A well designed prospectus ideally would be similar to a well crafted brochure, providing readable information, but WITHOUT ANY

HYPE. Unfortunately, most prospe ctuses are dull, boring, long documents with all the excitement of the telephone directory, because any omissions can place you in severe jeopardy. Companies must clearly describe any risks prominently in the prospectus, often a t the very beginning. Risks that must be disclosed often at length -- include an y lack of business operating history, any past problems with the company or memb ers of its management, any adverse economic conditions in the company s particular industry, the company s competitive disadvantages, the regulatory structure and d angers in the event of non-compliance, any lack of a market for the securities o ffered, and the lack of assurance that there will be a market, the "dilution" be tween the price the new shareholders are paying and the low price the insiders b ought their shares at, and dependence upon key personnel. In short, some prospec tuses appear to be a combination prospectus The company also must describe in the prospectus its business, its properties, i ts competition, its officers and directors and their compensation, transactions between the company and its officers and directors, legal proceedings involving the company or its officers and directors, the plan for distributing the securit ies; and the intended use of the proceeds of the offering. You also need to incl ude financial statements audited by an independent certified public accountant.

hat Does Prospectus Mean? A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details about an investment offering for sale to the public. A prospectus should contain the facts that an investor needs to make an informed investment decision. Also known as an "offer document". Investopedia Says Investopedia explains Prospectus There are two types of prospectuses for stocks and bonds: preliminary and final. The preliminary prospectus is the first offering document provided by a securit ies issuer and includes most of the details of the business and transaction in q uestion. Some lettering on the front cover is printed in red, which results in t he use of the nickname "red herring" for this document. The final prospectus is printed after the deal has been made effective and can be offered for sale, and supersedes the preliminary prospectus. It contains finalized background informat ion including such details as the exact number of shares/certificates issued and the precise offering price. In the case of mutual funds, which, apart from their initial share offering, con tinuously offer shares for sale to the public, the prospectus used is a final pr ospectus. A fund prospectus contains details on its objectives, investment strat egies, risks, performance, distribution policy, fees and expenses, and fund mana gement. Legally mandated document published by every firm offering its securities to pub lic for purchase. It must comply with strict legal requirements and is filed for approval with the country's securities inspectorate such as the Securities & Ex change Commission (SEC) of the US, or the Securities & Investment Board (SIB) of the UK. A prospectus must disclose essential information such as (1) firm's obj ectives, (2) primary business activity, (3) background and qualification of prin cipal officers, (4) current financial position, (5) projected financial statemen ts, (6) assumptions underlying the projections, (7) foreseeable risks to the fir m, (8) offering price on the stock (shares), and (9) (in case of bonds and notes ) how the interest and principal will be paid. Sometimes, a prospect is preceded

by an offering circular (called a red herring) and/or a preliminary disclosure (called pathfinder), but they, although legitimate, are not legal documents