual charge to the participant of the performance-based management fee. Commissions applied in the period, on average assets Management Fee % effectively charged Period Accumulated Calculation Base System imputation s/ assets s/profits Total s/ assets s/profits Total

Current Period Previous Period
Current Year Year t-1
Portfolio turnover index
Average liquidity profitability (% annualized) Note: The period refers to the quarter or semester, as the case may be. In the case of CIIs whose net asset value is not determined daily, the data refers to the last available. Custodian Fee % effectively charged Period Accumulated Calculation Base

cve: BOE-A-2011-19174

No. 293 Tuesday, December 6, 2011 Sec. I. Page 129412
2.2 Behavior
A) Individual (ONCE FOR EACH CLASS, if they exist). Denomination currency Profitability (% without annualizing) The net asset value and, therefore, its profitability do not reflect the effect derived from the individual charge to the participant of the performance-based management fee.

(i) Only reported for classes with a minimum age of the requested period and always provided that their investment vocation has not been modified.
Refers to the maximum and minimum profitability between two consecutive net asset values.
The periodicity of calculation of the net asset value is Remember that past profitability does not presuppose future profitability. Only reported if a homogeneous investment policy has been maintained during the period.
Risk measures (%)
Accumulated Year t current
Quarterly Annual
Last trim (0) Trim-1 Trim-2 Trim-3 Year t-1 Year t-2 Year t-3 Year t-5 Volatility(ii) of:
Net asset value

Ibex-35
Letra Tesoro 1 year

Historical VaR of the net asset value(iii)

(ii) Historical Volatility: Indicates the risk of a value in a period, the higher the volatility the higher the risk. For comparative purposes, the volatility of different references is offered. Volatility is only reported for periods with homogeneous investment policy. (iii) Historical VaR of the net asset value: Indicates the maximum that can be lost, with a 99% confidence level, in a 1-month period, if the behavior of the CII of the last 5 years were repeated. The data is at the end of the