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Updated Investor Bulletin: How to Read a Mutual Fund or ETF Shareholder Report

The SEC's Office of Investor Education and Advocacy is issuing this Investor Bulletin to educate individual investors about mutual fund and ETF shareholder reports.

The SEC recently revised the requirements for annual and semi-annual shareholder reports provided to shareholders by mutual funds and exchange-traded funds (ETFs). The new shareholder reports are designed to highlight key information for investors. Funds may already choose to use this new streamlined shareholder report, and all will be required to use the new report by July 2024.

This bulletin focuses on the revised requirements for shareholder reports. For information about how to read the old shareholder reports (which investors will receive until July 2024, and which are significantly lengthier than the new streamlined shareholder reports), please see Investor Bulletin: How to Read a Mutual Fund Shareholder Report

What are shareholder reports?

Mutual funds and ETFs that register with the SEC must deliver reports to their shareholders twice a year. These reports include updated information about the funds and are intended to help retail investors assess and monitor their fund investments on an ongoing basis. You can think of these shareholder reports as a report card on the fund's progress. 

The semiannual report covers the first six months of the fund's fiscal year.

The annual report covers the fund's entire fiscal year.

Reading these reports can help you determine how well a fund has met its goals and investment strategies during the period covered in the report.  

What information is included in a shareholder report?

Shareholder reports are meant to be an accessible and concise read. They are prepared separately for each fund or, if the fund has multiple share classes, each share class of a fund.

What if I have a fund with multiple share classes?

A fund may have multiple share classes. These different share classes may have different fees and expenses and therefore different performance. Be sure you read the report that applies to your fund and the correct share class of that fund. Funds are required to deliver to you the report that relates to the share class that you own. If you seek this information online, please make sure the fund’s ticker (or if there is no ticker, the fund’s name and share class) matches the information on your account statement.

Information in shareholder reports must appear in a required order. Shareholder reports are required to have certain specific charts and tables and are allowed to include other various design features. For electronic reports, these could include interactive online tools such as videos, chats, and expense calculators. Additionally, more detailed information about your fund is also available online, at the website address that the cover page of the shareholder report includes.

Here is a list, in order, of the information required to be in shareholder reports.

Shareholder Reports

Cover page or beginning of report with identifying information

Expense information

Performance information - required in the annual report and permitted in semi-annual report

Certain statistical information

Graphical representation of the investments the fund owns

Material fund changes, if any - required in the annual report and permitted in semi-annual report 

Information about changes in the fund’s accountants, if applicable

Availability of additional information online

 What does this information tell me?

Cover page

The information on the cover page or at the beginning of the report is designed to help you identify what you are reading and give you identifying information. The cover page includes:

  • Name of fund and of fund share class, where applicable;
  • Exchange ticker symbol of the fund’s shares or of the fund share class, where applicable;
  • For ETFs, the principal U.S. market(s) on which the fund’s shares are traded;
  • Whether the report is an annual or semi-annual shareholder report;
  • Statement explaining where investors can find and request more information about the fund; and
  • Whether the report describes any material fund changes.

Expense information

A fund must include a table showing the fund costs for a hypothetical $10,000 investment over the period covered by the report. The expense table will appear in this format:

What were the fund costs for the last [year/six months]? (based on a hypothetical $10,000 investment)

Fund or Class Name

Costs of a $10,000 investment

Costs paid as a percentage of a $10,000 investment

Hypothetical Fund XYZ, Class A

$ 90

0.89%

This table shows fund costs in two ways:

  1. as a dollar amount based on a $10,000 investment to help you determine the actual amount you paid over the period (see text box below); and
  2. as an annualized percentage of a $10,000 investment to help you compare funds.

When reviewing the expense table, please be aware:

  • The fund costs are calculated using a fund's expense ratio for the preceding six months in the semi-annual report or twelve months in the annual report. These costs reduce the value of your investment in the fund.
  • These calculations do not include any sales charges or commissions you may pay when buying or selling shares. You pay these charges and commissions directly to your financial intermediary, such as your broker, adviser, or retirement plan.
  • The fees in the report may differ from the fees shown in the fund prospectus. One reason is that the reports show actual fees of the fund over the period while the prospectus shows the current estimated fees. Also, the report does not reflect the fees associated with your fund investing in other funds while the prospectus does.
  • It is important to note that the dollar fee for a semi-annual report only shows six months of expenses and is therefore about half the fee shown in the annual report because it only covers half of the year. However, both reports show an annualized expense ratio (expenses as a percentage of the fund’s net assets) that can be used to compare fees between funds or over time for the same fund.

How do I know how much I paid in fund expenses last year (or last six months if looking at the semi-annual report)?

If you held the fund for the full period of the report, simply:

  • divide your investment value at the beginning of the period by $10,000,
  • then multiply the result by the dollar cost figure in the table.

For example, using the information in the above table, if your investment value at the beginning of the period is $25,000, your annual cost would be $225.

First, $25,000 (your starting investment value) divided by $10,000 = 2.5.
Then, 2.5 (the result above) multiplied by $90 (the dollar cost shown in the table) = $225. 

 Performance information - required in the annual report and permitted in semi-annual report

This section of the report is called the Management’s Discussion of Fund Performance. A fund’s manager is typically its investment adviser. This section must include a narrative discussion, a line graph, and a table to help explain and illustrate the fund’s performance over the reporting period. Money market funds are permitted, but not required, to include this section in their reports.

  • Narrative discussion of the fund’s performance. A fund must include a narrative discussion of the key factors that materially affected the fund’s performance during the reporting period. This is the fund management's opportunity to discuss the fund's performance in light of market conditions and the investment strategies and techniques used by the fund’s investment adviser.  

  • Performance line graph. A fund must include a line graph that shows the performance of a hypothetical $10,000 investment both in the fund and in an appropriate broad-based securities market index for the past 10 years (or for the life of the fund, if shorter than 10 years). A broad-based index is a market index that represents the overall applicable domestic or international equity or debt markets. You can use this broad-based index to better understand how the fund’s performance has compared to the market’s performance. A fund can include additional indexes as well, including more narrowly based indexes that reflect the market sectors in which the fund invests.  

The performance line graph will be similar to the line graph pictured below:

This graph can tell you whether the fund's performance has been steady or volatile over the period shown and how that volatility compares with the index. For example, the smoother the line, the more stable the fund's or index's performance has been over the period shown. A choppier line, with more peaks and valleys, means more volatile performance.

  • Performance table. A fund must include a table that shows the fund's average annual total returns for the past 1, 5, and 10 years (or for the life of the fund, if shorter). The table must include for all the time periods both (1) the fund’s average annual total returns with and without sales charges and (2) the average total returns of an appropriate broad-based securities market index. You can use this table to see how the fund’s annual total returns compared to the market and how any sales charges affected the return. Any sales charge will reduce a fund’s performance.

The performance table will be similar to the table pictured below:

Average Annual Total Returns
Periods Ended December 31, 20XX

 

One Year

Five Years

Ten Years

Hypothetical Fund XYZ, Class A
(with sales charge)

3.08% 5.31% 3.84%

Hypothetical Fund XYZ, Class A
(without sales charge)

8.08%

6.31%

4.35%

ABC Broad-based Index

9.13%

6.09%

4.87%

Just because a fund had one good year does not mean that positive investment returns will continue. The fund’s past performance is not a good predictor of the fund’s future performance. If you do consider performance, you may want to pay particularly close attention to the fund's 5- and 10-year returns. If the fund's returns were stellar in the past year but unimpressive in the past 5 or 10 years (or over the life of the fund, if shorter), it is possible that the past year's outperformance will not last. On the other hand, if the fund experienced steady returns in the past 5 or 10 years, but suffered a sharp loss in the past year, it may be unclear as to whether the recent loss signals the beginning of a trend or is an isolated occurrence.

Statistical Information

A fund must include certain statistics as of the end of the reporting period. This information can help you better understand the fund and how the fund is changing over time. This information includes:

  • Net assets. This amount shows the total dollar amount of the investments the fund owns minus its total liabilities—that is, the size of the fund.
  • Total number of portfolio holdings. This number shows how many investments the fund owns.
  • Portfolio turnover rate. This percentage shows how often a fund is buying and selling investments. A high portfolio rate may indicate higher transaction costs and may result in higher taxes if the fund is held in a taxable account. This statistic is not required for money market funds.
  • The total advisory fees. Total dollar amount of advisory fees paid by the fund for fund management during the reporting period. These fees are paid out of fund assets and lower the fund’s return for all shareholders. This statistic is required to be in the annual report only.

In addition, a fund is permitted to disclose additional statistics if they are reasonably related to the fund’s investment strategy and would help shareholders better understand the fund’s activities and operations during the reporting period.

Graphical representation of the investments the fund owns

A fund must include one or more tables, charts, or graphs depicting the fund’s portfolio holdings by category as of the end of the reporting period. These categories could include, for example, type of investment, industry sector, geographic regions, credit quality, or maturity. The categories and the basis of the presentation should be designed to clearly depict the types of investments made by the fund, given its investment objectives.

A fund is permitted to show its holdings based on the percentage of net asset value, total investments, or total exposure. Total exposure depicts long and short exposures to each category to the extent applicable. Holding an investment “long” means the fund owns the investment outright and generally expects the value to increase. Holding an investment “short” refers to an investment technique designed to profit from the decrease in the value of an investment.

A fund may also list the fund’s 10 largest portfolio holdings.

You can use this information to verify that the fund's holdings are consistent with your expectations based on the fund's name, investment objectives, strategy, and principal risks as disclosed in the fund's prospectus.

Material fund changes, if any - required in the annual report and permitted in semi-annual report

The fund must include a brief description of material changes involving the topics below if they have occurred since the beginning of the reporting period.

  • The fund’s name;
  • The fund’s investment objectives or goals;
  • The fund’s fees and ongoing expenses;
  • The fund’s principal investment strategies;
  • The principal risks of investing in the fund; and
  • The fund’s investment adviser.

In addition, the fund can include other fund changes that may be helpful for investors to understand the fund’s operation and/or performance over the reporting period. The fund also can include anticipated material changes that will occur within a few months of the fiscal year-end.

Information about changes in the fund’s accountants, if applicable

The fund must include a brief discussion of certain disagreements with, or changes in, accountants. While this rarely occurs, when it does happen it is important that investors are put on notice of the dismissal or resignation of an accountant and the existence of a material disagreement with that accountant.

Availability of additional information online

A fund must include a statement that informs investors about certain additional information that is available on the fund’s website, such as the fund prospectus, financial information, holdings, and proxy voting information, as applicable. A fund also has the flexibility to refer you to additional information online that may be viewed by shareholders as important.

How can I get a shareholder report?

A fund must provide its shareholders with its annual and semi-annual shareholder reports. Depending on your preferences and the fund’s practices, this could mean delivery of a paper copy or e-delivery. You can always request to receive paper copies free of charge, and most funds also make electronic copies of annual and semi-annual shareholder reports available on their websites. These reports are also accessible through the SEC’s EDGAR database.

Additional Information

Information Available to Investment Company Shareholders

Mutual Funds

Updated Investor Bulletin: Exchange Traded Funds (ETFs)

Updated Investor Bulletin: Focus on Money Market Funds

Using EDGAR to Research Investments

This bulletin represents the views of the staff of the Office of Investor Education and Advocacy.  It is not a rule, regulation, or statement of the Securities and Exchange Commission (“Commission”).  The Commission has neither approved nor disapproved its content.  This bulletin, like all staff statements, has no legal force or effect: it does not alter or amend applicable law, and it creates no new or additional obligations for any person.
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