The U.S. and Singapore were co-valedictorians in a new Morningstar report released on Friday as both countries earned "A" grades on a report card that measured the overall experience of mutual fund investors based on a variety of factors including taxation, transparency and investor protection. 

At the other end of the spectrum, South Africa received a C- and New Zealand found itself at the back of the class with a D-.

The investment research firm's follow-up to a similar study conducted in May 2009 evaluated 22 countries on four key categories: regulation and taxation, disclosure, fees and expenses and sales and media.

Morningstar officials the questions and answers were deliberately weighted to give greater importance to factual, empirical answers. Each country was given a letter grade for each of the four categories with additional value assigned to high-priority issues such as fees, taxes and transparency to generate an overall grade.

The U.S. mutual fund environment received an A for disclosure, fees and expenses and sales and media. However, it was dinged with a sobering C+ in the regulation and taxation category.

Researchers justified the poor grade by citing government regulators' inability to identify violations like the infamous Madoff ponzi scheme and the fact that the U.S. is one of only five countries to tax fund investors on capital gains earned within fund shares. Also, U.S. tax rates for short-term capital gains are among the highest of the nearly two dozen countries studied.

Singapore earned A's in both the regulation and taxation and sales and media categories.
"[Singapore] has a strong regulatory regime with an absence of most investment taxes," the report said. "Regulations ban sales practices that are most rife for abuse and disclosure is good. However, Singaporean funds could carry lower costs."

Among the newcomers to the study, Thailand debuted with an A- grade, thanks mostly to strong disclosure policies and low fund fees. South Africa's less-than-auspicious C- rating was attributed to poor disclosure requirements as well as regulations that limit foreign investments and, therefore, the variety of investment options available to mutual fund investors and their advisors.

"Just as with stocks, some jurisdictions offer relatively friendly investment climates for mutual fund owners and others less so," John Rekenthaler, Morningstar's vice president of research, said in the report. "We hope our global study will help investment companies, distributors, and regulatory bodies worldwide continue to focus on and enhance best practices for investors."

New Zealand's woeful D- grade was substantiated by extremely low grades in the disclosure and regulation and taxation categories.