Mutual funds commonly offer more than one class of shares. Each mutual fund class is invested in the same portfolio with the same investment policy and objective as the other share classes. Each class provides different shareholder services and/or distribution arrangements with different fees and expenses.
Class A shares typically carry a higher front-end load but have a lower distribution fee and other expenses than any other class of mutual fund shares.
Class B shares usually have a contingent deferred sales charge (CDSC), rather than a front-end load, a distribution fee and other expenses that are higher than for class A shares. They may automatically convert into class A shares after a certain holding period, often two years after the CDSC is eliminated.
Class C shares generally have a higher distribution fee and other expenses than either class A or class B shares. They typically have a front-end or back-end load that is lower than for class A or B, respectively, but usually without automatic conversion into another class.
| Shareholder Fees and Annual Fund Operating Expenses* (Example) | ||||||||
| Class A | Class B | Class C | Class I | Class R | ||||
| Maximum sales charge* | 5.75% | None | None | None | None | |||
| Maximum deferred sales charge† | None | 4% | 1% | None | None | |||
| Management Fees | 0.65% | 0.65% | 0.65% | 0.65% | 0.65% | |||
| Distribution and Service (12b-1) Fees | 0.25% | 1.00% | 1.00% | 0.00% | 0.50% | |||
| Other Expenses | 0.35% | 1.03% | 0.46% | 0.11% | 0.45% | |||
| Total Annual Fund Operating Expenses | 1.25% | 2.68% | 2.11% | 0.76% | 1.60% | |||
| * Paid by fund investors as a percentage of the investment value. † A percentage of offering price or the amount received when shares are sold, whichever is less | ||||||||
Other classes of mutual funds include:
- Class I shares – A class of mutual fund shares targeted to institutional investors and subject to very high minimum investment requirements, but no-load – alternatively referenced as “Class X”, “Class Y” or “Class Z” shares.
- Class R shares – A class of mutual fund shares usually for use in retirement plans such as 401(k) plans, which typically charge a small distribution and services fee, but no load.
- Class N shares – A class of mutual fund shares for which a distribution and services fee of no more than 0.25% of fund assets is charges, but no load.
When a fund offers different classes of shares, the total return will generally vary from class to class due to their varying fee and expense structures. Multiclass structures allow investors to choose the one that is most appropriate for their investment goals.
US closed-end funds and certain ETFs are generally restricted from offering multiple classes of shares representing interests in the same fund portfolio. To issue multiple share classes, these funds must apply for an exemptive order from the SEC and comply with special policies and procedures.
