ALFI UCITS IV implementation project – KID Q&A Document

Art 16Q. Past performance "shall be calculated on the basis that any distributable income of the fund has beenreinvested". If a distribution is made from capital, how should it be considered for the purpose of calculatingpast performance?A. It should be reinvested by the same method. If the fund's distribution policy creates a risk of capital erosion it shouldbe described in the risk narrative section of the KID.Q. Should past performance and the SRRI be calculated and displayed when the fund's calculation of netasset value has been suspended?A. If the suspension was for a short term, we think that it would be pragmatic to calculate the past performance andSRRI using the last published NAV prior to the start of the suspension period. However, if the suspension was for along term, we recommend the practitioner to consult its regulator.Art 17Q. The EU Regulation 583/2010 says, "The period prior to the material change referred to in paragraph 1 shallbe indicated on the bar chart and labelled with a clear warning that the performance was achieved undercircumstances that no longer apply." What should such annotations look like (e.g., may they be overlaid,signalled by the use of a symbol and a footnote, etc)?A. CESR/09-949 (technical advice on level 2 measures related to format and content of the KID) presents an exampleat Page 34 which shows the annotation printed over the bar chart. This appears to be CESR's preferred design.However, the key test is that the indication should be clear and it seems reasonable to think that with careful design asymbol and a footnote could achieve the required effect.Q. In respect of Art 17(2), is it permitted to explain in the KID the detail of the change or is it only permitted toexplain that "the performance was achieved under circumstances that no longer apply"?A. We think that it is permitted to say that "the performance was achieved under circumstances that no longer apply"and to provide a very brief explanation, such as the ongoing charge was lower, or the investment strategy wasdifferent, or the investment manager was different, etc.Q. Article 17(1) states that: "Where a material change occurs to a UCITS' objectives and investment policyduring the period displayed in the bar chart referred to in Article 15, the UCITS' past performance prior to thatmaterial change shall continue to be shown." In some sectors of the industry, when a fund undergoes amaterial change of investment objective, self-governing bodies and performance rating firms do not permitthe performance history to be used in marketing material. The performance history is discarded and a newhistory begins from the effective date of the change. In this situation could it be argued that the pastperformance is not available to the KID and that these years should be represented under Article 15(3): "Forany years for which data is not available, the year shall be shown as blank..."?A. No. Art 17(1) is clear that the "past performance prior to the material change shall continue to be shown."Q. If the benchmark is changed, which of the following charts of past performance are acceptable?i:ALFI KID Q&A, Issue 1314, 11 April25 September 2012 Page 25