Mutual Fund Sales Charges, Fees, and Expenses

Key Points

With thousands of mutual funds to choose from, selecting the funds
appropriate for your needs can be a challenge. Many investors choose to work
with qualified financial advisors who can assist them in choosing funds to
pursue their financial goals.

Before you begin making investment selections, you should review your
situation. What is your investment goal? How long do you plan to keep your
money invested? How comfortable are you with changes in the value of your
investment over short and long periods? You should also familiarize yourself
with the principles of asset allocation and diversification. And finally,
before you invest in a mutual fund, carefully examine its performance, fees,
and any sales charges.

All funds have annual fees and expenses, which are used to compensate their
professional managers and cover operating expenses. These fees may include a
12b-1 fee, which is collected to cover marketing and distribution costs and is
periodically deducted from the fund's earnings each year.

Some funds also apply a sales fee. These funds are known as "load"
funds. The sales load, or fee, compensates the broker who helps you determine
which fund is right for you (if you buy the fund from a broker or registered
representative). If you are working with a fee-based financial advisor to
select your investments, you may want to avoid buying shares that charge a
front-end sales load unless the fund offers exceptional performance potential.
When evaluating load funds, which charge either a front-end load (A shares), a
back-end load (B shares), or a level load (C shares), consider your investment
goals and time frame as they relate to how and when the fees are paid.

Glossary of Terms

Contingent-Deferred Sales Charge (CDSC) -- A fee that may be charged when a shareholder sells fund shares.12b-1 Distribution Fee -- An annual asset-based sales charge that is used to pay for sales-related expenses. Income Distribution -- Payments to shareholders resulting from interest or dividend income earned by a fund's portfolio. Service Fee -- Payments by a fund for personal service to investors and/or for maintenance of shareholder accounts by the distributor or a financial representative.

1. Before you invest in a mutual fund, consider
   the fund's performance, fees, and any sales charges.
2. All funds have annual fees and expenses.
3. These fees may include a 12b-1 fee. In
   addition, funds may charge a sales fee, known as a load.
4. Load funds are classified as either A shares,
   B shares, or C shares.
5. A shares -- front-end loads -- means the sales
   charge is deducted from your up-front investment. This reduces the amount of
   money that goes to work for you. These funds are more appropriate for long-term
   investors.
6. B shares -- back-end loads -- typically charge
   a contingent-deferred sales charge, usually at the time you withdraw the funds.
   These funds may charge a higher 12b-1 fee; therefore, they are more appropriate
   for an investor with an intermediate investment time frame.
7. C shares -- level loads -- may collect a sales
   charge based on net asset value each year and may include a small front- or
   back-end load or a 12b-1 fee. These funds are more appropriate for time frames
   of less than five years.
8. No-load funds do not charge a sales fee but
   may charge an annual 12b-1 fee of up to 0.25%.
9. Before you invest in no-load funds because of
   their lower fees, consider if it would be more beneficial to you to take
   advantage of the assistance that a financial advisor can offer.