SIE Mutual Funds & Investment Companies

Open-End Mutual Fund

Investment company that continuously issues and redeems shares.

• Purchased at POP (NAV + applicable sales charge)

• Redeemed at NAV

• Priced once daily after market close

• Does NOT trade on an exchange

Closed-End Fund

Investment company that generally issues a fixed number of shares in an IPO.

• Trades on exchanges like stocks

• Price determined by supply and demand

• Can trade at premium or discount to NAV

• Investors typically pay brokerage commissions

Exchange-Traded Fund (ETF)

Fund traded on an exchange throughout the day.

• Bought and sold at market prices

• Can trade above or below NAV

• Often tracks an index

• May be passive or actively managed

Exchange-Traded Note (ETN)

Unsecured debt security issued by a financial institution.

• Returns linked to an index or benchmark

• Does NOT own underlying assets like a traditional ETF

• Subject to issuer credit risk

• Trades on an exchange

Unit Investment Trust (UIT)

Investment company with a generally fixed portfolio.

• Usually has a specified termination date

• Typically unmanaged

• Issues redeemable units

• Investors receive income and/or proceeds from portfolio assets

Net Asset Value (NAV)

Value per share of a fund's net assets.

NAV = (Total assets − Total liabilities) ÷ Shares outstanding

Open-end mutual funds calculate NAV at least once each business day.

Public Offering Price (POP)

Price investors pay to purchase Class A mutual fund shares.

POP = NAV ÷ (1 − Sales charge rate)

POP includes the front-end sales charge.

Class A Mutual Fund Shares

• Front-end sales charge

• Lower ongoing 12b-1 fees than many Class C shares

• Eligible for breakpoint discounts

• Often suitable for larger, long-term investments

Class B Mutual Fund Shares

• Traditionally no front-end sales charge

• Contingent deferred sales charge (CDSC) if sold early

• Higher ongoing expenses than Class A

• Historically may convert to Class A after several years

Class C Mutual Fund Shares

• Usually no front-end sales charge

• Higher ongoing 12b-1 fees

• May have a short-term CDSC

• Often more costly for long holding periods

Mutual Fund Breakpoints

Discounts on front-end sales charges for qualifying Class A mutual fund purchases.

Larger qualifying investments → Lower sales charge percentage.

Breaking up purchases to avoid discounts is a prohibited breakpoint sale.

Rights of Accumulation (ROA)

Allows investors to combine eligible existing mutual fund holdings with new purchases to qualify for a breakpoint discount.

Remember: ROA = ALREADY OWNED.

Letter of Intent (LOI)

Investor states intention to invest a specified amount in eligible mutual funds over 13 months.

May receive breakpoint discount immediately.

Not a binding obligation to complete purchases; escrowed shares may cover unpaid sales charges.

12b-1 Fees

Mutual fund fees used for distribution and shareholder services.

• Paid from fund assets

• Increase ongoing investor expenses

• Commonly higher for Class C than Class A shares

Index Fund vs. Actively Managed Fund

INDEX: Seeks to track a benchmark; typically, lower management costs.

ACTIVE: Manager selects investments seeking to outperform a benchmark or meet an objective; generally higher costs.

Either may be structured as a mutual fund or ETF.