ALFI UCITS IV implementation project – KID Q&A Document

Share Class ALU0112345789Share Class BLU0212345789Share Class CLU0312345789Share Class XLU0412345789Alternative presentation:One-off charges taken before or after you investEntry chargeExit chargexx%xx%This is the maximum that might be taken out of your money before it is invested.Charges taken from the fund over a yearOngoing charge xx% xx% xx% xx%Charges taken from the fund under certain specific conditionsPerformance fee% a year of any returns the fundachieves above the benchmark forthese fees, the name benchmarkxx% xx% xx% xx%A. Yes, we think that both designs are permitted.Q. What must the KID describe: the potential performance fee, as described in the prospectus, or theperformance fee that was paid in the latest calendar year?A. Both. Article 12 of the EU Regulation 583/2010 says that "performance fees shall be disclosed in accordance withArticle 10(2)(c). The amount of the performance fee charged during the UCITS' last financial year shall be included asa percentage figure." This information should be included in the charges table. See also Annex II of the EU Regulation583/2010 and CESR/10-1321 – the template for the KID. Example: "Performance fee: [x]% a year of any returns thefund achieves above the S&P 500 Index. In the fund's last financial year the performance fee was [y]% of the fund."Q. Is it permitted to show switch charges by inserting a new row in the table?A. We think that the requirement to show switch charges in satisfaction of Art 25(3) may be achieved by inserting astatement in the narrative part of the charges section of the KID. This would be consistent with Annex II of EURegulation 583/2010 and the KID template at CESR/10-1321. The CESR guide to clear language and layout for theKID (CESR/10-1320) also appears to support this interpretation; it says on page 12 that the explanation of charges(i.e., the narrative part, not the table) should say "if a charge for a fund switch differs from the normal charge for buyingunits."Q. If a fund has the power to apply a dilution levy should it be described in the KID and if so where?A. We think that it should be described in the Charges section of the KID because it is an amount "that might be takenout of your money before the proceeds of your investment are paid out" (EU Regulation 583/2010, Annex II) – it is anentry or exit charge. We cannot provide definitive advice on what the description should say because dilution levypractices vary considerably in the industry. The detail of the description is therefore a matter for the relevant board ofdirectors to decide. For example, if a dilution levy is applied often they may consider it appropriate to include it in themaximum value of the entry or exit charge that is shown in the charges table and if it is applied rarely they mayconsider it sufficient to describe the rate of the levy and the circumstances in which it might be applied in the narrativesection only. In each case, they may wish to state in the narrative section that the levy is retained by the UCITS. Notethat a dilution levy is different to swing pricing (see Q&A on Art 10(2)(a), below).Q. If no performance fee or entry or exit charge is applied, should the relevant row be removed from the tableor should the phrase "Nil" or "not applicable" be used?A. We recommend that a phrase such as "None" or "Not applicable" should be used. We do not recommend "Nil" or"N/A" or "-" because some readers might not understand what they mean. We do not recommend deleting the rowfrom the table because its absence might cause the reader to question whether the charge is not applicable or simplynot disclosed.Q. Must the prospectus contain the same information about ongoing charges, presented in the same way?A. No. However, the prospectus should not disagree with the KID on facts.ALFI KID Q&A, Issue 1314, 11 April25 September 2012 Page 20