What happens when an investor redeems Class B shares?

When an investor redeems Class B shares, a contingent deferred sales charge (CDSC) may apply. Class B shares are typically designed to have lower initial sales charges than Class A shares, which means that they do not impose a front-end load when investors purchase them. However, they often carry a contingent deferred sales charge that is applied if the shares are sold or redeemed within a specified period, usually several years. This fee decreases over time and may eventually reach zero if the shares are held long enough. This structure is intended to encourage longer-term investment, as the investor may face costs if they decide to redeem their shares too soon.

In contrast, front-end sales charges are not applicable to Class B shares at the time of purchase and these shares do not come with a guaranteed return. Additionally, while Class B shares do have specific fee structures, they are not exempt from all charges upon redemption. Therefore, the correct interpretation of what occurs during the redemption of Class B shares is the potential for a contingent deferred sales charge being assessed.