Information: For Immediate Release Friday 27 August 1999

AUTIF AND FITZROVIA TO REVIEW TOTAL EXPENSE RATIOS

AUTIF is keen to ensure that accurate and objective information about investment fund charges is readily available to investors. A recent press release from Fitzrovia, which drew conclusions about the relative charges of unit trusts and OEICs, has raised serious questions within the industry about how Fitzrovia’s data has been interpreted.

In Fitzrovia’s press release entitled "What does the OEIC mean to the man in the street" it was suggested that investors would be better investing in a unit trust than one of the more recently launched Open Ended Investment Companies (OEIC) because of differences in Total Expense Ratios (TERs).

In the interests of achieving accurate information which all sections of the industry can use with confidence, AUTIF has reviewed carefully with Fitzrovia the methodology behind the recent comparison and the conclusions drawn by Fitzrovia. As a result of this review, Fitzrovia has agreed that, although the calculations on fund TERs are correct, the conclusions drawn were extremely misleading.

A Total Expense Ratio calculates the total annual running costs of an investment fund. These consist principally of the manager’s annual charge, plus other services paid for by the fund in addition to this, such as the costs of custody, audit and registration. The effect of a fund’s Total Expense Ratio is disclosed in a Key Features document issued to investors in the UK and the items which can be charged to a fund are strictly controlled by FSA regulations.

There is no necessary reason for an OEIC to be more or less expensive than a unit trust. It is likely that large funds will have lower TERs than small funds, that funds investing in overseas markets have higher TERs than UK funds (because of higher custody costs) and that new funds will show higher costs than old funds. However, the principal difference in TERs is whether the fund manager has a higher or lower annual charge. Thus the level of TER is not related to whether the fund is a unit trust or an OEIC.

Both Fitzrovia and AUTIF believe that confusion about the effect of TERs is not in the interests of investors or management groups. AUTIF has already carried out considerable work on the methodology of TER calculations and is in discussion with the FSA in the context of their work on league tables.

AUTIF will call on Fitzrovia’s wide experience of these issues as it develops its thinking.

Paul Moulton, Chief Executive of Fitzrovia said:

"I regret that our recent press release did draw some misleading conclusions. I believe that TERs should be widely available on a public basis. We welcome AUTIF’s initiative in this area, which is in the interest of the investing public and of their members. We have a great deal of data and experience of analysis which we think will be of great value."

Alan Ainsworth, Chairman of AUTIF, said:

"The costs of managing funds are very much under the spotlight, particularly with the new FSA league tables of costs in preparation. We have welcomed the FSA initiative. All fund charges are already disclosed in the UK but the format of disclosure can be unhelpful. A TER could be a worthwhile simplification. Fitzrovia’s database and knowledge will be of great value in this initiative."

For further information, please contact:

Alan Ainsworth, Chairman - AUTIF -0171 464 5739
Philip Warland, Director General - AUTIF -0171 831 0898
Paul Moulton, Chief Executive - Fitzrovia - 0171 495 4777
Clare Arber, PR Manager - AUTIF - 0171 831 0898