Alternative performance measures

On 27 January 2017, ESMA published a Q&A on its Guidelines on Alternative Performance Measures ("APMs"). These guidelines apply only to certain investment funds which fall within the scope of the Prospectus Directive¹ , i.e. certain closed-ended funds.

An APM is a financial measure of historical or future financial performance, financial position, or cash flows, other than a financial measure defined or specified in the applicable financial reporting framework. Examples of APMs include: operating earnings, cash earnings, earnings before one-time charges, earnings before interest, taxes, depreciation and amortisation (EBITDA), net debt, autonomous growth or similar terms denoting adjustments to line items of statements of comprehensive income, statements of financial position or statements of cash flow.

The objective of the Q&A is to promote common supervisory approaches and practices in the application of the ESMA Guidelines on APMs and to help give issues and persons responsible for the prospectus an indication of the correct implementation of the guidelines.

As a reminder, the ESMA Guidelines on APMs apply to APMs disclosed by issuers whose securities are admitted to trading on a regulated market and who are required to publish regulated information as defined by the Transparency Directive²   or persons responsible for the prospectus when publishing regulated information or prospectuses for securities.

The guidelines set the principles that issuers should follow when disclosing APMs in the prospectus or other documents such as the labelling, presentation and explanations on the use of the APMs.

The guidelines entered into force on 3 July 2016 and were implemented into the Luxembourg regulatory framework by CSSF Circular 16/636.A CSSF Press Release was also issued in December 2016 (Press Release 16/46) which reminds the issuers or persons responsible for the prospectus of their obligations when they use APMs and in which the Commission de Surveillance du Secteur Financier ("CSSF") highlights the lack of information that it identified regarding APMs during the examination of the 2016 half-yearly financial reports.