General Information for Mutual Fund Investors

Janney Montgomery Scott (Janney) wants our clients to understand the features, options and risks of each investment vehicle they consider. This disclosure statement explains certain options and features which are common to most mutual funds. Of course we cannot cover everything about mutual funds. The best source of information about specific mutual funds is the investor prospectus, prepared by the mutual fund company, which your Janney Financial Consultant can provide upon request. If you have questions about an investment you should discuss them with your Janney Financial Consultant before you invest.

What is a Mutual Fund?

Mutual funds are shareholder owned investment vehicles which invest in stocks, bonds, and other assets or some combination of these securities. There are thousands of funds in existence, designed to meet a variety of investment objectives. Of course there is no assurance that a particular fund will achieve its objectives. Your investment in a fund may lose value.

Mutual Fund Share Classes

Generally, mutual funds are purchased in A, B and C share classes, although there are other classes which also may be appropriate. The decision about which share class best meets your investment objectives should consider your individual financial situation as well as your investment time horizon.

Class A Shares

Class A shares are typically characterized by a “front-end” sales load. This refers to the charge which is paid by the investor. This amount is expressed as a percentage of a fund’s public offering price. Sales charges are typically 4.50% for fixed-income funds and 5.75% for equity funds. For larger investments, discounts known as breakpoints, discussed below, may reduce the sales charge. Once the sales charge has been deducted, the remaining amount is invested in the fund. In addition to front-end sales loads, investors in mutual fund Class A shares will pay ongoing expenses levied by the funds, including 12b-1 fees, also explained in this document.

Class B Shares

Class B shares carry higher ongoing expenses than Class A shares. These expenses will reduce your returns by the amount they exceed the ongoing expenses of Class A shares. Class B share expenses are usually 0.50% to 0.75% per annum higher than those of Class A shares. Class B shares are not assessed a front end sales charge, allowing the entire purchase to be invested in the fund. However, if you redeem your investment within a prescribed time period, you will be assessed a “back-end” charge called a “Contingent Deferred Sales Charge” or CDSC. CDSC periods usually expire in 4 to 7 years. The maximum amount of the CDSC is usually between 3.50% and 5.00% and declines the longer you hold your shares. Often when the CDSC period expires, your shares “convert” from Class B to Class A. This conversion allows you to pay a lower ongoing expense.

Class C Share

Class C shares charge higher ongoing expenses than Class A shares. Class C shares usually are not assessed a front-end sales charge, but charge a CDSC if you decide to redeem your investment within a short time period, typically the first 12 to 18 months of ownership. CDSCs for Class C shares are usually 1.00%. Class C shares do not “convert” to Class A shares. Typically, among Class A, B and C shares, Class C shares have the highest internal expenses. These higher expenses will reduce your returns.

Annual Operating Expenses

All funds have annual fund operating expenses. These are not paid directly by the investor, but they are taken out of the fund’s assets. These expenses include:

Making An Appropriate Choice

Understanding the basic principles of mutual fund share classes is the first step in making an appropriate share class choice. Not all funds have the same policies; therefore, before investing, it is essential to always read the fund’s prospectus which outlines the specific information concerning fees and expenses.

Class A shares may be appropriate for:

Class B shares may be appropriate for:

Class C shares may be appropriate for:

Breakpoints

Depending on share class, mutual funds often offer volume discounts on front-end sales charges for larger investments. The investment levels at which the discounts become available are called “breakpoints.” When your initial mutual fund investment exceeds a specified amount, or breakpoint, you may qualify for a volume discount. For example, an investment of $49,500 in mutual fund shares may incur a front-end sales charge of 5.75% or $2,846.25, while an investment of $50,000 may incur a sales charge of 4.50% or $2,250.00. In this example, by choosing to invest $500 more, and realizing a lower sales charge, $596.25 more would be invested in the fund. Typically there are several breakpoints. As investments reach subsequent breakpoint thresholds, the sales charge will be further reduced.

Members of the same household (as defined by each mutual fund prospectus) may be permitted to aggregate their holdings with those of other family members to qualify for a breakpoint. Also, breakpoint levels may be reached by combining investments in different funds within the same fund family. Mutual fund prospectuses contain tables that illustrate the available breakpoint discounts and the investment levels. If you own shares in different names or at different firms, you need to tell us if you want those shares to count for breakpoint purposes. Additionally, Rights of Accumulation and Letters of Intent may allow investors to qualify for breakpoint discounts.

Rights of Accumulation

Rights of Accumulation (ROA) discounts apply to mutual fund purchases when new investments are added to the value of prior investments. The combination of these values can be used to reach a breakpoint. For example, a $10,000 investment can be added to an existing $40,000 investment so that when these amounts are combined, a $50,000 breakpoint is reached. Mutual funds may apply ROA’s based on the current value of prior investments. For example a $10,000 investment today combined with a prior investment of $30,000, which now may have a value of $40,000, may qualify for the $50,000 breakpoint. ROA’s are not retroactive to the original investment.

Letter of Intent

A Letter of Intent (LOI) is a signed statement that expresses your intent to invest an amount exceeding a given breakpoint within a period of time specified by the fund. For example, if an investor plans to purchase $50,000 worth of Class A shares over a period of 13 months, where each individual purchase on its own would not qualify for a breakpoint discount, the investor could sign a LOI at the time of the first purchase and receive the breakpoint discount associated with $50,000 investments on the first and all subsequent purchases.

If you fail to invest the amount stated in your LOI over the prescribed timeframe, the fund will retroactively collect the higher sales charge.

Understanding How Janney and Your Financial Advisor Are Compensated

Janney and our Financial Consultants receive compensation when clients invest in mutual funds. Depending on share class, compensation may be in the form of a front-end sales charge, a payment or dealer concession from a fund company, or a fee if a mutual fund is purchased in a Janney fee-based account. In addition, mutual fund companies may pay distribution and service based fees (also known as 12b-1 fees) that vary by share class. Your Janney Financial Consultant receives a portion of this compensation. This compensation is explained in the prospectus, statement of additional information or 12b-1 plan of each mutual fund. You should read this information completely before investing in any mutual fund and discuss, with your Financial Consultant, the form and amount of compensation she or he receives.

Through our relationship with mutual funds, Janney and our Financial Consultants may also receive other forms of compensation that do not directly affect the amounts our clients are charged for mutual fund transactions, including revenue sharing arrangements, promotional assistance and networking reimbursements.  These forms of additional compensation are generally referenced but may not be discussed in detail by a mutual fund’s prospectus, statement of additional information or 12b-1 plan.  These forms of compensation are meant to cover a variety of initiatives and expenses incurred by Janney, including expenses associated with marketing mutual funds to investors, educating Financial Consultants, and performing administrative services for clients.  Since Janney and our Financial Consultants do not receive these forms of additional compensation from every mutual fund family with which we do business, we have a greater financial incentive to promote those fund families that do offer additional compensation.  However, our Financial Consultants recommend, and you are free to choose, investments in fund families that do not offer additional compensation.

Revenue Sharing Arrangements

Janney incurs a variety of expenses in connection with educating its Financial Consultants and clients regarding mutual fund investments, and providing marketing and sales support to mutual funds and their affiliated underwriters, distributors and advisors.  Mutual fund underwriters, distributors or advisors may enter into revenue sharing arrangements with Janney in connection with the distribution of their mutual funds through our Financial Consultants.  Some mutual fund underwriters, distributors or advisors may also enter into revenue sharing arrangements to off-set the costs associated with Janney’s educational and marketing initiatives.  In exchange for entering into revenue sharing arrangements, Janney may provide underwriters, distributors or advisors opportunities to (i) participate in Janney’s seminars with Financial Consultants and clients; (ii) distribute information regarding mutual funds to Janney’s Financial Consultants; (iii) review Janney sales data relating to certain Financial Consultants and mutual funds; and (iv) access Financial Consultants in Janney’s branches. 

Under a revenue sharing arrangement, a mutual fund underwriter, distributor or advisor will agree to pay Janney a portion of the revenue generated from the sale and management of mutual fund shares in clients’ accounts.  When entering into revenue sharing arrangements, Janney requires that the fees be paid directly by the mutual fund underwriter, distributor or advisor, and will not permit them to be made using mutual fund portfolio trading commissions.    Where Janney has entered into a sales-based revenue sharing arrangement with a particular fund underwriter, distributor or advisor, Janney typically requests a fee equivalent to .05%  of the participating underwriter’s, distributor’s or advisor’s gross sales made through Janney during a given timeframe.  Where Janney has entered into an asset-based revenue sharing arrangement with a particular fund underwriter, distributor or advisor, Janney typically requests a fee equivalent to .10% per year of the assets managed by the participating underwriter, distributor or advisor for Janney’s clients.  Our Financial Consultants do not directly share in the fees received by Janney pursuant to its revenue sharing agreements.

Janney attempts to impose a standard fee schedule upon all mutual fund underwriters, distributors or advisors whose funds are sold through Janney, and requests a minimum contribution of forty thousand dollars ($40,000).  Certain mutual fund underwriters, distributors or advisors, however, may not agree to comply with Janney’s standard fee schedule or minimum contribution amounts.  Other mutual fund underwriters, distributors or advisors who distribute shares through Janney may elect not to participate in a revenue sharing arrangement with Janney.

For 2007, Janney has entered revenue sharing agreements with the following mutual fund underwriters, distributors or advisors:

Promotional and Educational Assistance

Janney, our Financial Consultants and our clients may, from time to time, receive from mutual fund underwriters, distributors, advisors or marketing representatives (known as wholesalers) occasional nominal gifts, meals, tickets to sporting events or other comparable entertainment, or payment or reimbursement in connection with conferences or meetings held for the purpose of training or educating clients, prospective clients or Financial Consultants.  From time-to-time, our Financial Consultants may also be invited to attend conferences or meetings sponsored by mutual fund underwriters, distributors or advisors.  These activities are also intended to result in the promotion of mutual funds.

Networking Reimbursements

To defray the cost of sending confirmations, statements and tax reporting, Janney receives networking reimbursements from certain mutual funds. These range from $3.00 – $10.00 per client account per year, paid quarterly. Our Financial Consultants are not required to recommend these funds, nor do they directly share in any of the reimbursements.

For the year ending December 31, 2007, Janney received networking reimbursement from forty-five mutual fund companies. Listed in declining order of reimbursement amount, these companies are:

• American Funds
• Franklin Templeton Investor Services
• Oppenheimer Funds • Federated Securities Corp.
• Putnam Investments
• Eaton Vance Funds
• John Hancock Signature Services, Inc.
• Hartford Funds
• Lord Abbett Family of Funds
• AIM Investments
• Alliance Bernstein Investor Services
• Massachusetts Financial Services Company
• Henderson Global Investments
• DWS Scudder Inc.
• Davis Selected Advisers, LP
• Delaware Service Company Inc.
• Columbia Management
• Allianz Global Investor Fund Management LLC
• Evergreen Funds
• Thornburg Investment Management
• Van Kampen Investor Services
• Prudential Funds
• Fidelity Corporate Services
• Pioneer Investment Management USA Inc.
• Dreyfus Service Corp
• Munder Funds
• Ivy Funds
• ING Funds
• AIG SunAmerica Asset Management
• Goldman Sachs and Co.
• Sentinel Administrative Services Inc.
• Seligman Data Corp.
• JP Morgan Worldwide Securities Services
• Nuveen Investments LLC
• Northtrack Funds

Money Market Funds

Janney offers our clients a series of money market mutual funds which are managed by the Dreyfus Corporation. Janney and our Financial Consultants receive payments from Dreyfus in the form of 12b-1 fees and other marketing support payments. For further information, please request a prospectus on any of the Dreyfus money market funds we offer.

 Institutional Sales Activities

In addition to payments noted above, Janney receives commissions as compensation for executing trades generated through our institutional sales activities which are not related to the products and services or to the related compensation (as described above) we receive from mutual fund companies. 

Conclusion

At Janney, we believe it is important that our clients understand the options and features of mutual funds before investing. It is also important that you understand how Janney and your Financial Consultant are paid. The SEC extensively regulates mutual funds and the broker-dealers that sell them. In addition, the NASD, a self-regulatory organization, regulates broker-dealers’ sales of mutual funds. There are several informative websites where you can obtain further information about mutual funds including:

http://www.sec.gov/ Securities and Exchange Commission

http://www.nasd.org/ National Association Securities Dealers

http://www.ici.org/ Investment Company Institute

http://www.sia.com/ Securities Industry Association

The NASD site includes a Mutual Fund Expense Analyzer which can be found at
http://www.nasd.com/Investor/Tools/Calculators/FundCalc/expense_analyzers.asp

If you have additional questions about mutual funds, please contact your Janney Financial Consultant. As always we appreciate any comments you may have about this or other disclosure documents we’ve prepared. You can also contact us at:

Email: disclosure@jmsonline.com

Mail: Disclosure
Janney Montgomery Scott
1801 Market Street
Philadelphia, PA 19103