KIID webinar by CLS Communication on 10 Nov 2011

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Webinar on writing and translating Key Investor Information Documents (KIIDs)

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KIID webinar by CLS Communication on 10 Nov 2011

  1. 1. WebinarThe Key Investor Information Document (KIID) – initial experiences and lessonsKatrina Austin Team Leader Language Operations Austin,Reto Schlegel, Business Development Manager10 November 2011
  2. 2. UCITS IV and KIIDs – What are they?UCITSUndertakings for collective investments in transferable securitiesScope of applicationEuropean Union and European Economic Area; Switzerland to follow Investment fund regulation in Europe UCITS I UCITS II UCITS III: New UCITS IV: AIFM: Other collective 1985 Failure asset classes added Simplification/KIID investment schemes 2 Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011
  3. 3. The challenge Key Investor Information Document (KID/KIID/KII) Mandatory for fund distribution in the EU and EEA, with Switzerland to follow Replaces the simplified prospectus Laid down in the UCITS IV Directive: in force since July 2011 “Grandfathering” exemption applies until July 2012 (except for funds under Grandfathering German law) A KIID must be produced for each share class, translated into at least one official language of each country in which th f d i di t ib t d -> many ffi i l l f h t i hi h the fund is distributed > different versions Translations are legally binding g y g Responsibility for the KIID lies with the fund management company Funds under Swiss law: KIIDs are to be introduced in July 2012 (for new funds) and July 2014 (existing funds) 3 Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011
  4. 4. KIID requirements KIIDs follow a standard layout and must include: Brief description of the strategy and investment objective Brief presentation of the risk/return profile (chart and text) Charges Past P t performance in standardised f f i t d di d format t Practical information Simple, easy-to-understand language must be used (short sentences, no jargon) Updated annually p y Also updated whenever material changes take place (trigger events) Must be registered with the authorities and kept for five years (including the associated data) 4 Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011
  5. 5. CLS’s model KIID Key Investor Information Document (KIID)This document provides you with key investor information about this fund. It is not marketing material. The Charges for this Fundinformation is required by law to help you understand the nature and the risks of investing in this fund. You areadvised to read it so you can make an informed decision about whether to invest.CLS Fund (Lux) Swiss Equity CHF ISIN LU0123456789, Swiss security no. 123456 Commission on the issue and redemption of fund units: The entry and exit charges shown areThis fund is managed by CLS Fund Management, xx Route de XX, L-1470 Luxembourg maximum figures. In some cases you might Entry charge max. 2.5% pay less – you can find this out from yourObjectives and Investment Policy Exit charge max. 2.5% financial adviser.We invest in Swiss equities (stocks) and similar equity-like Level of investment: At least two-thirds of the fund’s This is the maximum that might be taken out of your money before The ongoing charges figure is based oninstruments, allowing you to share in the performance of the assets must be invested at all times. The cash position subscription/redemption. expenses for the year ending [date]. ThisSwiss stock market. We aim to achieve a higher return than may not be more than one-third of the fund’s assets. figure may vary from year to year. It excludesthe benchmark’s. The investment process prioritises careful Charges taken from the fund over a year: performance fees and portfolio transaction Reinvestment fund: We reinvest income such as divi- costs, except in the case of an entry/exitstock selection, and we are not required to follow a particular Ongoing charges as at 31 December 2010 1.66% dend payments rather than distributing it to you. As such, charge paid by the fund when buying or sellingstyle (e.g. value or growth). We use macroeconomic fore- it contributes to the fund’s return. units in another collective investmentcasts and sector analysis only to avoid excessive portfolio This amount may vary from year to year year.weightings for particular stocks or sectors. Daily trading: Each day, CLS Fund Services, xx Route undertaking de XX, L-1470 Luxembourg, calculates the net asset Charges taken from the fund under certain specific conditions: For more information about charges, pleaseInvestment universe and benchmark: Our portfolio holds value (NAV) of the sub-funds of the CLS Funds SICAV No additional fees (such as performance fees or stock see the fund’s prospectus, which is availablestocks listed on the Swiss Exchange (SIX) and forming the under Luxembourg law. Fund subscriptions and redemp- exchange fees) apply at www.sample_url.com/ucitsfund/.Swiss Performance Index® TR (SPI). That index is used to tions are made at that price on the next value date. Thismeasure our performance. We can also buy shares in com- means you can buy and sell units at the current net assetpanies that are listed on the Berne Exchange (BX), in unlisted value on a daily basis.companies and in companies that have their registered office Past Performance (in CHF)in another country but generate most of their revenues in Transaction costs: Transaction costs are charged to theSwitzerland. However, such investments may not make up fund, which reduces its returns. Percentage changemore than 10% of the fund’s assets. Investment horizon: The CLS Fund (Lux) Swiss Equity 40 versus previous yearLuxembourg law: Luxembourg law may lead to large devia- CHF is a pure equity fund, so its performance is affectedtions from the benchmark index. The three largest stocks in by stock market fluctuations. 20the benchmark index have weightings of well over 10%, Recommendation: this fund may not be appropriate for 0which we are not allowed under Luxembourg law to replicate. investors who plan to withdraw their money within sevenSuch deviations can have a positive or a negative effect for years. ‐20 1 2 3 4 5 6 7 8 9 10you. ‐40 Time (2001 = 1) Swiss Performance Index  ® TR (SPI) CLS Fund (LUX) Swiss Equity CHF Risk and Reward Profile Practical Information • The CLS Fund (Lux) Swiss Equity does not engage in securities lending; the shares in which we invest are all in the possession of the fund. No operational Luxembourg tax legislation may have an impact on the personal tax position of the investor. Lower risk Higher risk 1 2 3 4 5 6 7 risk is entered into in this regard. The net asset value is published every day at www.sample-url.com and www.sample_url.com. Typically lower reward Typically higher reward • As we only invest in securities, we do not enter into any counterparty risk (i.e. the risk of insolvency of a CLS Fund Management, xx Route de XX, L-1470 Luxembourg may be held liable solely on the basis of any statementOn the financial markets, returns in excess of the risk-free contained in this document that is misleading, inaccurate or inconsistent with the relevant parts of the prospectus for the market participant in addition to that of the compa-interest rate are earned by entering into risk. Over the longer fund. nies in which investments are made).term, investors who are prepared to accept greater risk can • We seek to invest in liquid stocks, i.e. those that can Investors have the right to switch free of charge between the sub-funds of the CLS Funds SICAV under Luxembourg law. g g gtypically look forward to higher returns. The c a abo e yp ca y oo o a d o g e e u s e chart above be freely traded. Liquidity is t l b f l t d d Li idit i not always assured f d for This KIID relates only to the CLS Fund (Lux) Swiss Equity CHF.shows the risk/reward profile of the CLS Fund (Lux) Swiss small and medium-sized companies, particularly inEquity CHF. the event of market turmoil. As such, a degree of li- This fund is authorised in Luxembourg and Switzerland and regulated by the local supervisory authorities.• Risk level 5 signals fairly high risk, with a commensurate quidity risk cannot be ruled out. fairly high return potential. Even investments in the low- • Historical performance is not an indicator of current The depositary is ABC-Bank (Luxembourg) S.A. For more information about this fund, other sub-funds or unit classes, est risk category are not entirely free of risk. or future returns. please see the fund’s prospectus. The prospectus and the most recent annual and semi-annual reports are available free• The CLS Fund (Lux) Swiss Equity CHF is an equity fund. • The risk class to which the fund is assigned may of charge at www.sample-url.com/ucitsfund/, in English and German. It is therefore subject to fluctuations in performance. As change over time. This key investor information is accurate as at 1 July 2011. It was published by CLS Asset Management AG, we are limited to buying and holding securities and do Elisabethenanlage 11, 4000 Basel, Switzerland and is accurate as at that date. not engage in short-selling or borrow money to fund in- vestments, the fund does not fall into the very highest risk category. category 5 Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011
  6. 6. Plain English The same universal rules apply across all types of writing:- Poetry- Prose- Technical texts These rules have not changed materially over centuries. There are any number of readability formulae that can be used to test these rules, some of which are supported by software. Nevertheless, the same principles apply! 6 Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011
  7. 7. Plain language requirement The directive says: “Key investor information shall be written in a concise manner and in non- technical language. It shall be drawn up in a common format, allowing for comparison, and shall be presented in a way that is likely to be understood by retail investors.” DIRECTIVE2009/65/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS), Article 78 The l Th only guidance i th t sentences should be a maximum of 25 words. id is that t h ld b i f d So what does that mean for KIID writers? 7 Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011
  8. 8. Writers of English have the most guidance English-speaking countries have the most organisations that have already addressed the issue of plain language. Examples include:- Campaign for Plain English- SEC guidelines g- Oxford Guide to Plain English- Warren Buffet: “When writing Berkshire Hathaway’s annual report, I pretend that I m talking to my sisters I have no trouble picturing them: though highly I’m sisters. intelligent, they are not experts in accounting or finance. They will understand plain English, but jargon may puzzle them. My goal is simply to give them the information I would wish them to supply me if our positions were reversed.” reversed. 8 Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011
  9. 9. General, long-standing rules+ MiFID principles When Wh CLS writes and edits d it d dit documents, we apply generally accepted principles t l ll t d i i l of plain language. We also offer innovative, objective software-supported text analysis. There has been no further specification of readability requirements by the EU or industry associations. So what does that mean for KIID writers? -> Follow long-established rules -> Consider software-supported testing -> Keep the MiFID rules in mind p 9 Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011
  10. 10. Rafik Schami: Damascus Nights “Words are sensitive, magical flowers, that only grow when they fall upon fertile ground in the listener’s ear ” ear.” -> The act of writing implies a desire to be read ead -> Text becomes meaningful when it is read, not when it is written 10 Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011
  11. 11. Focus must be on the reader, not the writer The act of writing implies a desire to be read Who am I writing for? -> Know your reader -> Be your reader’s advocate y KIIDs: We are writing for retail investors, not for regulators or lawyers There can often be a conflict when writing between the needs of the writer and of the reader. The UCITS directive comes down squarely on the side of the reader. 11 Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011
  12. 12. Comprehensibility dC h ibilit depends on… d…sentence length and structure Based on several studies, press associations in the USA have laid down a readability table. Their survey shows readers find sentences of: up to 8 words very easy to read 11 words easy 14 words fairly easy y y 17 words standard 21 words fairly difficult 25 words difficult 29 words or more very difficult(Jyoti Sanyal, Indlish) The Oxford Guide To Plain English offers the following guideline: “Over the whole document, make the average sentence length 15-20 words.” -> If a sentence reaches 25 words, start wielding the axe! h 2 d i ldi h ! 12 Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011
  13. 13. Comprehensibility depends on……the words chosen Use short, simple, precise words Avoid jargon Be consistent in terminology use – avoid synonyms -> Explain, gloss or omit Use verbs rather than nouns: English is built around verbs Use the active rather than the passive voice Use a subject-verb-object word order j j Don’t fear the imperative Be sparing with adjectives and beware superlatives No need for defined terms/abbreviations Create immediacy and clarity by using “we” and “you” Question everything! 13 Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011
  14. 14. Examples:E l ORIGINAL: Financial derivatives are used by the investment manager to protect the value of individual assets held by the sub-fund. BETTER: The investment manager uses financial derivatives to protect the value of individual assets held by the sub-fund. BEST: We use financial derivatives to protect the value of individual assets held by the sub-fund. ORIGINAL: For further information, we refer you to the prospectus. BETTER: See the BETTER S th prospectus for more information. t f i f ti Find out not ascertain So not consequently Buy t B not purchaseh Below not hereunder ORIGINAL: We seek to achieve the investment objective by means of investments in stocks bonds and money market instruments and through the stocks, use of derivatives for hedging purposes. BETTER: We seek to achieve the investment objective by investing in stocks, bonds and money market instruments and using derivatives for hedging y g g g purposes. 14 Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011
  15. 15. Is the language understandable to all?Software-supported testing CLS Communication analyses draft KIIDs according to numerous comprehensibility parameters (such as the rules mentioned above). This is objective analysis conducted using software. The barriers to comprehension are plain to see see. Transparent scores are awarded, with a figure shown for each index. The software can be used for English and German texts; the German version h additional f i has dditi l functionalities. ti liti 15 Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011
  16. 16. Initial experiences (I)LinguisticTechnicalRegulatory/legal 16 Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011
  17. 17. Initial experiences (II)Linguistic: It can be hard to achieve clear and simple language in practice Key information is missing (e.g. investment objective not stated) Writers copy and paste straight f Wi d i h from prospectuses Tendency towards further standardisation of texts Lack f k L k of knowledge th l d throughout institutions, e.g. role of L h t i tit ti l f Legal d l departments t t Resistance from clients (“We know that’s the mandatory wording but it’s not what we want it to say!”) y ) A separate KIID is produced for each share class. Very little use is being made of the representative share class option. 17 Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011
  18. 18. Initial experiences (III)Technical: Excel solutions -> A nightmare for our clients! -> Ab Absence of triggering rules f i i l -> Difficult to update quickly Automated systems that link t A t t d t th t li k together sections of text that do not really fit th ti f t t th t d t ll Automated systems that are not designed for KIIDs and require a lot of subsequent manual input q p Automated systems through special KIID service providers -> Our preferred option -> Low level of error thanks to automated handling and triggering -> Save on resources (even internal resources cost money) -> Third-party costs can be charged to the fund assets 18 Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011
  19. 19. Initial experiences (IV)Regulatory/legal: Slow progress on implementation into national law, but deadline must be met Contradictions of the directive and additional requirements are being introduced in the implementation into national law -> KIID writers’ hands are tied -> Denmark -> Belgium 19 Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011
  20. 20. Examples of non-plain language:“No person has been authorized to give any information or make anyrepresentation other than those contained or incorporated by reference in thisjoint proxy statement/prospectus, and, if given or made, such information orrepresentation must not be relied upon as having been authorized.” t ti t tb li d h i b th i d ”“The foregoing Fee Table is intended to assist investors in understanding thecosts and expenses that a shareholder in the Fund will bear directly orindirectly.”“The fund is constructed with a volatility target of 10% but it can deviate due tosudden volatility spikes. While the derivatives used are liquid, these dd l tilit ik Whil th d i ti d li id thinstruments embed leverage. The fund aggregates three portfoliosdifferentiated by investment horizons. In the case of an increase of thecorrelations between asset classes, a hedging overlay is applied to cover tailrisk.” Overly long Technical jargon – too much knowledge assumed Unnecessary capitalisation Passive voice Taken directly from a disclaimer 20 Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011
  21. 21. Reworked:“You should rely only on the information contained in this document or that wehave referred you to. We have not authorized anyone to provide you withinformation that is different.”“This table describes the fees and expenses that you may pay if you buy andhold shares in the fund.”“The fund has a volatility target of 10%, but it may deviate from this when thereis sudden market volatility. The fund uses derivatives for which there is a readymarket of buyers and sellers. By their nature, however, these instrumentsaccentuate b th positive and negative changes in asset prices. The fund is t t both iti d ti h i t i Th f d imade up of three portfolios with different investment horizons. If correlationbetween asset classes increases, we use hedging to cover the unlikely butextreme risks that result.” result. 21 Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011
  22. 22. UCITS IV/KIID 1.7.2011 1 7 2011UCITS IV implemented in July 2011 KIIDs to be implemented by July 2012 (at the latest)The challenge for you Our solution How you benefit- To write a large number of - Outsource writing, editing - Glossaries and style guides KIIDs in plain language and translation to CLS - Internal expert knowledge:- T translate your KIIDs To t l t KIID Communication C i ti experienced fi i d financial editors – i l dit into all target languages - Full outsourcing in readability- Data and version conjunction with a - Specialist translators management, updates and g cooperation partner - Professional project j tight deadlines management 22 Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011
  23. 23. Translation of KIIDs into all target languagesOur language professionals translate your KIIDs into all the languages you need.You receive: A text that is terminologically consistent g y Translations that remain comprehensible to the general public 23 Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011
  24. 24. KIID workshopsWe work with you to define what plain language means within the context of your fundrange. This can be defined separately for each language should you wish. We build on our company-specific glossaries. 24 Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011
  25. 25. KIID instructions and glossariesWe respond to your questions applying our general KIID glossary. You can reap the benefits of our KIID language guidelines and corresponding g glossaries. On request, we can also manage your own KIID terminology. 25 Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011
  26. 26. KIID writing coursesCLS Communication can hold a tailored writing course at your premises, helping your experts tohone their skills in writing KIIDs. This is a practical course specifically designed around the KIID requirements. The trainer will take your specialists through the KIID by means of presentations and exercises. 26 Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011
  27. 27. Entire KIID solutions Structured workflow Clear division of responsibilities A network of expertise Fund Operational p Operational p Fundmanagement t CLS & IT partner management t partner partner company partners company Data input Data centre KIID PDF file Approval and • Fund data • Interfaces • Preparation distribution • Text blocks • Databases • Ch k Checks • E-mail E il • Translations • Calculation module • Quality assurance • Download • Workflow module • FTP • FundsXML • Chart module • Website • FTP • Output manager • Other 27 Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011
  28. 28. How you benefitThe challenge How you benefitIT environment, Incorporation into automated solutions (with fund servicesinterfaces p provider) )Expert knowledge Financial expertise and knowledge of UCITS IV and legal KIID requirementsPackage of services Full-service provider for all your language needs from writing and needs, editing through to translationMultilingual Consistent use of your corporate terminology and plain language in all languages g gTight deadlines (same Capacity for efficient translation into all EU languagesdeadline of 1 July 2012applies to everyone) pp y )Reliability Professional project management 28 Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011
  29. 29. Your contacts at CLS CommunicationIn SwitzerlandDaniel Funk Reto SchlegelSenior Financial Copywriter Business Development ManagerTel.Tel +41 44 206 41 77 Tel. Tel +41 21 317 54 08Sägereistr. 33 Rue Centrale 108152 Glattbrugg-Zurich | Switzerland 1003 | Lausanne | Switzerlanddaniel.funk@cls-communication.comdaniel funk@cls communication com reto.schlegel@cls-communication.com t hl l@ l i tiIn the UKKatrina AustinK t i A ti Michael EllisTeam Leader Language Operations Head of Business DevelopmentTel. +44 (0)20 3117 2828 Tel. +44 (0)20 3117 281414-20 SShand SStreet 14-20 Shand StreetLondon SE1 2ES | UK London SE1 2ES | UKkatrina.austin@cls-communication.com michael.ellis@cls-communication.comwww.cls-communication.com 29 Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011
  30. 30. ThankTh k you for your attentionBasel | Beijing | Chiasso | Copenhagen | Frankfurt | Hong Kong | Lausanne | London | Madrid j g p g g gMoncton | Montreal | New York | Ottawa | Paris | Quebec | Shanghai | Singapore | Toronto | Zurich

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