For the Appropriateness Questionnaire, Walliance is required to ask potential investors to conduct a simulation regarding their ability to bear loss, calculated as 10% of their net worth.
Specifically, according to Article 9 of Commission Delegated Regulation (EU) 2022/2114 of July 13, 2022, certain data are required within the simulator, including annual net income, total liquid assets, and annual financial commitments.
Let’s find out what they consist of.
Net annual income
Net annual income represents the total annual income received after deducting related costs and charges as well as social contributions and taxes.
Total annual income is the sum of labor income, interest on bank deposits or other debt instruments, dividend payments or income from real estate, where:
"labor income" includes wages, unemployment benefits, and pension payments received by the Non-sophisticated investor, excluding exceptional payments;
"interest on bank deposits or other debt instruments" includes payments on bank deposits or other debt instruments received by a Non-sophisticated investor during the previous calendar year, excluding exceptional payments;
"dividend payments" include payments received by the potential Non-sophisticated investor by holding shares or units in a collective investment scheme or other equity instruments, excluding any capital gains realized through the sale of all or part of such a holding;
"income from real estate" includes any payment received from the rental of real estate, excluding any capital gains realized through the sale of all or part of such real estate.
Total liquid assets
Total liquid assets represent the sum of cash held on deposit accounts and checking accounts, as well as the value of assets that can be easily and quickly converted into cash, which include:
savings products that can be converted into cash within a maximum of 30 calendar days;
financial instruments traded on a regulated market within the meaning of Article 4(1)(21) of Directive 2014/65/EU of the European Parliament and of the Council;
shares and shares in collective investment schemes with the possibility of exercising the redemption right at least on a weekly basis.
The following assets are not considered liquid assets:
real estate;
amounts paid into an occupational pension scheme;
shares in companies that are not freely redeemable or transferable, including previous crowdfunding investments.
Annual financial commitments
Annual financial commitments include all expenses for which a commitment has been made with respect to a given calendar year, and include:
alimony and child support payments;
rent and mortgage payments;
loan repayments;
insurance premium payments;
utility payments, including payments made to cover electricity, heating, and water expenses;
payments for subscriptions to services;
income and property taxes.
Date of valuation of total liquid assets and annual financial commitments
The total liquid assets referred to in Article 9 of Commission Delegated Regulation (EU) 2022/2114 of July 13, 2022, and the annual financial commitments referred to in Article 10 of the same Regulation are valued as of December 31 of the calendar year preceding the one in which the simulation is conducted.
However, if a valuation at that date does not accurately reflect the current state of equity, the valuation shall be made at a more recent date such that a more accurate valuation can be made.
For this purpose, a more recent date can be any date between December 31 of the calendar year preceding the one in which the simulation is conducted and the date on which the simulation is conducted and should be used for the assessment of both total liquid assets and annual financial commitments. In determining this date, you can consider whether your assumption as the reference date allows for an accurate assessment of annual net income, total liquid assets, and annual financial commitments.
Annual net income is the income during the calendar year preceding the year in which the simulation is conducted. However, if the assessment of total liquid assets and annual financial commitments is made based on a more recent date, annual net income is the income received during the 12 months preceding that more recent date.