CHAPTER 5: SCHEME RELATED INFORMATION

- The Offer Document is one of the most important sources of information on the scheme, to help prospective investors evaluate the merits and demerits of investing in it. OD is the Operating Document and describes the product.

- Mutual Fund Offer Documents have two parts: Scheme Information Document (SID) Which has details of the scheme, and Statement of Additional Information (SAI) which has statutory information about the mutual fund, that is offering the scheme.

- In practice, SID and SAI are two separate documents, though the legal technicality is that SAI is a part of the SID.

- SID and SAI together are the primary source of information for any investor—existing as well as prospective.

- SAI contains every detail regarding the fund house other than a particular scheme for which investors wants to apply, So, it is obvious to understand that single SAI is relevant for all the schemes offered by a mutual fund.

- As per SEBI regulations, every application form is to be accompanied by the KIM. KIM is essentially a summary of the SID and SAI.

- The suitability of the scheme depends upon multiple factors such as the financial need of the investor from the investment, the risk and return preferences, the investment horizon and other individual preferences.

- The Riskometer and Statement of the suitability of the scheme is available on the front page of the SID.

- The past performances are only indicative and does not guarantee the future performance of the schemes

- The risk mitigation strategies adopted by the fund management to control and manage the risks associated with investing in specific types of securities are described in the SID.

- The Investment Strategy that will be followed by the scheme is detailed under Section II, Sub-section E of the SID.

- According to 18(15A) of SEBI (Mutual Funds) Regulations, 1996, the Trustees are required to ensure that no change in the fundamental attributes of the Scheme(s) or the trust or fee and expenses payable or any other change which would modify the scheme shall be carried out unless:

 A written communication about the proposed change is sent to each Unit-holder and an advertisement is given in one English daily newspaper having nationwide circulation as well as in a newspaper published in the language of the region where the Head Office of the mutual fund is situated; and

 The Unit-holders are given an option for a period of 30 days to exit at the prevailing Net Asset Value without any exit load.

- Statement of Additional Information (SAI), has statutory information about the mutual fund or AMC, that is offering the scheme. Therefore, a single SAI is relevant for all the schemes offered by a mutual fund.

- While the SID, SAI and KIM need to be updated periodically, the interim changes are updated through the issuance of such addendum. Which is is considered to be a part of the scheme related documents, and must accompany the KIM.

- Updation of SID for 1st time (Post – NFO)

a) Scheme launched in the first 6 months of the financial year (say,April 2010), SID must be updated within 3 months of the end of the same financial year (i.e. by June 2011).

b) Scheme launched in the second 6 months of the financial year (say, October 2010)The first update of the SID is due within 3 months of the end ofthe next financial year (i.e. by June 2012).

- SID is regularly updated every year or whenever there is a change in a Fundamental attribute of the scheme.

- SAI is regularly updated by the end of 3 months of every financial year or any Material changes have to be updated on an ongoing basis and uploaded on the websites of the mutual fund and AMFI.

- KIM has to be updated at least once a year or whenever there is need based change in SID or SAI.

- Disclosure of Daily NAV, Disclosure of Total Expense Ratio, Portfolio disclosure, Financial results and Annual reports are other Mandatory information/disclosure.

- In case of open ended schemes, the NAV is calculated for all business days and released to the Press. In case of closed ended schemes, the NAV is calculated at least once a week.

- The Mutual Fund declares the Net Asset Value of the scheme on every business day on AMFI’s website www.amfiindia.com and also on their website.

- SEBI has mandated that the Asset Management Companies (AMCs) should prominently disclose on a daily basis, the Total expense ratio (scheme-wise, date-wise) of all schemes under a separate

head – “Total Expense Ratio of Mutual Fund Schemes” on their website.

- The AMCs shall send half yearly portfolio via email within 10 days from the end of each half year, if email address is registered with the fund.

- Annual statement has to be sent by email to the investors who have registered their email id with the fund, no later than four months from the date of closure of the relevant financial year

- The mutual fund shall before the expiry of one month from the close of each half year, (Mar 31st and Sep 30th) shall display the unaudited financial results on AMC website.

- It is not mandatory to publish the monthly fact sheet, it is a market practice followed by all the fund houses, on a voluntary basis.

- Factsheet is a marketing and information document, various SEBI regulations pertaining to information disclosure are applicable toit.