American Funds to eliminate Class B shares

American Funds will no longer sell Class B and 529-B shares of its mutual funds, effective April 21, the firm said today. The reason for the move is that the arrangement American Funds had with a third party to front commissions to brokers who sold its B shares — essentially providing the financing for their sale — has ended, said Chuck Freadhoff, a spokesman for the fund group. American Funds was unable to find replacement financing beneficial to both investors and brokers, he said. B shares provide a back-end load, meaning that investors pay no sales charges unless they sell fund shares within a given period. Investors who redeem those shares in less than six years pay a sales charge. After eight years, Class B and 529-B shares for Section 529 college savings accounts convert to Class A and 529-A shares, respectively. Shareholders invested in Class B or 529-B shares will be able to hold those shares until they convert to Class A or 529-A shares. However, no additional investments into Class B or 529-B shares will be accepted on or after April 21. Instead, investments intended for Class B or 529-B shares will be invested in Class A or 529-A shares and subject to any applicable sales charges. Dividends and capital gains distributions may continue to be reinvested in Class B or 529-B shares until their conversion dates. In addition, shareholders invested in such shares will be able to exchange those shares for Class B or 529-B shares of other American Funds offering such shares until they convert. American Funds is advised by Capital Research and Management Co. of Los Angeles.