Mandatory Documents :
- Scheme Related Documents: Investors must review three key documents before investing in mutual funds:
- Scheme Information Document (SID)
- Statement of Additional Information (SAI)
- Key Information Memorandum (KIM)
- Purpose: These documents provide crucial information for making informed investment decisions and define the contractual agreement between the investor and the fund.
- Legal Relevance: Investors are presumed to have understood the documents; ignorance of disclosed details cannot be a defense later.
- SEBI’s Role: Documents follow SEBI-prescribed formats. SEBI offers observations but does not approve or certify the content.
- SID Structure: Includes sections on scheme type, investment objectives, risk factors, asset allocation, investment strategy, fund management, fees, taxation, and NAV calculation.
- Assessing Suitability: Investors should use SID to evaluate scheme suitability based on risk, objectives, investment type, and asset allocation.
- Transaction Details: SID outlines how and when units can be purchased or redeemed, applicable loads, minimum investments, and options (e.g., growth or dividend plans).
- Additional Features: Information is provided on systematic investment options, redemption procedures, liquidity, disclosures, and tax implications.
- Fundamental Attributes: These include scheme type, investment objectives, asset allocation, and terms of issue—any changes require prior notice and exit options for investors.
- Access and Availability: Draft and final documents are publicly accessible on SEBI, AMFI, and mutual fund websites.
- Statement of Additional Information (SAI) contains statutory details about the mutual fund, its constituents (sponsors, AMC, trustees, service providers), application process, unitholder rights, valuation norms, tax/legal details, and grievance redressal mechanisms.
- Key Information Memorandum (KIM) is a summary of the SID and SAI, mandatorily provided with application forms, and includes key facts like scheme details, objectives, risk profile, expenses, and past performance.
- Addendum is used for interim updates to scheme documents (SID, SAI, KIM) and must accompany the KIM.
- Updation Rules:
- SID must be updated semi-annually and immediately after any change in fundamental attributes.
- SAI must be updated annually and for material changes as they occur.
- KIM must be updated semi-annually and filed with SEBI.
- Mandatory Disclosures for Investors include:
- Daily NAV publication on AMC and AMFI websites.
- Daily disclosure of Total Expense Ratio (TER) on AMC/AMFI sites with prior notice of any increase.
- Scheme-wise dashboards on AMC websites with key scheme info and downloadable formats.
- Risk-o-Meter classifies schemes into 6 color-coded risk levels (Low to Very High) and must be updated monthly and disclosed with scheme performance.
- Portfolio Disclosures: Monthly and half-yearly portfolio details (including ISIN and yields) must be shared via AMC/AMFI websites and emailed to investors.
- Financial Results: Half-yearly unaudited results must be posted online and advertised in newspapers.
- Annual Reports: Abridged/full reports must be emailed within 4 months of financial year-end; physical copies are available on request.
- Change in AMC Control: Requires SEBI approval and advance communication to unitholders via letter/email and public advertisement.
Non Mandatory Disclosures :
- Fund Factsheet is a widely used, non-mandatory document published monthly by mutual funds.
- It includes scheme details like inception date, AUM, NAV, benchmark, and fund management style.
- Performance data vs. benchmarks, SIP returns, and top holdings are disclosed.
- Equity fund factsheets show sector and security allocations; some also disclose derivatives exposure.
- Debt fund factsheets include credit ratings and exposure by rating category.
- Key metrics like PE ratio, Beta, standard deviation, and Sharpe ratio are shared for equity funds.
- Investment details such as minimum amount, plans, expenses, and transaction options are provided.