How to Read a Statement of Additional Information

Not sure whether a potential fund will fit your expectations? For a better look at the inner workings of a fund before you purchase, be sure to carefully read the Statement of Additional Information (SAI). Often overlooked by potential investors, the Statement of Additional Information can give you a good idea about what the fund is capable of, general fund expenses and who represents your interests on the Board of Directors.

Difficulty: Moderately Challenging

Instructions

Things You'll Need:

• Fund contact information
• Statement of Additional Information

Understanding a Statement of Additional Information

1. If your fund doesn't routinely hand out a Statement of Additional Information, you'll need to request one using the contact information found on the back of the fund's prospectus.

2. The first section of the statement will offer a brief overview of the fund and investment objectives and policies. You may discover the history of the fund, as well as what types of shares the fund is authorized to issue.

3. After explaining the investment objectives, the Statement of Additional Information will introduce the current Trustees, officers of the Trust and principle shareholders. Supplemental background information, such as vital statistics, current position with the fund and previous employers, may be given.

4. Immediately following the management introduction, you will find details on Trustee and shareholder compensation and fund shares beneficially owned by the Trustees.

5. Find out how much money was spent on portfolio transactions and brokerage fees by perusing the section after the management introductions and costs. You'll also discover valuable information about the circumstances in which the fund is authorized to purchase or sell securities.

6. Pay careful attention to the section explaining the procedures for the purchase or redemption of fund shares. Since most funds have specific regulations regarding the purchase and sale of shares, it is important to thoroughly read and understand this section in order to avoid any surprises in the future.

7. Learn about the fund's financial history by studying its explanation of how income is derived, how it determines its net asset value (NAV) and how its overall performance is calculated.

Tips & Warnings

• Mutual funds and closed-end funds are not required by law to provide investors with a Statement of Additional Information. However, if a SAI is requested by an investor, it must be furnished free of charge.
• Although a Statement of Additional Information is a valuable document for investors, it should be used in conjunction with the fund's prospectus for a clearer look at the fund's finances and management.