Share Class FAQs (2024)

FAQs

How do different share classes work? ›

A company may issue different classes of shares accompanied by different levels of voting rights, access to dividends and more. Common stock typically provides voting rights and may include dividends; preferred stock typically guarantees dividends but does not include voting rights.

To determine what share classes a mutual fund offers, ask your Advisor and review the fund's prospectus. Fund prospectuses contain fee tables, details on waivers and discounts, examples, and other useful information.

Class F-2 shares do not include a 12b-1 fee but are subject to sub-transfer agency fees. Class F-3 shares do not include 12b-1 or sub-transfer agency fees. You can find expenses for individual funds on the F-1, F-2, F-3, 529 F-1, 529-F-2, 529-F-3 and ABLE-F-2 fund pages. These expenses will vary among the funds.

A series is a subset of a class of shares. If provided for in its articles, a corporation can issue a class of shares in one or more series. The articles may also authorize the directors to create and designate a class of shares in one or more series.

Shareholders usually receive dividend payments on the basis of how many shares they own in the company, but creating different share classes means you don't necessarily need to pay everyone the same amount, even if they own the same number of shares.

In some cases, different classes of ordinary share may be of different nominal values. For example, there may be £1 ordinary shares and £0.01 ordinary shares.

Each class within the fund charges different fees in an effort to provide a variety of fee structures that fit the varying needs of Registered Investment Advisors, Broker/Dealers and individual investors. The different fees charged for each share class account for some of the differences in daily net asset value (NAV).

The hedging strategy employs a currency overlay to hedge the Net Asset Value (NAV) of the relevant share class. This strategy is applied to funds with underlying assets in one or multiple currencies and is designed to reduce, but not eliminate, currency exposure between the base currency and the hedged currency.

Adding a new share class after company formation

To do so, the members will need to pass a shareholders' resolution authorising a change to the company's articles of association, either making specified changes to the existing articles or adopting an entirely new set.

Preferred shares offer advantages to both issuers and holders of the securities. The issuers may benefit in the following way: No dilution of control: This type of financing allows issuers to avoid or defer the dilution of control, as the shares do not provide voting rights or limit these rights.

What is the difference between retail and institutional share classes? ›

An institutional investor trades large volumes of securities on behalf of an individual or shareholder. This large-volume trade motivates brokerages to offer them lower fees. A retail investor is an individual who invests their own capital, typically at lower frequencies and volumes.

Class A shares generally have more voting power and higher priority for dividends, while Class B shares are common shares with no preferential treatment. Class C shares can refer to shares given to employees or alternate share classes available to public investors, with varying restrictions and voting rights.

Share class refers to different types of company or mutual fund stock; they are designated by letter or by name. Different classes of company shares often carry different privileges, such as voting rights. Different classes of mutual fund shares incur differing fees and expenses.

Which share class is best depends on the individual and their investing goals as well as how a company has structured their shares. Some shares come with more voting rights while others trade at lower prices. What matters to the investor most will determine which share class is better.

In this system, Class A shares are still premium shares with more voting rights, at least compared to Class C shares. However, Class B shares have the power that was traditionally associated with Class A shares. Investors should not assume that buying Class A shares makes them insiders or maximizes their voting power.

Voting shares, dividend shares, capital shares

Sometimes three classes of shares are created with class 'A' having all the voting rights, class 'B' having all the dividend rights and class 'C' having all the capital rights.

Class A, common stock: Each share confers one vote and ordinary access to dividends and assets. Class B, preferred stock: Each share confers one vote, but shareholders receive $2 in dividends for every $1 distributed to Class A shareholders. This class of stock has priority distribution for dividends and assets.

Class B mutual fund shares are seen to be a good investment if investors have less cash and a longer time horizon. To avoid the exit fee, an investor should typically remain in the fund for five to eight years.