Glossary

12b-1 fee: 12b-1 fees get their name from the SEC rule that authorizes their payment. Under the 12b-1 Distribution Plan, the fund pays distribution and/or service fees to the Distributor to support the sale and distribution of classes and shareholder servicing and account maintenance activities.

Annual rate of return: The total return over a 12-month period from an investment, including reinvested dividends or interest and capital gains or losses, but excluding sales charges.

Breakpoints In Sales Charges: Investment portfolios with front-end sales charges enable you to reduce front-end sales charges as the amount of your investment increases to certain levels called "breakpoints".

Contingent deferred sales charge (CDSC): The fee charged at the time you sell certain investment portfolios shares that were sold without an initial sales charge (for example, Class B shares). This fee normally declines each year and is eliminated after a number of years.

Earnings without expenses: The annual change in dollars on an investment, reflecting principal appreciation or depreciation, reinvested dividends or interest, capital gains or losses.

Expense ratio: The amount, expressed as a percentage of average net assets, that investors pay annually for investment portfolio expenses. These expenses include management fees, 12b-1 fees, shareholder service costs, custodian fees, shareholder communication costs, and audit and legal fees, among others. The expense ratio, adjusted for acquired fund fees and expenses (AFFE), if any, from underlying funds that the Fund may invest in, is taken out of the investment portfolio's current income and is disclosed in the prospectus.

Fiscal year: An accounting period typically covering 12 months, at the end of which the books are closed and the profit or loss is determined. This is not necessarily the same as a calendar year, which runs from January through December.

Foregone earnings: The amount you could have earned on your investment if the money spent on fees and expenses had been invested. Foregone earnings are calculated by taking the money used to pay portfolio related fees and expenses and compounding it at the rate of return you selected. Deferred sales charges are not included in this calculation because you only pay them when you sell the investment.

Front-end sales charge: The fee charged at the time you purchase certain portfolio shares (Class A shares). The public offering price includes the impact of the sales charge. For example, suppose you want to spend $10,000 to purchase portfolio shares and the portfolio imposes a front-end sales charge of 5%. You will be charged $500, and you will receive shares with a market value of $9,500. A portfolio may offer you a discount if you

  • make a large purchase
  • already hold other portfolios offered by the same fund family
  • commit to regularly purchasing the portfolio's shares

You should ask your investment professional about discounts or breakpoints.

Initial investment amount: The original amount invested in the fund before any applicable sales charges were deducted.

Sales charge: The fee charged when shares are purchased (front end) or redeemed (CDSC, see Class B shares below); it can also be called a "load." Most of the sales charge is returned to the broker/dealer as commission; a smaller portion is retained by the Fund's distributor. Reinvested dividends and capital gains generally are not assessed a sales charge. Not all portfolios have a sales charge. Many portfolios, called "no-load funds," have no sales charge. You can find the sales charge in the fee table in the front of a portfolio's prospectus.

Share class: A portfolio may offer more than one "class" of shares to investors. Each class represents a similar interest in the portfolio but has different fees and expenses. The investor and his or her investment professional choose the class of shares best suited to the investor's situation. You can find out if a portfolio has different classes by looking at the prospectus. Here are the basic definitions of classes of shares:

  • Class A shares: These shares typically charge a front-end sales charge that is deducted from the initial investment. Many Class A shares charge a 12b-1 fee, but it's generally lower than the 12b-1 fee for other classes that charge a 12b-1 fee (not all classes charge 12b-1 fees).
  • Class B shares: These shares do not charge a front-end sales charge. So, unlike Class A shares, all your money is invested immediately. Class B shares impose a contingent deferred sales charge (CDSC). The CDSC normally declines each year and is eliminated after a number of years. Class B shares often then "convert" into Class A shares. When they convert, they will begin to charge the same annual fund operating expenses as Class A shares. Class B shares typically charge higher 12b-1 fees than Class A shares. Before they convert, Class B shares usually have higher annual fund operating expenses than do Class A shares.
  • Class C shares: These shares typically do not charge a front-end sales charge. So, unlike Class A shares, all your money is invested immediately. Often Class C shares impose a small charge if you sell your shares within a short time of purchase, usually one year. Class C shares also typically impose higher annual fund operating expenses than do Class A shares.
  • Class R shares: These shares are available for purchase only through certain retirement plans and are purchased without a sales charge.
  • Class 529 shares: These shares are available for purchase only through certain 529 college savings plans.
  • Class I shares: These shares are available exclusively to certain eligible investors.
  • Class J shares: These shares are available exclusively to Japanese investors through financial institutions in Japan. These shares are no longer offered.

Some portfolios may offer additional classes of shares.

Sources:
- Barron's Dictionary of Finance and Investment Terms
- National Association of Securities Dealers Web site
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