Charlotte, North Carolina

Understanding Mutual Fund
Fees AND Expenses

There are two main types of costs associated with mutual funds:

Shareholder fees are commissions which are charged directly to the shareholder at the point of sale or upon redemption.

Shareholder expenses are total operating expenses, which are reflected in the fund’s share price and are not charged directly to the shareholder.

The fees and expenses charged to shareholders may vary from one mutual fund company to another. Understanding the fees and expenses associated with your mutual fund is important because it can have a material impact on your investment returns.

Shareholder Fees

Front-End Sales Charge is a one-time fee imposed at the time of purchase. Front-end sales charges can range from 2% to 8%, and are deducted from the initial amount invested. By law a sales charge may not exceed 8.5%. The sales charge is generally considered compensation for assistance received from a financial advisor.

Contingent Deferred Sales Charge (CDSC) also called a Back-End Sales Charge, is a one time fee that you pay if you redeem your shares within a certain number of years. The CDSC declines year after year until it eventually disappears, typically after six years.

Shareholder Expenses

Management Fees cover the costs of professional asset management and services, maintaining shareholder records and furnishing shareholder reports and statements. All mutual funds, regardless of whether they impose a sales charge, have management and operating expenses.

12b-1 Fees cover the cost of advertising, sales literature and other distribution expenditures. Under SEC regulation, a fund’s 12b-1 fee cannot exceed 0.75% and a no-load fund’s 12b-1 fee cannot exceed 0.25%.

Information about mutual fund fees and expenses can be found in the fund company’s prospectus.

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