Before you invest in any traditional investment company—such as a mutual fund, closed-end fund, or unit investment trust (UIT)—you should read the fund’s prospectus and any other available information from the fund. Below you’ll find descriptions of the different types of information that investment companies provide to investors. For information available to exchange-traded fund (ETF) investors, please refer to that separate topic.
An investment company prospectus contains important information about its fees and expenses, investment objectives, investment strategies, risks, performance, pricing, and more. A UIT’s prospectus (but not a mutual fund’s or closed-end fund’s prospectus) will also typically list the securities that the UIT holds.
When you purchase shares of a mutual fund or a UIT, the fund or UIT must provide you with a prospectus. Some mutual funds (but not closed-end funds or UITs) may furnish you with a summary prospectus containing key information about the fund. If you receive a summary prospectus, the fund’s long-form prospectus will be available on its website, and you can obtain a paper copy upon request and without charge.
When you purchase shares of a closed-end fund during the fund’s public offering, the fund must provide you with a prospectus. When you purchase shares of a closed-end fund on the secondary market, however, you will not necessarily receive a prospectus. This is because you are purchasing your shares from another investor rather than from the fund itself.
Statement of Additional Information (SAI)
Mutual funds and closed-end funds (but not UITs) also are required to have statements of additional information (SAIs). Closed-end funds may not have separate SAIs because they are allowed to include in the prospectus the information required to be disclosed in the SAI. Funds must give you the SAI without charge if you request it.
The SAI conveys information about the fund that some investors find useful. The SAI affords the fund an opportunity to expand discussions of the matters described in the prospectus. The SAI generally includes the fund’s financial statements and information (or additional information) about: the history of the fund; some fund; officers, directors and persons who control the fund; investment advisory and other services; brokerage commissions; tax matters; and performance measures, such as average annual total return.
A mutual fund and a closed-end fund must provide shareholders with annual and semi-annual reports. These reports contain updated financial information, a list of the fund’s portfolio securities, and other information. Portfolio holdings are disclosed on Shareholder Reports for the second and fourth fiscal quarters and on Form N-Q for the first and third fiscal quarters (see below). Reading these reports can help an investor determine how well a fund has met its goals and investment strategies during the period covered in the report.
A mutual fund and a closed-end fund must file a Form N-Q the first and third fiscal quarters and a Form N-PX each year on the SEC’s EDGAR database, although funds are not required to mail these reports to shareholders. Portfolio holdings are disclosed on Form N-Q for the first and third fiscal quarters and in Shareholder Reports for the second and fourth fiscal quarters (see above). Form N-PX identifies specific proposals on which the fund has voted portfolio securities over the past year and discloses how the fund voted. This disclosure enables fund shareholders to monitor their funds’ involvement in the governance activities of portfolio companies.
How to Obtain These Documents
You can obtain all of these documents by:
- visiting the fund’s website;
- calling or writing the fund (all funds have toll-free telephone numbers)
- contacting a broker that sells the fund’s shares; or
- accessing the SEC’s EDGAR database.
Investor Bulletin: How to Read a Mutual Fund Prospectus Part 1 (Investment Objective, Strategies, and Risks), Part 2 (Fee Table and Performance), and Part 3 (Management, Shareholder Information, and Statement of Additional Information).