Mutual Funds - Class A, B, C Shares
A single mutual fund, with one portfolio and one investment adviser may offer more than one class of its shares to investors. Although each class represents a similar interest in the fund's portfolio, the difference between the classes is that the fund will charge you different fees and expenses based upon the class you choose. The fee table located in the mutual fund's prospectus will tell you the fund's fees and expenses.
"A" SHARES
Class A shares typically have a front-end sales charge. Therefore a portion of the dollars you use to purchase these types of shares is not invested on your behalf. The fee is expressed as a percentage of the amount invested. Class A shares tend to have a lower 12b-1 fee and lower annual expenses than other mutual fund share classes.
If you plan to purchase Class A shares, be sure to inquire about breakpoints as the mutual fund may offer a discount off the front-end sales charge if you:
- Currently hold other funds offered by the same mutual fund family
- Make a large purchase
- Made a commitment to regularly purchase shares in the mutual fund
"B" SHARES
Class B shares generally do not have a front-end sales charge, so all of your dollars are immediately invested. They may, however, impose a contingent deferred sales load and a higher 12b-1 fee (than Class A shares), along with other annual expenses. The contingent deferred sales charge is paid when you sell your shares. This fee is expressed as a percentage of the amount invested and may also be called a back-end load , an exit fee, or a redemption charge. The contingent deferred sales charge will normally decline and be eliminated the longer you hold your shares. Once this happens they then often convert to Class A shares and will change to the Class A shares asset-based sales charge.
If you are planning a large purchase of Class B shares, refer to the funds prospectus and talk to your financial adviser as Class A shares may be a better choice as the Class A shares generally have a lower expense ratio and may offer a large purchase discount from their front-end sales charge.
"C" SHARES
Class C shares may have a 12b-1 fee, other annual expenses, and either a front- or back-end sales load. In most cases your expense ratio will be higher than Class A shares, as well as, Class B shares...even when held for a long time. Class C shares may impose contingent deferred sales charges or other redemption fees, however, the front- or back-end load for Class C shares tend to be lower than that for Class A or Class B shares. Class C shares do not generally convert into another share class. Class C shares are often purchased and used for asset-allocation purposes.
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