Banc One Corp. plans to introduce a "back-end load" option for its proprietary mutual fund family in January, joining a handful of banks that allow investors to defer their sales charges until redemption.

Known formally as contingent deferred sales charges. back-end loads are gaining popularity in the funds industry as an alternative to the traditional up-front sales charges on mutual fund purchases. If investors hold on to back-end funds long enough, they can avoid paying sales fees altogether.

So far, however, only the most aggressive banks have introduced a back-end load option, which can be difficult to finance. Among them: NationsBank Corp. and First Union Corp.

High Demand

Banc One, based in Columbus, Ohio, plans to roll out its back-end fund on Jan. 14, according to Michelle S. Lenzmeier, a senior vice president at Banc One Investment Advisors Corp. Demand for the product among Banc One's customer base is extremely high, she said.

Indeed, some 80% of all mutual funds sold by Banc One Securities Corp. carry a back-end load, she added.

"If you are serious about this business, it is what you have to do," Ms. Lenzmeier said. "Back-end is a must."

The back-end loads will make up a fourth class of shares in Banc One's mutual fund family, the One Group. The lineup has more than $6 billion in assets, making it the banking industry's sixth largest fund program.

Instead of being collected up front, back-end loads are only paid when investors redeem shares. Loads are figured on a sliding scale that drops from 4% in the first year after shares are bought to zero in the sixth.

That can create a problem for mutual fund managers, who use sale loads to compensate a broker who helps a customer select a fund. If the load isn't collected up front, the commission must be paid some other way.

Ms. Lenzmeier said Banc One is "still solidifying" its plans for advancing commissions on its back-end funds.

"We don't have that nailed down yet," she said.

Earlier this month, 440 Financial Group took over from SEI Corp. as distributor and administrator of Banc One's mutual funds. But it is unlikely that 440, which is based in Worcester, Mass, will finance the bank's back-end funds, sources said.

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