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

1. Webinar
The Key Investor Information Document (KIID) – initial experiences and lessons
Katrina Austin Team Leader Language Operations
Austin,
Reto Schlegel, Business Development Manager
10 November 2011

2. UCITS IV and KIIDs – What are they?
UCITS
Undertakings for collective investments in transferable securities
Scope of application
European 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
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Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011

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)
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Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011

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)
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Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011

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 Fund
information is required by law to help you understand the nature and the risks of investing in this fund. You are
advised 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 are
This 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 your
Objectives 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 on
instruments, 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]. This
Swiss 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 excludes
the 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/exit
stock 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 selling
style (e.g. value or growth). We use macroeconomic fore-
it contributes to the fund’s return. units in another collective investment
casts 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, please
Investment 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 available
stocks 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. This
measure our performance. We can also buy shares in com-
means you can buy and sell units at the current net asset
panies 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 the
Switzerland. However, such investments may not make up fund, which reduces its returns. Percentage change
more than 10% of the fund’s assets.
Investment horizon: The CLS Fund (Lux) Swiss Equity 40 versus previous year
Luxembourg law: Luxembourg law may lead to large devia- CHF is a pure equity fund, so its performance is affected
tions from the benchmark index. The three largest stocks in by stock market fluctuations.
20
the benchmark index have weightings of well over 10%, Recommendation: this fund may not be appropriate for 0
which we are not allowed under Luxembourg law to replicate. investors who plan to withdraw their money within seven
Such deviations can have a positive or a negative effect for years. ‐20 1 2 3 4 5 6 7 8 9 10
you.
‐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 statement
On 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 g
typically 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 in
Equity 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
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Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011

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!
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Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011

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?
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Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011

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.
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Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011

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
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Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011

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
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Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011

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.
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Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011

12. Comprehensibility d
C 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 !
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Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011

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!
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Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011

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.
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Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011

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
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Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011

16. Initial experiences (I)
Linguistic
Technical
Regulatory/legal
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Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011

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.
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Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011

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. 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
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Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011

20. Examples of non-plain language:
“No person has been authorized to give any information or make any
representation other than those contained or incorporated by reference in this
joint proxy statement/prospectus, and, if given or made, such information or
representation 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 the
costs and expenses that a shareholder in the Fund will bear directly or
indirectly.”
“The fund is constructed with a volatility target of 10% but it can deviate due to
sudden volatility spikes. While the derivatives used are liquid, these
dd l tilit ik Whil th d i ti d li id th
instruments embed leverage. The fund aggregates three portfolios
differentiated by investment horizons. In the case of an increase of the
correlations between asset classes, a hedging overlay is applied to cover tail
risk.”
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. Reworked:
“You should rely only on the information contained in this document or that we
have referred you to. We have not authorized anyone to provide you with
information that is different.”
“This table describes the fees and expenses that you may pay if you buy and
hold shares in the fund.”
“The fund has a volatility target of 10%, but it may deviate from this when there
is sudden market volatility. The fund uses derivatives for which there is a ready
market of buyers and sellers. By their nature, however, these instruments
accentuate 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 i
made up of three portfolios with different investment horizons. If correlation
between asset classes increases, we use hedging to cover the unlikely but
extreme risks that result.”
result.
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Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011

22. UCITS IV/KIID
1.7.2011
1 7 2011
UCITS 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
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Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011

23. Translation of KIIDs into all target languages
Our 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
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Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011

24. KIID workshops
We work with you to define what plain language means within the context of your fund
range.
This can be defined separately for each language should you wish.
We build on our company-specific glossaries.
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Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011

25. KIID instructions and glossaries
We 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.
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Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011

26. KIID writing courses
CLS Communication can hold a tailored writing course at your premises, helping your experts to
hone 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.
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Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011

27. Entire KIID solutions
Structured workflow
Clear division of responsibilities
A network of expertise
Fund Operational
p Operational
p Fund
management
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
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Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011

28. How you benefit
The challenge How you benefit
IT environment, Incorporation into automated solutions (with fund services
interfaces p
provider)
)
Expert knowledge Financial expertise and knowledge of UCITS IV and legal KIID
requirements
Package of services Full-service provider for all your language needs from writing and
needs,
editing through to translation
Multilingual Consistent use of your corporate terminology and plain language
in all languages
g g
Tight deadlines (same Capacity for efficient translation into all EU languages
deadline of 1 July 2012
applies to everyone)
pp y )
Reliability Professional project management
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Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011

29. Your contacts at CLS Communication
In Switzerland
Daniel Funk Reto Schlegel
Senior Financial Copywriter Business Development Manager
Tel.
Tel +41 44 206 41 77 Tel.
Tel +41 21 317 54 08
Sägereistr. 33 Rue Centrale 10
8152 Glattbrugg-Zurich | Switzerland 1003 | Lausanne | Switzerland
daniel.funk@cls-communication.com
daniel funk@cls communication com reto.schlegel@cls-communication.com
t hl l@ l i ti
In the UK
Katrina Austin
K t i A ti Michael Ellis
Team Leader Language Operations Head of Business Development
Tel. +44 (0)20 3117 2828 Tel. +44 (0)20 3117 2814
14-20 SShand SStreet 14-20 Shand Street
London SE1 2ES | UK London SE1 2ES | UK
katrina.austin@cls-communication.com michael.ellis@cls-communication.com
www.cls-communication.com
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Webinar – The Key Investor Information Document (KIID) – initial experiences and lessons | 10 November 2011

30. Thank
Th k you
for your attention
Basel | Beijing | Chiasso | Copenhagen | Frankfurt | Hong Kong | Lausanne | London | Madrid
j g p g g g
Moncton | Montreal | New York | Ottawa | Paris | Quebec | Shanghai | Singapore | Toronto | Zurich