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WATCH HIDDEN FEES ON MUTUAL FUNDS

 WATCH HIDDEN FEES ON MUTUAL FUNDS
 TUSCALOOSA, Ala., Sept. 22 /PRNewswire/ -- Are "hidden" fees eating


away at your mutual fund investments?
 Whether a mutual fund is classified as a "load" fund or a "no load" fund, fees may vary widely, according to Dr. Robert W. McLeod, an associate professor of finance at the University of Alabama who recently completed a study of mutual fund fees.
 New Securities and Exchange Commission (SEC) rules going into effect next July will make it easier to identify funds with fees, but consumers should watch for changes made now as funds prepare to meet the new guidelines, said McLeod, a Certified Financial Planner.
 "Load" funds are those with an upfront sales charge on the initial investment and, in some cases, on reinvestment of gains. While these charges can be as high as 8.5 percent, McLeod said most are currently in the 6 percent range -- still no bargain at today's low interest rates.
 Don't make the mistake of thinking that "no load" means no charge, he counseled. Many mutual funds, although classified as "no load," have distribution charges which are allowed under Rule 12b-1 of the SEC. These annual fees average 25 basis points (one-quarter of 1 percent) to 1.25 percent of assets, but can be higher.
 "These charges are supposed to cover expenses associated with distribution and sale of shares. The idea is that these charges -- which go toward commission on sales -- would encourage sales and expenses would be reduced by economies of scale," McLeod said.
 "But that has not happened. These fees have proven to be deadweight charges of no benefit to shareholders."
 The new SEC rules will prohibit mutual funds which charge over 25 basis points (one-quarter of 1 percent) from calling themselves "no load" funds.
 The new regulations will cap the annual 12b-1 charge at 75 basis points (three-quarters of 1 percent), but allow an additional service fee of 25 basis points, McLeod said. They will also limit the total amount of 12b-1 fees to 8.5 percent over the life of the fund.
 While these changes are aimed at clarifying charges, McLeod cautioned shareholders to watch for fees that may be added in preparation for the new regulations.
 "Most shareholders do not vote their proxies. Read materials and vote against new fees," he counseled. "And if fees get too high, take your money out of that fund and invest it elsewhere."
 -0- 9/22/92
 /CONTACT: Cathy Andreen, business writer for The University of Alabama, Tuscaloosa, 205-348-8318/ CO: University of Alabama ST: Alabama IN: SU:


SM -- NYPFNS9 -- 1957 09/22/92 06:54 EDT
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Date:Sep 22, 1992
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