B-Share

A B-share is a class of shares offered in an open-end mutual fund. It is one of many shares available for retail investors.

B-shares are often compared to A-shares and C-shares, which are also share classes offered in open-end mutual funds for retail investors. These retail share classes charge varying sales loads that are structured by the mutual fund company and paid to intermediaries. In addition to sales loads, investors will be charged operating expenses that are paid indirectly from the fund’s assets. Each retail share class may have different expense ratios, however all retail share classes will usually be charged 12b-1 distribution fees which increase their total expenses.

Class B shares are characterized by a back-end sales load structure. Back-end loads can be static or contingent deferred. With back-end load charges, an investor incurs a fee when they exit the fund. Fees are charged as a percent of the transaction and paid to the intermediary. These sales loads are separate from the operating expenses of a fund. (See also: The ABCs of Mutual Fund Classes.)

Back-end sales loads are usually structured with the lowest sales commission fees. Static back-end loads range from 1% to 4% and are charged regardless of the holding period. Contingent deferred back-end loads are charges that decrease over time. These sales loads can start at 1% to 2%, decreasing to zero after a specified timeframe. Some Class B shares with expired back-end contingent deferred charges may be reclassified to Class A shares, which offer investors the benefit of a lower annual expense ratio. Full details on a fund’s sales load structure will be included in its prospectus.

As a retail share class, B-share operating expenses are subject to 12b-1 fees. 12b-1 fees compensate intermediaries and distributors for marketing and selling retail funds. These fees can often be higher for B-shares since they do not require front-end loads and may have commission fees that decrease over time. As a result, B-shares often charge one of the highest total expense ratios.

Total expense ratios for retail share classes can range from 1% to 2%. In addition to 12b-1 fees, investors in retail share classes are also charged standard management and other operating expenses. Management and other expense fees are usually the same across all share classes.

MFS Global Equity Fund

The MFS Global Equity Fund provides one example of an open-end mutual fund with multiple retail share classes. B-shares of the Fund are charged a 4% back-end load. The Class B shares have the highest total operating expenses at 1.97% with the highest 12b-1 fee at 1%. Management fees are 0.81% and other expenses are 0.16% across all three retail share classes.