Shareholder Rights and Fund Disclosures

Flashcards covering shareholder rights, board structure, voting procedures, and required disclosure documents for mutual funds.

Board of Directors (BOD)

A group of shareholder-approved board members responsible for representing shareholder interests, overseeing overall operations, and ensuring compliance with securities laws.

Independent (non-interested) board member

A board member who has not had any related business with the fund sponsor, investment adviser, or fund affiliates within the past two years.

Investment Company Act of 1940

Federal legislation that requires at least $40\%$ of a fund's Board of Directors to be independent.

Investment adviser

The company responsible for investing the fund's assets and employing the fund manager.

Initial advisory contract

A contract that lasts no more than two years and must be approved by a majority of shareholder votes.

Shareholder voting power

A system where a shareholder receives one vote for each dollar invested in the fund, meaning the outcome depends on total value rather than the number of people voting.

12b-1 fees

Marketing fees that mutual fund shareholders may vote to change in the fund's fee schedule.

Dividend distributions

Payments to shareholders representing income received from investments held in the fund's portfolio, typically made annually.

Capital gain distribution

A distribution of profit to shareholders that occurs when the fund manager sells a security within the portfolio for more than its cost.

Statutory prospectus

A disclosure document providing key fund information that must be delivered to investors at or prior to solicitation, or by settlement of an unsolicited purchase.

Summary prospectus

A condensed version of the statutory prospectus that may be delivered to investors in today's digital environment.

Statement of additional information (SAI)

A document containing detailed 'in the weeds' information, such as fund policies and board member backgrounds, which must be available to investors upon request but does not have to be delivered.

Annual SEC report

A publicly available report filed with the Securities and Exchange Commission containing market recaps, fund manager comments, and financial statements.

Semi-annual shareholder report

A report that must be made available to shareholders every six months, comprising investment summaries, financial statements, and financial highlights.

Past performance disclosure

The requirement for funds existing at least $10$ years to disclose their past $1$, $5$, and $10$-year returns.

Fund policies

Disclosures regarding the minimum required investment, availability of shares, and excessive trading policies.

Financial highlights

A section of fund disclosures that includes historical income, expenses, and returns.