diff --git a/COMPATIBILITY.md b/COMPATIBILITY.md
new file mode 100644
index 0000000..c16eaca
--- /dev/null
+++ b/COMPATIBILITY.md
@@ -0,0 +1,17 @@
+# Differences and Compatibility
+
+Despite all efforts for compatibility, [rust-web/twig][documentation] and [twigPHP] differ in the following aspects:
+
+## Twig Templates
+
+* **Encoding** - Twig Rust only supports UTF8 encoded templates. Templates must be converted prior usage.
+
+* **Not yet implemented** - the following functionality is not yet implemented, but about to come.
+ * ... almost everything. But stay tuned.
+
+## Twig Extensions
+
+* **Rust** - twig-rust extensions must be written in rust, instead of php. (see `src/api` in the [documentation] for details)
+
+[twigphp]: http://twig.sensiolabs.org/documentation
+[documentation]: http://rust-web.github.io/twig
diff --git a/README.md b/README.md
index 4bd720e..3937fab 100644
--- a/README.md
+++ b/README.md
@@ -8,7 +8,7 @@ A **template engine** for everyone writing web applications with Rust. By design
 * fast
 * and secure
 
-This library is derived from [Twig (for PHP)][twigphp] and intended to become a _fully compatible_ port - as far as it makes sense.
+This library is derived from [Twig (for PHP)][twigphp] and intended to become a [_fully compatible_][compatibility] port - as far as it makes sense.
 
 ## Documentation
 
@@ -20,7 +20,8 @@ This is an effort to merge two alpha-grade implementations and to proceed from t
 * https://github.com/Nercury/twig-rs
 * https://github.com/colin-kiegel/twig-rust
 
-see issues and pull-requests for more information about next steps
+see issues and pull-requests for more information about next steps.
 
 [twigphp]: http://twig.sensiolabs.org/documentation
 [documentation]: http://rust-web.github.io/twig
+[compatibility]: https://github.com/rust-web/twig/blob/master/COMPATIBILITY.md