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Portfolio > Mutual Funds

Vanguard Backs More Disclosure for Funds

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Feb. 12, 2003 — Vanguard Group, the second largest mutual fund company, said it supports proposals by the Securities and Exchange Commission requiring funds to provide more information about fund expenses and portfolio holdings.

A rule requiring quarterly disclosure of fund holdings would benefit investors who want more information about what stocks their funds are invested in, without increasing fund expenses, the company said. Funds currently must disclose their holdings twice a year.

Providing more information on fund expenses will help investors better understand expenses and their effect on fund returns, according to Vanguard, a proponent of low-cost fund investing. The SEC proposed the rules in December. Public comments on the changes can be made through Friday.

The holdings rule, Vanguard said, also would protect investors from “predatory” trading practices, such as portfolio managers buying stocks for themselves before adding it to their funds, or investors seeking to copy a fund’s investments.

A complete list of holdings would be available 60 days after the quarter’s end on the SEC’s website, or, if the fund chooses, the fund’s website.

Funds would also be allowed to provide a summary consisting of the fund’s 50 largest holdings in their annual and semiannual reports. This option would benefit shareholders because the “streamlined listing” would let fund shareholders “focus on a fund’s primary holdings without getting bogged down in the many smaller and less material holdings,” Vanguard said.

Under the expense rule, fund reports would disclose expenses in dollars and cents, rather than as a percentage of assets. The reports would include one figure showing the cost of a $10,000 investment based on a fund’s actual expenses and returns, and a second figure including an assumed annual return of 5%.

The first figure would enable shareholders to estimate actual costs, and the second would let them compare expenses at different funds.


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