Fees and Expenses

The management fee is the most recently reported actual percentage that was deducted from an investment's average net assets to pay the investment's management.

The management fee is the maximum percentage deducted from a fund's average net assets to pay an advisor or subadvisor. It is collected from the prospectus.

The maximum annual charge deducted from fund assets to pay for distribution and marketing costs. Although usually set on a percentage basis, this amount will occasionally be a flat figure. Only active 12b-1 plans are represented here. This information is taken directly from the fund’s prospectus. (Morningstar lists the maximum amount.)

Some 12b-1 fees are something of a hidden charge, because they are taken out of the NAV. Morningstar breaks the 12b-1 amount out of the expense ratio so investors know how much they’re paying.

This information is taken directly from the fund’s prospectus.

Important Rules About 12b-1 FeesAs of July 1993, no member of FINRA is allowed to sell shares of a mutual fund whose asset-based sales charges are greater than 75 basis points per year. However, a maximum additional 25 basis points under the title "service fees" is permitted. This effectively raises a fund’s fee limit to 1.00% per year. Services fees, also known as trailing commissions, are fees paid by funds to brokers for continuing liaison services to clients, such as providing investment information or addressing general inquiries.
These FINRA rules place different limitations on funds with different fee structures. If a fund charges service fees, then its combined fee structure (including asset-based fees, front-end loads, and deferred loads) may not exceed 6.25% of total new gross sales. If, however, the fund does not charge service fees, yet has asset-based ones, the total sales charge cannot exceed 7.25%. Another stipulation prohibits any broker from describing (orally or in writing) a mutual fund as being "no-load if it has either 12b-1 fees (including service fees), or loads that exceed 25 basis points annually. Funds that have distribution fees in excess of.25%, but are not liable for broker compensation, may call themselves "no commission" funds. Type your expanding text here.

Service Fee Structure and Fund ClassesFINRA rules prohibit 12b-1 fees from being higher than 1%. This 1% is comprised of two parts: a distribution fee and a shareholder service fee, both of which are paid to the distributor. The distribution portion of the fee cannot exceed more than 75 basis points, while the shareholder service fee limit is 25 basis points.
In a typical multi-class situation, the class A fund has a front-end load and either a 0.25% distribution fee or a 0.25% service fee. Class B shares usually have a contingent deferred sales charge and a corresponding 0.75% 12b-1 fee, plus a maximum 0.25% service fee. Frequently, deferred loads have a conversion feature which automatically converts class B shares to class A status after a period of seven or eight years. Class C shares customarily charge a level load with the same fee structure found in a class B share, minus the conversion feature.
Investors should be aware, however, that these class designations are simply a noticeable industry trend, and not an enforced rule for fund structure. Consequently, investors should note that fee structure rules surrounding fund classes often can be complex and convoluted when it comes to fee structures and applications. Fee structure rules are designated differently among various fund families—lending further credence to the wisdom of reading a fund prospectus thoroughly before making an investment decision.Type your expanding text here.

A percentage of a fund's positive returns given to the fund manager.

These are also known as back-end sales charges and are imposed when investors redeem shares. The percentage charged generally declines the longer shares are held. This charge, often coupled with 12b-1 fees as an alternative to a traditional front-end load, diminishes over time. Understanding a fund's fee structure is essential in determining whether or not a fund is appropriate for your portfolio or investment plan. With a deferred fee an investor has the advantage of getting the full financial power of their investment from the onset. This information is taken directly from the fund's prospectus.

Details

Investors should note that there are combinations of deferred loads and 12b-1 fee that are costlier than a (typically higher) front-end load. Although contingent deferred sales charges usually decline to zero after a specified number of years, the cumulative 12b-1 fee always compensates any possible loss the fund company might incur by long-term shareholders holding onto their shares until the stated load is zero. The amount invested, and how long it will be invested, should be paramount in the share-class investment decision. Very long-term investors normally do not benefit from deferred load funds, especially deferred load funds that do not convert to the less-expensive front load shares.

An annual amount charged when assets are withdrawn from some funds. Unlike deferred fees, however, some redemption fees go back into the fund itself, rather than into the fund company’s pockets, and thus do not represent a net cost to shareholders.

The maximum fee charged by the insurance company on the investor's initial contribution to the variable account. Unlike other charges, the front-end load is a one-time charge. Yet less of the investor's initial contribution will be put to work, because a front-end load is deducted before any money is actually invested in the subaccount. This information is taken directly from the policy's prospectus.

The date of the fund's most recent annual report.

Often referred to as the Audited Expense Ratio, Morningstar pulls the annual net expense ratio from the fund's audited annual report. Annual-report expense ratios reflect the actual fees charged during a particular fiscal year, while prospectus expense ratios reflect material changes to the expense structure for the current period.

Note: The annual report expense ratio for a fund of funds is the wrap or sponsor fee only.

Often referred to as the Audited Gross Expense Ratio, Morningstar pulls the annual gross expense ratio from the fund's audited annual report. Annual-report expense ratios reflect the actual fees charged during a particular fiscal year, while prospectus expense ratios reflect material changes to the expense structure for the current period.

The percentage of fund assets, net of reimbursements, used to pay for operating expenses and management fees, including 12b-1 fees, administrative fees, and all other asset-based costs incurred by the fund, except brokerage costs. Fund expenses are reflected in the fund's NAV. Sales charges are not included in the expense ratio.

The expense ratio for funds of funds is the aggregate expense ratio as defined as the sum of the wrap or sponsor fees plus the estimated weighted average of the underlying fund fees.    

The Prospectus Net Expense Ratio is collected annually from a fund's prospectus.

Type your drop-down text here.The percentage of fund assets used to pay for operating expenses and management fees, including 12b-1 fees, administrative fees, and all other asset-based costs incurred by the fund, except brokerage costs. Fund expenses are reflected in the fund's NAV. Sales charges are not included in the expense ratio.

The expense ratio for fund of funds is the aggregate expense ratio as defined as the sum of the wrap or sponsor fees plus the estimated weighted average of the underlying fund fees.    

Often referred to as the Annual Operating Expense, the Prospectus Gross Expense Ratio is collected annually from a fund's prospectus.

Reveals the percentage of current income earned per share. The income ratio can be used as a gauge of how much of the total return comes from income. A high income ratio suggests that the fund depends on dividend distributions or coupon payments to fill out its total return. Conversely, a low income ratio suggests that capital appreciation very likely dominates the total return. It is entirely possible to have a negative income ratio. Since expenses are taken directly out of income (such as dividend or coupon payments), funds with few debt obligations or dividend-paying equities may have negative income ratios.

Fund Company's Calculation:

It is calculated by dividing the net investment income by average NAV. The net investment income is the total income, less operating expenses.

Represents pricing service, financial agent, or security servicing fees as represented in the fund's annual report. This figure is reported in U.S. Dollars.

Represents administrative service fees which usually include occupancy costs and other office expenditures. This figure is reported in U.S. Dollars.

Represents the dollar amount charged by manager(s) as represented in the fund's annual report. This figure is reported in U.S. Dollars.

Cost of acquiring outside auditors to examine a fund's financial statements. This number is taken from the fund's annual report and reported in U.S. Dollars.

Represents the compensation to the board of directors.

Funds are required to hold their securities in the custody of a qualified bank. This fee represents the cost of that bank's service and is culled from the fund's annual report. This figure is in U.S. Dollars.

Similar to a transfer agent fee. A distributor is responsible for distribution of the shares, marketing of the fund, and shareholder service. Total 12b-1 fees are capped at 1.00% of the average daily net assets.  A typical fee may consist of .75% for marketing/distribution and .25% for service. This number is taken from the fund's annual report and reported in U.S. Dollars.

Income generated from dividends and/or interest in U.S. Dollars. This number is culled from the fund's annual report.

Usually only seen on insured municipal bond funds. Represents the cost of purchasing insurance to protect assets in a market downturn. This can also represent insurance purchased for facilities or materials. Pull information from the fund's annual report and it is reported in U.S. Dollars.

Represents dividend expense on securities sold short or loan commitment fees as represented in the annual report. This figure is reported in U.S. Dollars.

Represents a fund's attorney fees as depicted in the annual report. This figure is reported in U.S. dollars.

Represents start-up costs of a fund and is reported in the fund's annual report. This figure is usually amortized over a period of years and is reported in U.S. Dollars.

Represents any other miscellaneous fee a fund may incur as represented in the fund's annual report. This figure is reported in U.S. Dollars.

Some funds use this term to represent "legal" or "audit" or a variety of other professional fees in their annual report. This figure is reported in U.S. Dollars.

Filing fees incurred with registering with the SEC or other governing bodies. Fees may include Blue Sky fees or other regulatory expenses as reported in the fund's annual report. This figure is reported in U.S. Dollars.

Represents costs for shareholder communications, postage and printing costs as depicted in the fund's annual report. The figure is reported in U.S. Dollars.

Incurred when the advisor outsources some type of management duties. This most often occurs on international funds. Figure is reported in U.S. Dollars and culled from the fund's annual report.

Often international funds incur taxes on their transactions and organization. Rarely, if ever, seen on a domestic fund. This figure is pulled from annual report and reported in U.S. Dollars.

Represents a shareholder servicing agent that maintains shareholder records, prepares shareholder reports and maintains the customer service department.  Often seen when no 12b-1 fee is in place. This figure is pulled from the fund's annual report and depicted in U.S. Dollars.