February 7, 1990
TO: SHAREHOLDER COMMUNICATIONS COMMITTEE NO. 4-90
RE: Simplifying the Prospectus
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A committee member called me recently to express concern over the
length and readability (or lack thereof) of fund prospectuses.
He inquired what other fund groups are doing to shorten or
simplify these documents.
Because this is an area of interest to the entire committee, I
thought I'd share this information with everyone. Please note
the following is NOT based on a scientific survey, random sample,
or anything more rigorous than a quick trip through the
prospectus file.
Of 34 1988 or '89 prospectuses (each from a different fund
group), the median number of pages was 18. Forty percent were
using some device to direct the investor's attention to key
information. These included the use of call-outs, margin notes,
and color or graphic elements to emphasize selected text.
The most common approach, however, was to ignore the readability
issue in the prospectus itself and provide either a wrapper or a
separate card or leaflet that summarizes key points, such as
investment objective, fees, services, and how to purchase or
redeem shares. These are typically "plain English" pieces that
use color and graphics to add visual interest.
If any of you have additional ideas on prospectus simplification
or would like to share your approach with the committee at our
April meeting, please call me (202/955-3538)--or committee chair
Anne Patenaude at Pioneer (617/742-7825). Thanks.
Sue Duncan