New to Mutual Funds - A Summary Prospectus

The Summary Prospectus

     In an effort to enhance the information available to mutual fund investors, in November, 2008 (effective February ’09), the Securities and Exchange Commission approved the use of a new Summary Prospectus. The intent of the Summary Prospectus is to improve mutual fund disclosure by providing streamlined and user-friendly information that is crucial to making an investment decision.  If you are currently a mutual fund investor, you should notice some significant changes to your annual Prospectus document this year. This new guidance allows a mutual fund company to send you this new simplified version of the full Prospectus, as long as the full, or statutory, Prospectus is available upon request. It’s a little more work for the mutual fund companies, but it should greatly benefit the average mutual fund shareholder. The Summary Prospectus will quickly give investors a basic understanding of a fund and will permit them to readily compare one fund to another. 

     What will the summary prospectus contain? The Summary Prospectus must include specific disclosure items. This “summary information” must appear sequentially and may describe only one fund.   These items include:

1)      Cover page identifying a fund’s name, identification as a summary prospectus, date and a legend referencing a website for additional information. The cover page must also identify any document incorporated by reference;

2)      The fund’s investment objectives/goals;

3)      Fee table, annual fund expenses and portfolio turnover;

4)      Principle investment strategies and risks, return bar chart and table;

5)      Identification of the investment advisor as well as individual portfolio managers;

6)      Minimum investment requirements and procedures for redeeming shares;

7)      Tax information; and

8)      Statement regarding financial intermediary compensation.

     Compared to the statutory prospectus required in the past, and still available by request, this document will be considerably smaller, easier to read and structured in a way as to make comparing funds much easier. The new regulation does not impose a page limit, however it is expected that the average summary prospectus will be 3-4 pages. This is good news for all of us. So keep an eye out for these new and improved documents.

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