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Fund Times: It's Thanksgiving, Pass the Capital Gains

Plus, shakeup at SSgA, SEC disclosure proposal, and more.

Morningstar Analysts, 11/26/2007

With the season of giving just around the corner, fund companies are getting in on the action by announcing year-end capital gains distributions. Not to be outdone, Vanguard has posted fund-by-fund estimates of capital gains to be distributed to shareholders in December.

Ranking distributions as a percentage of net asset value as of Nov. 19, the winner is Vanguard International Explorer VINEX, which is estimated to pay $2.95 per share or 13.4% of NAV. The next-largest distribution belongs to Vanguard Capital Value VCVLX with a $1.41 per share distribution or 11.8% of NAV. Rounding out the top five are Vanguard Growth and Income VQNPX and Vanguard Windsor VWNDX with distributions of just over 11%, as well as Vanguard Strategic Equity VSEQX with a 10.3% payout.

Also noteworthy is Vanguard U.S. Value VUVLX, which is expected to pay a distribution of $1.34 per share or 9.5% of NAV. This fund handed over half its portfolio to subadvisor Axa Rosenberg in June. Though Axa Rosenberg employs a value-oriented quantitative investment strategy like U.S. Value's longtime subadvisor GMO, the shift probably resulted in some portfolio reshuffling that generated gains.

For those who own mutual funds in a taxable account, now's a good time to consult your fund company's Web site to see what capital gains distributions you can expect this year. If you're considering purchasing a fund in a taxable account before year-end, you may also want to check the timing of any distributions, as you won't want to buy in just in time to get a capital gain. For more information on the basics of capital gains distributions, check out this article.

SSgA Revamps Executive Ranks
State Street Global Advisors announced an organizational shakeup, naming new CIOs for a number of asset classes. Fixed-income CIO Paul Greff and head of active fixed income Michael O'Hara are leaving the firm, according to the release. Replacing Greff is Mark Marinella, who joins from State Street's investment research and trading arm where he helmed fixed-income efforts.

This change comes on the heels of a disappointing showing for several of the firm's bond funds amid this summer's subprime-fueled liquidity crisis. O'Hara had formerly managed the now beleaguered SSgA Yield Plus SSYPX, which has been the worst-performing ultrashort bond fund this year by a mile, posting losses of 8.59% for the year through Nov. 20. The losses were largely due to the fund's meaty stake (recently a third of assets) in asset-backed bonds supported by subprime home-equity and mortgage loans.

In other changes, the following SSgA veterans will take on new duties: Alistair Lowe has been named asset-allocation and currency CIO; Steve Meier will be the firm's cash CIO; Arlene Rockefeller will head up equities; and Shawn Johnson will oversee the firm's research and product engineering group.PAGEBREAK

SEC Proposes Summary Prospectus
The Securities and Exchange Commission advanced its campaign to make mutual fund disclosure more user-friendly by proposing that funds issue a summary prospectus. The simplified document will contain, in "plain English," key details such as a fund's objectives, risks, costs, performance, and management. According to SEC Chairman Christopher Cox, a summary of this type in a standardized format will help facilitate "comparison shopping" for investors. The SEC is also proposing that the full prospectus be made available online to investors. Public comments on the proposal are now being accepted.

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