Statement of Additional Information (SAI)

A Statement of Additional Information (SAI) is a supplementary disclosure document that a US registered mutual fund or open-end exchange-traded fund (ETF) must prepare alongside its prospectus. It contains the detailed, more technical information that regulators consider useful to some investors but too long for the main document. The SAI is formally Part B of Form N-1A, the registration form for open-end funds.

The SAI belongs to a layered disclosure system. The prospectus (Part A) gives the essentials, the summary prospectus condenses them further, and the SAI holds the remaining detail. It is filed with the Securities and Exchange Commission (SEC), is legally part of the fund's registration statement, and must be supplied free of charge to any investor who asks for it. Closed-end funds use Form N-2, which has its own SAI.

If the prospectus is the brochure a fund hands out, the SAI is the thick appendix kept behind the counter. Most customers never ask for it, but it is there for anyone who wants to check exactly who runs the fund, how they are paid and what rules they have promised to follow.

A useful comparison is a car's sales leaflet and its full technical manual. The leaflet tells a buyer the price, the fuel use and the main features. The manual lists every part, every specification and every warning. Analysts, lawyers, journalists and careful investors read the manual; the ordinary buyer relies on the leaflet but benefits from the manual existing.

Form N-1A sets out the items that belong in Part B. A typical SAI includes:

• Fund history and structure. When and where the fund was organised, for example as a Massachusetts business trust or a Delaware statutory trust, and any name changes.
• Investment policies and restrictions. The fundamental policies that can only be changed by a shareholder vote, such as limits on borrowing, lending and industry concentration, and the non-fundamental policies the board can change.
• Management of the fund. The members of the board of trustees, which of them are independent, their other directorships, the committees they sit on and how much they are paid.
• Control persons and principal holders. Investors owning 5% or more of a share class, and anyone who controls the fund.
• The adviser and service providers. Details of the investment adviser, the advisory contract and fees paid in recent years, the principal underwriter, the custodian, the transfer agent, the fund administrator and the auditor.
• Portfolio managers. Since amendments adopted in 2004, the other accounts each portfolio manager runs, the structure of their pay and the dollar range of fund shares they personally own.
• Brokerage and trading. How the fund chooses brokers, commissions paid and any "soft dollar" research arrangements.
• Pricing, purchases and redemptions. How net asset value (NAV) is calculated, and details of sales-charge discounts such as breakpoints and rights of accumulation.
• Taxation and policies. The fund's tax status, its proxy voting policies and its policy on disclosing portfolio holdings.
• Financial statements. Often incorporated by reference from the most recent annual report.

Funds must state on the prospectus cover how to get the SAI. In practice it is posted on the fund's website, available on the SEC's EDGAR database and sent by post or email on request at no charge. Funds that use a summary prospectus under Rule 498 must keep the SAI online so that investors can reach it from a link.

The SAI is most useful when a question goes beyond headline figures. An investor comparing two funds with similar expense ratios can check whether the managers own shares in their own fund, how much of the board is independent, how much the fund paid in brokerage commissions and whether it lends securities. Researchers use SAIs to study manager incentives, board pay and conflicts of interest. Because the SAI is part of the registration statement, statements in it carry the same legal liability as those in the prospectus.

The SAI does not replace any other document. The prospectus remains the primary disclosure; the SAI is "incorporated by reference" into it, meaning the law treats it as part of the prospectus even though it is printed separately. Ongoing results appear in shareholder reports, which since the SEC's tailored shareholder report rule (compliance from July 2024) have been short documents with more detail moved to Form N-CSR. A fund fact sheet is marketing material and carries none of the SAI's legal status.

Outside the United States there is no exact equivalent. European UCITS funds publish a full prospectus, the fund rules or instrument of incorporation and a short Key Information Document, and much of what a US SAI covers sits in the full prospectus or the annual report instead.

SAIs are long, legalistic and updated only once a year plus supplements, so details such as fees paid or principal holders can be months out of date. They describe policies rather than outcomes: a fund may list a restriction on borrowing without showing how close it came to the limit. Like the prospectus, the SAI is disclosure and not a guarantee, and it leaves judgement about market risk and suitability to the investor.

• Investor.gov (SEC): Statement of Additional Information (SAI)
• eCFR: 17 CFR 274.11A, Form N-1A