See Morningstar's version of the summary filing.
Morningstar's fund analysts cover 2,000 mutual funds. Their full analyst reports, including Stewardship Grades, are available in Morningstar Principia Mutual Funds Advanced and Morningstar Advisor Workstation Office Edition.
Morningstar's mutual fund analysts filed a comment letter with the SEC on Feb. 27 supporting the commission's proposal for a summary mutual fund prospectus. The SEC has suggested that funds distribute a three- to four-page document to potential shareholders that highlights the fund's strategy, historical performance, and fees. The fund's traditional, full prospectus would be available on the fund company's Web site, and shareholders also could receive paper copies, should they request them. To accompany our comment letter, the text of which is below, we created our own sample of a summary prospectus. You can see our version here.
February 27, 2008
Nancy M. Morris
U.S. Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549-0609
Dear Ms. Morris,
The mutual fund analysts at Morningstar, Inc. appreciate the opportunity to comment on the Commission's proposal for a summary mutual fund prospectus (File No. S7-28-07, Enhanced Disclosure and New Prospectus Delivery Option for Registered Open-End Management Investment Companies).
We support the Commission's effort to make mutual fund disclosure more understandable and meaningful, and we think the proposed summary prospectus is a step in the right direction. We regularly review mutual fund prospectuses as part of our analysis of funds' investment processes and stewardship practices. Many current prospectuses go into great detail on the types of securities funds could (but probably won't) buy and various wide-reaching investment policies, making it difficult for investors to figure out what a fund will actually do. We suggest a greater emphasis on strategy, performance, and cost. We support the spirit of the summary prospectus, and we have some suggestions as to how it could be improved. Our sample version of the document, which is based largely on the SEC's version, can be viewed here.
We organized our version into three main sections centering on fund strategy, past performance, and fees. In the strategy section, we started with a concise, yet substantive, overview of the fund's strategy so investors can quickly determine whether an offering's approach may be appropriate for their portfolios. We discussed the basics here, including the types of securities the fund usually owns and the criteria a fund manager uses when buying and selling securities. These details are far more helpful than the standard investment objective, with its vague references to "income" or "capital appreciation," so we cut the investment objective from our example.