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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.

This proposal is just one part of the SEC's larger initiative to provide mutual fund investors with better information, an effort that began last year when the commission hosted a roundtable discussion on the matter with industry participants and investors. It also follows the SEC's adoption of rules that will pave the way for investors to get fund-specific risk/return information online in interactive data form.

Fidelity Fund Gets Mega-Cap Makeover
Following Vanguard's launch of three new mega-cap index funds, Fidelity announced plans to take Fidelity Growth & Income II FGRTX in a similar direction. Under its new name (fittingly, Mega-Cap Stock) and mandate, the fund will invest at least 80% of assets in companies with the largest market capitalizations, aiming to outperform the Russell Top 200 Index. Rick Mace, who managed Fidelity Overseas FOSFX for nearly a decade, has returned from a leave of absence to take the reins from manager Jim Catudal.

Although Catudal had previously emphasized mega-cap stocks here, these changes should raise the average market capitalization of the fund's holdings. As a result, existing shareholders may want to consider whether a fund with a more narrow mega-cap focus still meets their objectives.

Several Columbia Funds to Absorb Excelsior Counterparts
Taking the next step toward integrating the recently acquired Excelsior Funds into Bank of America's Columbia Funds lineup, the Excelsior board approved plans to merge several funds into Columbia counterparts with similar mandates. For instance, large-value fund Excelsior Equity Income UMEIX will be merged into Columbia Dividend Income LBSAX. Most of the funds slated for reorganization are fixed-income, including a number of government, municipal-bond, and money market funds.

Excelsior's fund lineup came under Columbia's umbrella as a result of Bank of America's acquisition of Excelsior's parent U.S. Trust from Charles Schwab in July. Shareholders of the Excelsior funds will vote on the proposed mergers in the first quarter of 2008, according to the filing.

Dot-Com Relic Calls It Quits
Schwab Technology
SWTFX will close and liquidate, returning what's left of its $58 million in assets to remaining shareholders by Feb. 15, 2008. The fund launched in July 2000 when Internet stocks were singing their swan song only to post double-digit losses in the following two years.

Barclays launches new Asia ETF
The slicing and dicing in ETF-land marches on. Barclay's Global Fund Advisors recently launched a new Asia-themed ETF, iShares S&P Asia 50 Index Fund. The fund is designed to track the performance of the 50 leading companies from Hong Kong, South Korea, Singapore, and Taiwan. Annual expenses will amount to half a percentage point.

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