Define C Shares:

""C shares" refer to a class of mutual fund shares that are typically structured with a level load fee or a contingent deferred sales charge (CDSC)."

Explain C Shares:

What is C shares?

These shares are designed for investors who prefer to pay the sales charge over time rather than upfront.

Here are some key features of C shares:

1. Sales Charges: C shares are associated with a sales charge, also known as a load fee. Unlike other share classes such as A shares, where the sales charge is paid upfront, C shares have a level load fee. This means that the sales charge is spread out over a specific period, usually a few years.
2. Contingent Deferred Sales Charge (CDSC): C shares may include a CDSC, which is a fee charged to investors if they redeem their shares within a certain time frame, typically several years after the initial purchase. The CDSC gradually decreases over time until it eventually reaches zero.
3. Higher Ongoing Expenses: C shares generally have higher ongoing expenses compared to other share classes. This is because the distribution costs associated with the sales charge are spread out over a longer period.
4. No Conversion Option: C shares typically do not offer a conversion option to a different share class. Investors who wish to switch to another share class with lower expenses or front-end sales charges may need to sell their C shares and repurchase the desired share class.
5. Suitable for Long-Term Investors: C shares are generally more suitable for investors who plan to hold their investments for a longer period. The ongoing expenses associated with C shares can be relatively high, so they may be more cost-effective for investors with longer investment horizons.

It's important for investors to carefully evaluate the fee structure, expenses, and sales charges associated with C shares before investing.

Example: 

Let's consider a hypothetical mutual fund company, ABC Investment Management, offering C shares for their flagship ABC Growth Fund. Here's an example of C shares with some numerical values:

1. ABC Growth Fund - C Shares:
• Sales Charge: 1% of the investment amount annually, paid over a 5-year period.
• Contingent Deferred Sales Charge (CDSC): 2% if shares are redeemed within the first year, decreasing by 0.4% each subsequent year until reaching zero after the fifth year.
• Ongoing Expenses: 1.5% of the fund's assets per year.

Example: Investor John decides to purchase C shares of the ABC Growth Fund and invests $10,000.

1. Sales Charge:
• Annual sales charge: 1% of the investment amount ($10,000 x 1% = $100) paid over five years.
• John would pay $20 ($100 divided by 5 years) as the annual sales charge.
  
  
2. Contingent Deferred Sales Charge (CDSC):
• If John decides to redeem his C shares within the first year, he would incur a CDSC of 2% ($10,000 x 2% = $200).
• If John redeems his shares in the second year, the CDSC would be 1.6% ($10,000 x 1.6% = $160), and so on until reaching zero after the fifth year.
  
  
3. Ongoing Expenses:
• John would incur annual ongoing expenses of 1.5% of the fund's assets, which would be deducted from the fund's value. These expenses cover management fees, administrative costs, and other operational expenses associated with running the fund.

It's important to note that the specific numerical values for sales charges, CDSC, and ongoing expenses can vary between mutual fund companies and specific C share classes.