Statement Of Additional Information

The Statement of Additional Information (SAI):

1. A.Is identical to the prospectusIf the two documents were identical there would be no reason for both to exist. The SAI supplements the prospectus with fuller detail on matters such as portfolio policies, officers and directors, and the fund's history.
2. B.Must be delivered with every saleAutomatic delivery is the prospectus requirement, and it is easy to extend that obligation to the SAI. The SAI need not be sent with every sale; it must be furnished free of charge to any investor who asks for it.
3. C.Provides more detailed information and is available on requestCorrect - the SAI supplements the prospectus on request.
4. D.Is confidential and never sharedNothing about the SAI is secret; it is filed with the SEC and available to the public. Its detail is simply too extensive for the main prospectus, so it is provided on request at no cost.

Why: The SAI contains more detailed fund information and must be provided free upon request.

Isolde has read Pemberton Growth Fund's summary prospectus and now wants the fund's detailed investment restrictions and the biographical background and compensation of its directors. Her representative should tell her that this material appears in the fund's:

1. A.The fund's most recent proxy statementA proxy statement appears only when shareholders are being asked to vote on something. It is not a standing source of the fund's investment restrictions.
2. B.Semi-annual report to shareholdersShareholder reports carry financial statements and a schedule of investments as of the reporting date. They are not where governance and restriction detail lives.
3. C.Statement of additional information, furnished free on requestCorrect. The SAI carries the detailed restrictions and the director and officer information, and the fund must supply it free to anyone who asks.
4. D.Summary prospectus, in the section describing the fund's principal risksThe summary prospectus is deliberately brief, covering objectives, fees, principal strategies and risks, performance and how to buy and sell. Detailed restrictions and director compensation are outside it.

Why: The statement of additional information expands on the prospectus with the detail most investors do not need but are entitled to have: the fund's history, its full investment restrictions, information about the directors and officers including their compensation, and details of the fund's service arrangements. It is furnished free of charge on request and is legally part of the registration statement.

The Statement of Additional Information (SAI) is:

1. A.The same as the prospectusThe two are companion documents, not duplicates. The prospectus carries what an investor needs to make a decision; the SAI holds the fuller detail, including the directors, the advisory agreement, and the audited financial statements, which is why it exists separately.
2. B.ConfidentialIts lower profile makes the SAI feel like an internal document, but it is filed with the SEC and available to anyone. The distinction is that it need not be handed over unprompted, and a fund must supply it at no charge to any investor who asks.
3. C.Provided free upon requestCorrect - available on request at no charge.
4. D.Required with every purchaseThat obligation belongs to the prospectus, which must accompany or precede every sale. The SAI is delivered on request instead, a design that keeps the routine disclosure package manageable while leaving the detail available to anyone who wants it.

Why: The SAI is provided free to investors upon request and supplements the prospectus.

A customer of Silverbrook Securities wants detail on the Larkfield Growth Fund's brokerage allocation practices and on the professional background of its directors. None of it appears in the prospectus she was given. Where is that information found, and what is the fund's obligation?

1. A.In an internal document the fund provides only to its board and its distributorThe SAI is a public disclosure document available to any investor.
2. B.The Statement of Additional Information, which the fund must provide free of charge on request and which is incorporated into the prospectus by referenceCorrect. The SAI carries exactly this detail and must be furnished at no cost to any investor who asks.
3. C.Only in the fund's registration statement on file with the SEC, obtainable from a commercial filing service for a feeThe SAI is part of the registration statement, but the fund itself must supply it free on request.
4. D.Only in the fund's annual report to shareholdersThe annual report carries financial statements and holdings, not brokerage allocation policy or director backgrounds.

Why: The Statement of Additional Information is the second half of a fund's registration statement. It carries the material a prospectus omits for readability: brokerage allocation and portfolio transaction policies, director and officer backgrounds and compensation, control persons, and detailed tax and valuation policies. It is legally part of the prospectus by incorporation, and the fund must send it to any investor who asks, free of charge.