The prospectus is your legal blue print to the mutual funds offered by an investment company. They provide to you, in a fairly easy to read format, all the information you need to know about a particular fund.

Before we look at the prospectus, let's step back for a second. Remember, when you invest in a mutual fund, you're a shareholder of an investment company. And, like any other company that makes a product, an investment company sends out various reports to shareholders.

Here's some of the information you might expect to get from your mutual fund company:

• A confirmation statement each time you make a trade;
• A prospectus that details how the fund will be managed; and
• Annual and semi-annual reports.

For many people, the numbers and words in these various reports can be confusing. But for knowledgeable investors, the information is the key for not only how things have been, but how things will be and if the fund stacks up well against its competitors.

For the prospectus, there are many areas, which may be of interest to the prospective investor. However, for now, let's zero in on three key areas to look at in the mutual fund prospectus:

1. Fees and Expenses
   Here you'll find a breakdown of the sales commissions, management fees and operating charges expressed as a percentage of the fund's assets.
2. Fund Details
   Here you will get a snapshot of the fund itself (as at one point in time), including the Type of Fund; Startup Date; Securities offered; Registered Tax Plan Status; Annual Management Fee; and more. You can also find its year-by-year performance dating back 10 years.
   
   Look, too, at distributions and portfolio turnover. A turnover rate of 50% means the manager turned over half the portfolio that year. Look for consistency. If you see a turnover rate of 61% one year and 187% the next year, you should find out why. It may mean the manager's investment strategy has changed or that he or she has lost faith in that strategy.
3. Investment objective
   This tells you how the manager plans to make money. For example, "the fund invests substantially all, but at least 65% of its assets in common stocks of companies that do business outside the United States." You'll also see what else the fund can invest in and perhaps where it's invested: "The Fund currently intends to invest primarily in Europe, the Pacific Basin and emerging industrialized countries."

If the fund invests in bonds, you should find out whether it buys only investment grade bonds or whether it buys junk bonds that offer higher rates of return, but have a much higher risk of not paying off. In that case, the prospectus might say: "The fund may invest in lower-quality bonds."

This is just a snap shot of many details you can find about a fund in a prospectus. To find out all the details contained in a prospectus, contact your personal Financial Advisor. or the mutual fund company of your choice. They will be glad to send you a copy of their prospectus.

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