Can the contingent deferred sales charge be waived for certain redemptions?
The CDSC on Class C and 529-C shares (and Class A and 529-A shares purchased without a sales charge and redeemed within a year) may be waived for certain transactions, including:
- Permitted exchanges of shares, except if shares acquired and then redeemed within the period during which a CDSC would apply to the initial shares purchased
- Tax-free returns of excess contributions to IRAs
- Redemptions due to death or postpurchase disability of the investor (this generally excludes accounts registered in the names of trusts and other entities)
- Class 529 share redemptions due to a beneficiary’s death, postpurchase disability or receipt of a scholarship (to the extent of the scholarship award)
- Redemptions due to the complete termination of a trust upon the death of the trustor/grantor or beneficiary, but only if such termination is specifically provided for in the trust document
- Required minimum distributions from retirement accounts and payments through systematic withdrawal plans, up to 12% of the account value each year combined
The investor or financial professional must inform American Funds that a transaction qualifies for a sales charge waiver when the transaction is made.
Please see fund prospectuses and statements of additional information for more details.
Why do Class C shares convert to A shares?
Class A shares have lower annual expenses than Class C shares. To keep long-term investors from paying higher fees over time, Class C shares, including shares acquired by dividends, convert to Class A shares after an investor has owned them for 8 years.
Why do Class 529-C shares convert to 529-A shares?
Class 529-A shares have lower annual expenses than Class 529-C shares. To keep long-term investors from paying higher fees over time, Class 529-C shares, including shares acquired by dividends, convert to Class 529-A shares after an investor has owned them for 5 years.
Why is the 12b-1 fee higher for Class C shares than for Class A shares?
By purchasing Class C shares, an investor elects to pay the cost of acquiring fund shares over time through an asset-based sales charge rather than immediately paying a sales charge up front.
Class C share 12b-1 expenses include an annual 1% fee to reimburse American Funds for dealer commissions paid to financial professionals in the first year of share ownership and to pay dealers for providing ongoing service to their clients who own Class C shares.
Why are the funds’ dividends different for each share class?
Since expenses and dividends are paid from a fund’s income, the expense difference associated across share classes will affect the amount of the dividend distributions. Classes with higher expenses will have lower dividends.
Why isn’t check writing available for Class C shares of American Funds U.S. Government Money Market Fund℠?
Since each check could be subject to a contingent deferred sales charge, check writing is not available on these share classes. This option is only available for Class A shares on certain non-retirement account types.
Why does the fund value drop when a capital gain distribution is paid?
Fund managers buy and sell securities throughout the year, sometimes at a profit, sometimes at a loss. When profits outweigh losses, they accumulate and contribute to the rise of the net asset value (NAV), or share price, of the fund’s shares. When that profit is paid out to investors as a capital gain distribution, its NAV will be reduced by the amount of the distribution.
However, this doesn’t mean that investors are losing money. Investors can either take capital gain distributions in cash or reinvest them, as most investors do. If capital gains are reinvested, the number of shares in the account will increase, leaving the total value of the account unaffected by the distribution.
Are there ways for investors to reduce Class A and 529-A sales charges?
Why are investment amounts limited for Class C and 529-C shares?
Because we want to make sure that investors choose the share class with the lowest long-term costs. Class C share purchases are allowed only up to $500,000. Purchases of that size or larger would qualify for a reduced Class A share sales charge of 2% or less, which might be more cost-effective than paying the higher Class C share annual expenses over a number of years. Investors eligible to invest in Class A and 529-A shares without a sales charge cannot invest in Class C and 529-C shares.
Class 529 share investments are limited to $500,000 per beneficiary across all share classes. Investments in a CollegeAmerica® account cannot be made if the value of all 529 plans maintained by Virginia 529℠ (CollegeAmerica, Virginia 529 prePAIDSM, Virginia 529 inVESTSM and CollegeWealthSM) for the same beneficiary is $500,000 or more.
Why does a fund’s dividend vary across different share classes?
Since expenses and dividends are paid from a fund’s income, the expense difference associated across share classes will affect the amount of the dividend distributions. Share classes with higher expenses will typically have lower dividends.
Can investors exchange among share classes?
Exchanges are generally allowed only within the same class of shares because of the different expenses associated with each class. However, investors may exchange from Class A shares of American Funds U.S. Government Money Market Fund to other share classes.
Class A, C, F-1 and F-2 shares generally may be exchanged into the corresponding 529 share class without a sales charge. Additionally, exchanges from UGMA or UTMA custodial accounts to a 529 account may create significant legal and tax consequences.
To find out more about exchanges, refer to our Share Class Pricing and Details page.