Fees and Expenses
Maximum Sales Fees
Initial Sales Fee (Front-end Load): The initial sales charge or front-end load is a deduction made from each investment in the fund. The amount is generally based on the amount of the investment.
Deferred Sales Fee (Back-end Load): Also called a contingent deferred sales charge or back-end load, a deferred load is an alternative to the traditional front-end sales charge as it is only deducted at the time of sale of fund shares. The deferred load structure commonly decreases to zero over a period of time. A typical deferred load's structure might have a 5% charge if shares are redeemed within the first year of ownership, and decline by a percentage point each year thereafter. These loads are normally applied to the lesser of original share price or current market value. It is important to note that although the deferred load declines each year, accumulated annual distribution and services charges (the total 12b-1 fee) can sometimes offset this decline.
Redemption Fee: The redemption fee is an amount charged when money is withdrawn from the fund. This fee does not go back into the pockets of the fund company, but rather into the fund itself and does not represent a net cost to shareholders. Also, unlike contingent deferred sales charges, redemption fees typically operate only in short, specific time clauses, commonly 30, 180, or 365 days. However, some redemption fees exist for up to five years. Charges are not imposed after the stated time has passed. These fees are typically imposed to discourage market timers, whose quick movements into and out of funds can be disruptive. The charge is normally imposed on the ending share value, appreciated or depreciated from the original value.
Total Cost Projections (per $10,000)
Found in the fund's prospectus, these figures show how much an investor would expect to pay in expenses—sales charges (loads) and fees—over the next three, five, and 10 years, assuming a $10,000 investment that grows by 5% per year with redemption at the end of each time period. Total cost projections are commonly based on the past year's incurred fees or an estimate of the current fiscal year's fees, should a portion of the overall fee structure change as of the printing of the fund's most current prospectus. Newer funds are only required to print total cost projections for one- and three-year time periods since longer-term projections may not be possible to estimate.
Maximum Fees
Administrative Fee: The administrative fee is the fund's maximum allowable charge for its management-fee structure, excluding advisor fees. Costs associated with SEC compliance may also be included under this label. Administrative fees often operate on a sliding scale and include the costs of basic fund operations, such as leasing office space.
Management Fee: The management fee is the maximum percentage deducted from a fund's average net assets to pay an advisor or subadvisor. Often, as the fund's net assets grow, the percentage deducted for management fees decreases.
Alternatively, the fund may compute the fee as a flat percentage of average net assets. A portion of the management fee may also be charged in the form of a group fee. To determine the group fee, the fund family creates a sliding scale for the family's total net assets and determines a percentage applied to each fund's asset base.
The management fee might also be amended by or be primarily composed of a performance fee, which raises or lowers the management fee based on the fund's returns as they compare with an established index (we list the maximum by which the fee can increase or decrease); or a gross income fee, a percentage based on the total amount of income generated by the investment portfolio.
12b-1 Fee: The 12b-1 fee represents the maximum annual charge deducted from fund assets to pay for distribution and marketing costs. Although occasionally a flat dollar amount, this fee is almost always expressed as a percentage. Some funds may be permitted to impose 12b-1 fees but are currently waiving all or a portion of the fees. Total 12b-1 fees, excluding loads, are capped by law at 1.00% of average net assets annually. Of this, the distribution and marketing portion of the fee may account for up to 0.75%. The other portion of the overall 12b-1 fee, the service fee, may account for up to 0.25%.
Actual Fees
12b-1 Fee: Taken from the fund’s prospectus, this number qualifies the 12b-1 fee listed under Maximum Fees. If fee levels have changed since the end of the most recent fiscal year, the actual fees will most commonly be presented as a recalculation based on the prior year’s average monthly net assets using the new, current expenses. Although contract-type distribution costs are listed in a fund’s prospectus, these are maximum amounts and funds may waive a portion, or possibly all, of this fee. Actual fees thus represent a closer approximation of the true costs to shareholders.
Management Fee: Taken from the fund’s prospectus, this area qualifies the management and administrative fees listed under Management Fees. The actual fees listing most commonly represents the costs shareholders paid for management and administrative services over the fund's prior fiscal year. If fee levels have changed since the end of the most recent fiscal year, the actual fees will most commonly be presented as a recalculation based on the prior year's average monthly net assets using the new, current expenses. Although contract-type management costs are listed in a fund's prospectus, these are maximum amounts and funds may waive a portion, or possibly all, of those fees. Actual fees thus represent a closer approximation of the true costs to shareholders.
Total Expense Ratio: The expense ratio expresses the percentage of assets deducted each fiscal year for fund expenses, including 12b-1 fees, management fees, administrative fees, operating costs, and all other asset-based costs incurred by the fund. Portfolio transaction fees, or brokerage costs, as well as initial or deferred sales charges are not included in the expense ratio. The expense ratio, which is deducted from the fund's average net assets, is accrued on a daily basis. If the fund's assets are small, its expense ratio can be quite high because the fund must meet its expenses from a restricted asset base. Conversely, as the net assets of the fund grow, the expense percentage should ideally diminish as expenses are spread across the wider base. Funds may also opt to waive all or a portion of the expenses that make up their overall expense ratio.
Note: The Expense Ratio listed here is the Annual Report Net Expense Ratio. 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.
The annual report expense ratio for a fund of funds is the wrap or sponsor fee only.
Purchase Information
Minimum Investments
Initial Investment: The minimum purchase indicates the smallest investment amount a fund will accept to establish a new account.
Additional Investment: This indicates the smallest permissible additional purchase a fund will accept in an existing account.
Initial IRA Investment: The smallest investment amount accepted for establishing an individual retirement account. If none appears, the fund does not have a plan. If the minimum is zero, then $0 will appear.
Additional IRA Investment: This indicates the smallest permissible additional purchase a fund will accept in an existing IRA account.
Initial Auto-Invest Program (AIP) Investment: This indicates the smallest amount with which one may enter a fund’s automatic-investment plan—an arrangement where the fund takes money on a monthly, quarterly, semiannual, or annual basis from the shareholder’s checking account. Often, the normal minimum initial purchase requirements are waived in lieu of this systematic investment plan. The systematic investment amount is the minimum amount required for subsequent regular investments in an automatic investment plan. Studies indicate that regular automatic investment, also known as dollar-cost averaging, is perhaps the most successful investment plan for long-term investors.
Additional Auto-Invest Program (AIP) Investment: This indicates the smallest permissible additional investment a fund will accept in an existing automatic-investment plan account.
Correspondence Information
This section includes the fund family name, address, and phone number through which an investor can request a prospectus or other information.
Brokerage Availability
Morningstar lists the brokerages through which a fund is available. The brokerage firms themselves provide us with this data. It is the brokerage firm’s responsibility to disclose any fees associated with these plans.
Management
Fund Inception Date
The fund inception date gives the date on which the fund commenced operations.
Manager Name
The portfolio manager is the individual or individuals responsible for the overall fund strategy, as well as the buying and selling decisions of the securities in a fund's portfolio. Management teams may consist of many people, but if one manager is considered a central figure or lead manager, that individual's name will be printed. We also note the year in which the manager began running the fund. This information is useful for determining how much of a fund's performance is attributable to its current management. Investors often wonder whether they should redeem their shares in a fund when it changes managers. This question usually arises when a manager with a great reputation leaves a fund. First and foremost, investors should not hastily sell their shares. While it is easy to feel that it is necessary to make an immediate decision, in fact, the departing manager’s imprint will usually remain on the fund for some time after his or her departure. The new manager will inherit a portfolio and only slowly begin to replace the securities with ones of his or her own choosing. Therefore, hasty judgments are unnecessary; shareholders often have plenty of time to consider what, if any, action the manager change necessitates.
Manager Start Date
The date on which the listed manager(s) took over day-to-day operations of the fund.
Fund Advisor(s)
This is the company that or companies that are given primary responsibility for managing a fund.
Fund Subadvisor(s)
In some cases, the advisor employs another company, called the subadvisor, to handle the fund’s day-to-day management. In these instances, the portfolio manager generally works for the fund’s subadvisor, and not the advisor.