Understanding Sales Charges and Share Classes

Class C Shares. Sales charges. Breakpoints.

If you're interested in investing in mutual funds and these terms sound confusing, you're probably not alone. While mutual funds are attractive investments that offer the benefit of professional money management and diversification, they contain some unique terminology that can be difficult to understand.

What are share classes and loads?

As an investor, you may have read about "Class A," "Class B," Class C," or other classes of mutual fund shares. You may also have read about front-end loads, back-end loads, and level loads. If you're thinking about investing in mutual funds, it is important for you to understand the differences between these classes and loads.

Sales charges are known as loads and are usually used to cover the cost for any advice you receive in selecting the fund.

A single mutual fund with one portfolio and one investment adviser may offer more than one "class" of its shares to investors. Each class represents a similar interest in the mutual fund's portfolio. The principal difference between the classes is that the mutual fund will charge you different fees and expenses depending upon the class that you choose.

Fees and expenses

While you should check the fee table in the mutual fund's prospectus to find out the precise amount of the mutual fund's fees and expenses, the following details some common fees and expenses associated with different classes.

If You Buy Class A Shares:

Class A shares typically charge a front-end sales charge. When you buy Class A shares with a front-end sales charge, a portion of what you pay is not invested. Class A shares may impose an asset-based sales charge, but it generally is lower than the asset-based sales charge imposed by the other classes.

A mutual fund may offer you quantity discounts, called breakpoints, on the front-end sales charge if you:

• make a large purchase;
  
• already hold other mutual funds offered by the same fund family; or
  
• commit to regularly purchasing the mutual fund's shares.
  

You should ask your financial advisor whether any breakpoint discounts are available to you before making your purchase decision.

If You Buy Class B Shares:

Class B shares typically do not entail a front-end sales charge, but they do impose asset-based sales charges that may be higher than those that you would incur if you purchased Class A shares. Class B shares also normally impose a contingent deferred sales charge (CDSC), which you pay when you sell your shares. The CDSC normally declines over a period of time and eventually is eliminated the longer you hold your shares. Once the CDSC is eliminated, Class B shares often then "convert" into Class A shares, which normally have lower expenses than Class B shares.

If you intend to purchase a large amount of Class B shares, you may want to discuss with your financial advisor whether Class A shares would be preferable. The expense ratio charged on Class A shares is generally lower than for the Class B shares, and the mutual fund may offer large-purchase breakpoints from the front-end sales charge for Class A shares.

To determine if Class A shares may be more advantageous, refer to the mutual fund's prospectus, which may describe the purchase amounts that qualify for a breakpoint.

If You Buy Class C Shares:

Class C shares usually do not impose a front-end sales charge on the purchase, so the full dollar amount that you pay is immediately invested. Often Class C shares impose a small charge if you sell your shares within a short time of purchase, usually one year. Class C shares typically impose higher asset-based sales charges than Class A shares, and since their shares generally do not convert into Class A shares, their asset-based sales charge will not be reduced over time. Class C shares are often used for asset allocation purposes.

Class C shares may impose a CDSC or other redemption fees. Additionally, in most cases your expense ratio would be higher than Class A shares, and even than Class B shares.

Carefully Consider Mutual Fund Expenses

Like most investments, mutual funds charge fees and expenses that are paid by investors. These fees and expenses can vary widely from fund to fund and class to class. Even small differences in expenses can make a big difference in your return over time, so be sure to talk to your financial advisor to determine which funds may be right for you.

Investors should carefully consider their investment objectives and the risks, charges, and expenses associated with mutual funds before investing. The prospectus contains this and other information about the funds. Contact your investment professional or call Transamerica Funds at 1-888-233-4339 for a prospectus, and read it carefully before investing.

Both the principal value and returns of mutual funds will fluctuate over time so that shares, when redeemed, may be worth more or less than their original cost.

WBSL0605