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Funds 109: Important Mutual Fund Documents: The Shareholder Report

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1.
For details about how your mutual fund fees are spent, consult the _______.
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Statement of Additional Information. While the prospectus provides a view of all fund costs--including management and operational fees, as well as any commissions--the SAI breaks down those costs into their components, such as the portion of 12b-1 fees paid to brokers.
2.
Where in the mutual fund documents are you most likely to find an explanation of why your fund performed the way it did during the past year?
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In the portfolio manager's letter. Your manager runs the fund day to day, so you are most likely to find useful context in his or her letter. The president's letter tends to focus on economic and market trends. The footnotes provide details about the portfolio.
3.
Where in the shareholder report are you most likely to find information about whether a fund shorts stock or practices other complex strategies?
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In its footnotes. While some information about strategies such as shorting stocks may appear in the portfolio holdings section, your best bet is to scrutinize the footnotes for this information. Don't count on managers touching on these strategies in their letters.
4.
Which part of the mutual fund shareholder report discusses broad economic trends?
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The letter from the president. The president typically covers broad economic trends that have affected the markets and provides some context for evaluating your fund.
5.
Where should you turn for information about a mutual fund?
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Both. While mutual fund documents such as prospectuses, statements of additional information, and shareholder reports are essential for smart fund analysis, don't rely strictly on fund company materials. Seek outside sources to help put the information into context.