Designing a Summary Prospectus for a Fund - Due in 18 Hours $85 Max

Designing a Summary Prospectus Almost everyone agrees that the full prospectus for a mutual fund is too long, too complex, and simply too boring for most investors. As a result, most investors do not read the entire full prospectus; instead, at most they read a few pages of the full prospectus and usually rely on other sources of information such as press articles, rating services, and friends‘ suggestions. To make fund disclosure documents simpler and more readable, the SEC and the fund industry have developed a short-form prospectus called the summary prospectus. This is designed to provide investors with the key items of information about a fund in an easy-to-read format. The SEC requires all funds to address the same subjects in the same sequence in order to facilitate comparisons. Funds may divide these disclosures into any number of categories as long as the information is presented in the sequence required by the SEC. According to the SEC, the profile should address seven subjects: 1. The fund‘s goals or objectives 2. The fund‘s fees, expenses, and portfolio turnover 3. The fund‘s principal investment strategies, the principal risks of investing in the fund, and the fund‘s past performance 4. The fund‘s investment adviser and portfolio manager 5. Information about buying and selling shares 6. Tax information 7. Financial intermediary compensation information However, the summary prospectus does not do away with the full prospectus. The cover or the beginning of the summary prospectus must offer an 800 number, web site, and e-mail address for investors to call if they want to be sent the full prospectus before purchasing a fund. In addition, the fund‘s summary prospectus, full prospectus, statement of additional information, annual report, and semiannual report must be available on a web site in a specified manner. The summary prospectus must offer to send investors a copy of other information about the fund (such as the fund‘s latest annual or semiannual report) if they wish to learn more about it. After an investor chooses to purchase a fund on the basis of the summary prospectus, the investor must receive the full prospectus along with the confirmation of the purchase. Thus, the summary prospectus is part of a multitier system of disclosure. An investor may obtain more or less information from fund disclosure documents depending on the investor‘s needs or desires. The summary prospectus is designed to provide the key information necessary for a purchase; an existing shareholder may use a full prospectus to find out more detailed information about taxes or available services. But some investors may want the full prospectus and the fund‘s annual report before purchasing. These documents can be obtained easily for free by making a call to an 800 number or using a web site. In the light of this background information, the Exercise asks you to draft your own summary prospectus based on the full prospectus.