For Immediate Release: Monday 2 April 2001

AUTIF ISSUES DISCUSSION PAPER ON SIMPLIFICATION OF PRICING RULES FOR INVESTMENT FUNDS

The Association of Unit Trusts and Investment Funds (AUTIF) is asking members to comment on a discussion paper it has prepared regarding a consistent approach to the pricing of investment funds. AUTIF is seeking an agreement from the industry which can then be presented to the Financial Services Authority (the FSA), which is responsible for the rules in this area.

Following initial consultations with a group of members experienced in single pricing, AUTIF is proposing that all funds, whether unit trusts or oeics, should be presented in the same way. Investors, buying or selling a particular fund's units or shares on a single day, would do so at the same price. The initial charge would be shown separately.

AUTIF is suggesting a mechanism that allows managers to protect existing investors from the dealing costs which would be incurred if the manager has to buy or sell securities as a result of large movements into or out of the fund. Such a mechanism already exists for OEICs, where managers may impose a "dilution levy" on investors who are buying or selling shares in the OEIC. This is paid into the fund to the sole benefit of continuing investors. Experience shows, however, that the dilution levy is often misunderstood and is unpopular among investors.

AUTIF proposes, therefore, that managers should, within strictly defined and regulated parameters, be permitted to adjust the price up or down to take account of dealing costs in the underlying investments. This achieves the same effect as the dilution levy: if there is a large number of sellers or of buyers on a particular day, the single, mid-market price can be adjusted to ensure that continuing holders are automatically protected.

Most unit trusts currently operate a dual pricing system, but some already apply the swinging single pricing method.

Sheila Nicoll, Deputy Director General at AUTIF, commented:

"AUTIF believes that it is important for the industry to take a coherent approach to pricing and make things as simple and clear to investors as possible. The issue is not whether to move to single pricing for all funds, but how.

"The ultimate decision is for the Financial Services Authority, and we believe that it is important for investors to know that the process will be regulated and carefully monitored. We would like to see this question resolved as soon as possible, hence our desire to put an agreed industry proposal to the FSA."

Members have until 27 April 2001 to respond to this paper. A copy of the paper is available on request.

For further information please contact:

Sheila Nicoll, Deputy Director General, AUTIF +44 (0)20 7831 0898
Clare Arber, PR Manager, AUTIF +44 (0)20 7831 0898