ALFI UCITS IV implementation project – KID Q&A Document

Part 3CESR/10-674CESR's guidelines on the methodology for calculation of the ongoing chargesfigure in the Key Investor Information DocumentPage 4, IntroductionQ. The introduction mentions only management companies but does it also mean to include self-managedinvestment companies?A. Yes, it means to include self-managed investment companies.Page 4, Para 1(c)Q. This paragraph requires that records of each calculation be kept for a period of 5 years whereas paragraph16 on Page 7 says that the "ongoing charges figures that were applicable during previous years/periodsshould be published at the location (…)". Is the maximum record maintenance period limited to 5 years?A. The data that were used to compute the ongoing charges figure should be retained for 5 years following the last dayon which the KID was available to be issued. The result of the computation – the single ongoing charge figure that waspublished in the KID – should be published at the place specified in the KID for as long as the fund remains inexistence. The civil law in Luxembourg requires companies to keep records for 10 years.Page 4, Para 4(c)Q. How should the Luxembourg taxe d'abonnement be treated under the methodology?A. CESR/10-674 says at Para 2 on page 2, "there is a presumption that all costs borne by the fund must be taken intoaccount unless they are explicitly excluded," and this tax is not excluded. We think that it should be included in theongoing charge figure under Para 4(c).Page 5, Para 5(c)Q. Should bank overdraft charges be excluded under Para 5(c)?A. Yes, bank overdraft charges are interest on borrowing.Page 5, Para 5(d)Q. Is it correct to exclude withholding tax on dividends/interests, stamp duty payments, re-registration feesand VAT on custody fees from the ongoing charges figure?A. Para 5(d) is not relevant to the treatment of withholding taxes on dividend and interest income because they ariseduring the period in which the fund owns the asset; they are not related to the "acquisition or disposal" of that asset.However, being taxes that are deducted at source, they should be excluded from the ongoing charges figure.Stamp duty is clearly excluded under Para 5(d) and we consider that re-registration charges associated with portfolioactivity should also be excluded unless Paras 4 or 6(a) require them to be included.VAT should be treated in the same way as the payment to which it was related: if the payment is excluded so shouldthe VAT be and vice versa.Q. Is it permitted to exclude the cost of action in respect of withholding tax recovery on the basis that they are"linked charges"?A. Para 5(d) is not relevant to the treatment of withholding taxes on dividend and interest income because they ariseduring the period in which the fund owns the asset; they are not related to the "acquisition or disposal" of that asset.Tax reclaim expenses are therefore not "linked charges".ALFI KID Q&A, Issue 1314, 11 April25 September 2012 Page 47