New investment options and simpler charging

We’re making some changes

As you may be aware and possibly have discussed with your financial adviser, the UK financial services industry is going through a period of significant regulatory change. The majority of these changes are the result of a regulatory programme called the Retail Distribution Review (RDR) – driven by the industry’s governing body, the Financial Conduct Authority (FCA).

Most recently, in April 2013, the FCA released a paper known as Policy Statement 13/1 – ‘Payments to platform service providers and cash rebates from providers to consumers’ – that sets out rules for how investment platforms, such as FundsNetworkTM, may charge for their services. This change in regulation will come into effect in April 2014 and we are making some changes in advance of this to ensure we comply with the rules in good time.

We need to tell you about some changes

What changes are we making?

To meet the new regulation we are making changes to the investment options we offer and the way we charge for our services with effect from 16 December 2013. Here’s a summary:

• For all new investments into an ISA or investment fund account, the ongoing Annual Management Charge (AMC) will solely reflect the fund manager’s charges and not include any other fees, for example, our platform Service Fee. Such fund structures are known as clean share class funds and only this type of share class will be available from

16 December

• No initial or switch charges will be paid on new investment instructions

In place of the charges being removed we will introduce:

• An annual Investor Fee of £45

• A Service Fee of 0.25% each year calculated against the value of your clean share

class investments

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No initial or switch charges will be paid on new investments

Clean and bundled share classes

Historically, many of the funds made available to you through FundsNetwork have been ‘bundled’ share classes. The quoted AMC of a bundled share class, typically 1.5%, comprises the fund provider’s charge for managing the investment (0.75%), our platform Service Fee (0.25%) and your adviser’s ongoing commission (0.5%).

A clean share class AMC consists solely of the fund provider’s charge. Our Service Fee is charged separately as will be any fee you agree to pay your adviser.

From 16 December 2013, all new investments made into an ISA or investment fund account through FundsNetwork will be made into clean share classes of which we currently offer more than 1,800 from over 80 different providers.

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Understanding share classes and the investments available to you

When investing, you will often find that

your chosen fund can be accessed

through a number of different share

classes. The share class you choose can,

for example, determine whether the fund

pays you income or whether that income

is reinvested. Equally, there are share

classes that have different fee structures

both in terms of overall costs and how

those costs are divided up between the

fund manager, your adviser, and us as

the investment platform.

To help explain the difference between a bundled and a clean share class further, these pages give a quick example that illustrates how the ongoing charges would be applied to each and how the costs compare. In this example, an investor invests £10,000 into an ISA before making a fund switch to an alternative fund a few months later. We assume that there is zero growth in the year on the value invested and a fee has already been agreed with the adviser. Naturally, the AMC of a fund will vary but the figures used in the example are typical of the majority of funds available on our platform. Please bear in mind that the total cost of investing in a clean share class won’t always necessarily be cheaper than its bundled equivalent as a result of the new charges.

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The difference between a bundled and a clean share class

The example here is of a bundled share class that you may invest in today. This shows the AMC which includes the fund management charge, adviser commission and the platform Service Fee, all bundled together.

£50

Initialcharge0.5%

Investment of £10,000 is made

Investor makesa fund switch

£150 ++-+

This example shows the make up of a clean share class that you would invest in from 16 December 2013.Here the AMC includes just the fund management charge. The platform Service Fee and any fees agreed with your adviser are completely separated. You'll also pay no initial or switch charges.

Bundled share classes: How the charges are applied and typical costs over one year

Clean share classes: How the charges are applied and typical costs over one year

AdviserFee0.5%

AMC1.5%

Platform Service Fee (0.25%)

Advisercommission

(0.50%)

FundManagement

(0.75%)

£25£50£50

Switchcharge0.25%

£225= £0

Initial charge0%

Switchcharge

0%

Investment of £10,000 is made

Investor makesa fund switch

£75+

AMC0.75%

FundManagement

(0.75%)

Feeagreed

with adviser

0.5% Platform Service Fee

0.25%

Annual Investor

Fee

£50+ £25+ £0+ £45+ £195=

Commission rebate -0.5%

Since 1 January 2013, commission can no longer be retained by advisers, so this is rebated back to you. Your adviser will agree a fee with you which will be charged separately.

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The example here is of a bundled share class that you may invest in today. This shows the AMC which includes the fund management charge, adviser commission and the platform Service Fee, all bundled together.

£50

Initialcharge0.5%

Investment of £10,000 is made

Investor makesa fund switch

£150 ++-+

This example shows the make up of a clean share class that you would invest in from 16 December 2013.Here the AMC includes just the fund management charge. The platform Service Fee and any fees agreed with your adviser are completely separated. You'll also pay no initial or switch charges.

Bundled share classes: How the charges are applied and typical costs over one year

Clean share classes: How the charges are applied and typical costs over one year

AdviserFee0.5%

AMC1.5%

Platform Service Fee (0.25%)

Advisercommission

(0.50%)

FundManagement

(0.75%)

£25£50£50

Switchcharge0.25%

£225= £0

Initial charge0%

Switchcharge

0%

Investment of £10,000 is made

Investor makesa fund switch

£75+

AMC0.75%

FundManagement

(0.75%)

Feeagreed

with adviser

0.5% Platform Service Fee

0.25%

Annual Investor

Fee

£50+ £25+ £0+ £45+ £195=

Commission rebate -0.5%

Since 1 January 2013, commission can no longer be retained by advisers, so this is rebated back to you. Your adviser will agree a fee with you which will be charged separately.

The fee is activated by making one of the following qualifying transactions:

• A new investment

• Increasing an existing investment

• Switching an investment

• Transfers and re-registration of investments held elsewhere to FundsNetwork

• Increasing the amount invested in a fund in your Monthly Savings Plan (MSP) or adding new funds to an MSP

If you currently invest via an MSP, your existing investments can carry on as before. The Investor Fee will only be activated when you make one of the transactions described.

Once activated, the Investor Fee is collected in instalments of £22.50 either from a CashManager Account, if you have one, or from one of your fund holdings.

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A closer look at the Investor Fee

From 16 December 2013, the Investor Fee – which applies to both individual and joint accounts – will be payable on new investments made into an ISA or investment fund account. This brings the charging of these investments in line with the competitively priced and recently launched FundsNetwork Pension.

Joint accounts and the Investor Fee

As with individual accounts, the Investor Fee is activated on a joint account at the point of your first qualifying transaction after 16 December 2013.

Only one Investor Fee is payable across multiple accounts where the individuals named on those accounts are the same. However, if you hold multiple joint accounts, and the individuals named on those accounts differ, an additional Investor Fee will be payable for each unique group of account holders.

Here’s an example of how the Investor Fee would be charged to a family with multiple single and joint accounts.

Mr Jones pays one Investor Fee which covers all of his individual accounts.

Mr and Mrs Jones pay one Investor Fee for the two accounts they have in their joint names.

Mr and Mrs Jones and their son form another unique account grouping and pay a further Investor Fee.

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What if I am currently paying the Account Fee?

Investors paying our existing £45

Account Fee will be automatically

switched to the Investor Fee.

Your next payment will be

collected in accordance with your

current schedule.

1. What changes are FundsNetwork making? From 16 December 2013, FundsNetwork will

only be offering clean share classes for all new investments made within an ISA and an investment fund account. Our charges that will apply to these share classes consist of an Investor Fee and a Service Fee. This new charging structure already exists on the FundsNetwork Pension.

2. What is a clean share class? Clean share classes are investments where

the Service Fee due to FundsNetwork is charged separately to the fund provider’s quoted AMC.

3. How many clean share classes do you currently offer?

We currently offer more than 1,800 clean share class funds from over 80 fund providers.

4. What is the Investor Fee? The Investor Fee is a flat annual charge of

£45. The fee is taken twice a year – £22.50 every six months.

5. What are the transactions that will activate the Investor Fee?

Transactions include: • A new investment • Increasing an existing investment • Switching an investment • Transfers and re-registration of investments

held elsewhere to FundsNetwork • Increasing the amount invested in a fund

in an MSP or adding new funds to an MSP

6. For which investment products and investment fund accounts would a transaction activate the Investor Fee?

The Investor Fee will be activated by transactions on the following: • Individual Savings Account • FundsNetwork Pension • Investment fund account • ISA Cash Park

The Investor Fee will not be activated when you transact on the following:

• Junior ISA • CashManager Account • FundsNetwork Self Invested Personal

Pension Plan (provided by Standard Life) • FundsNetwork International Bond

(provided by Standard Life) • FundsNetwork Investment Bond (provided

by Standard Life) • Investment Trust

7. After it’s been activated, when will the Investor Fee be collected?

For individual accounts, your first instalment of the Investor Fee will be collected on the second day of the month following your first qualifying transaction.

If you invest in the FundsNetwork Pension prior to 16 December 2013 your first Investor Fee will be collected on 2 January 2014. Where the Investor Fee is activated for a joint account prior to 30 June 2014, the first collection will be in July 2014 and every six months thereafter.

If you are currently paying the Account Fee you will be automatically migrated to the Investor Fee and your existing 6 monthly collection cycles will continue unchanged.

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Questions and answersHere we provide you with some additional information about the forthcoming changes and answer some of the more detailed questions you may have. If you are unsure about what the changes mean to you, please speak to your financial adviser.

8. How is the Investor Fee collected? For accounts in your sole name, the Investor

Fee is collected from a CashManager Account. If a CashManager Account is unavailable, or there is insufficient money within it, the full fee will be collected from one of your funds. The fee collection hierarchy is as follows:

• Largest non-ISA fund holding • Largest ISA holding (single Unit Trust/

OEIC/SICAV, including ISA Cash Funds) • Investment Trust ISA • SICAV (non-ISA) • FundsNetwork Pension

For joint accounts, the Investor Fee is collected from the largest fund holding within the largest of the joint accounts relating to each different group of account holders.

9. What is the Service Fee? The Service Fee is 0.25% each year

calculated against the value of your clean share class investments. For example, if you invest £10,000 in clean share classes and the value of your investment does not change we will charge a Service Fee of £25 a year.

10. When and from where is the Service Fee collected?

The Service Fee will be collected from your account via unit deductions on or around the 15th day of each month. The deductions will be made from the same fund your adviser’s fee is collected from. If you have not nominated a fund for this purpose, the fee will be collected from your largest fund holding.

11. What about my existing investments? Your existing investments are not affected.

However, should you wish to add to your investment, switch to an alternative fund or carry out one of the other transactions already described, your new investment will need to be made into a clean share class.

12. How will these changes affect my existing MSP?

Your MSP will not be affected and can continue as normal. However, should you wish to change the amount you invest in a particular fund, add a new fund or switch to an alternative fund you will need to do so into a clean share class.

13. Does the Investor Fee apply to joint accounts?

Yes, an Investor Fee can be applied to both single and joint accounts.

14. What if I have more than one joint account? Only one Investor Fee will be charged across

multiple joint accounts where the individuals named on those accounts are the same.

If you have multiple joint accounts, but the investors named on those accounts differ, an additional Investor Fee will be payable for each different group of account holders. Please refer to page 7 to see an example of how this would be applied.

15. How will the Investor Fee and Service Fee be reported to me?

You will receive details of the fees that have been applied to your account via your six-monthly statement and valuation.

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Helpful tip: fund codes If submitting applications after 16 December 2013, make sure you check that the fund code you supply is for the clean share class. You can look up fund codes with our online Fund Evaluator tool or via our Fund Range document which can be downloaded from our website.

FundsNetwork is an investment platform operated and owned by Fidelity Worldwide Investment, one of the UK’s largest investment companies.

Launched in 2000, FundsNetwork was one of the pioneers in the development of investment platforms. Initially, we offered ISAs and mutual funds, with a choice of 250 funds from 14 different providers. Since then, we have grown rapidly and enhanced our product range and services.

When making decisions about investing, we recommend that you always consult with your adviser. As you will be aware, they work with you to understand your needs and then offer broad-based advice to help you achieve your long-term goals. We only give information about our products and services and we do not provide investment advice.

Please remember the value of investments can go down as well as up and you could get back less than you invest.

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The value of advice

About FundsNetwork

We now:• Serve over 1 million customers• Look after £45.9 billion on behalf of

our customers*• Offer over 1,800 clean share classes from

more than 80 leading fund managers• Have a comprehensive selection of

accounts, including ISAs, investment funds, a pension and an offshore bond *Source: Fidelity as at 30 September 2013.

If you have any questions relating to the contents of this booklet, please speak to your adviser. Alternatively, you can call us on 08457 44 66 00 (9am to 6pm, Monday to Friday).

Issued by Financial Administration Services Limited, authorised and regulated by the Financial Conduct Authority. FundsNetwork™ and its logo are trademarks of FIL Limited.FNWCSO5503/1213