Most open-end investment companies offer several classes of fund shares. The most common examples are A, B and C shares, although some fund families offer R and F shares for special categories of investment such as college savings plans or employee retirement shares.


Share classes differ primarily in the way in which their sales charges and distribution charges - that is, loads and 12b-1 fees - are assessed. Although the specifics of the different classes sold by each fund family vary widely depending on the fund, most funds offer the share classes listed below.
  • Class A Shares: Class A shares usually have front-end loads. Investors purchasing larger numbers of shares can usually take advantage of reduced sales charges at defined intervals, known as breakpoints. These shares also have smaller 12b-1 fees.

  • Class B Shares: Class B shares come with back-end loads (contingent deferred sales charges (CDSCs)). Investors do not pay front-end loads, and they only pay a sales charge if the shares are redeemed within the CDSC schedule; otherwise, the sales charges are limited to the 12b-1 fees, which are usually higher than those of other share classes. Once the CDSCs are reduced to zero, these funds convert from B shares to A shares.

  • Class C Shares: Class C shares usually come with a load that is equal to 1% of the fund's assets if they are redeemed within the first year to 18 months. These shares also have higher annual 12b-1 fees than A shares; typically, they are equal to 1% or more of the net assets.
The article The ABCs Of Mutual Fund Classes contains useful information about the pros and cons of each type of mutual fund share.
  • Other Share Classes: For other special types of investors, such as employees of broker-dealers, 529 college savings plan investors, institutional investors or investors with fee-based accounts, mutual fund companies offer a number of different share classes that take into account the initial purchase size and type of investor. As a result, the initial sales charges and 12b-1 fees will differ for each share class.
Breakpoints

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