MUTUAL FUND -

PRODUCTS &
FEATURES
 SID & SAI
• Mutual Fund Offer Documents have two parts:
• Scheme Information Document (SID), which has details
of the scheme
• Statement of Additional Information (SAI), which has
statutory information about the mutual fund, offering the
scheme.
• The above documents are prepared by the fund house
and vetted by SEBI.
• Investor can download these documents from the mutual
fund website.
• The Scheme Information Document sets forth concisely
the information about the scheme that a prospective
investor ought to know before investing.
• Before investing, investors should also ascertain about
any further changes to this Scheme Information
Document after the date of this Document from the
Mutual Fund / Investor Service Centres / Website/
Distributors or Brokers.
 Key Information Memorandum
(KIM)
• The Key Information Memorandum (KIM) is a summary
of the SID and SAI.
• As per SEBI regulations, every application form is to be
accompanied by the KIM.
The important contents of KIM are:
• Name of the AMC, mutual fund, Trustee, Fund Manager
and scheme
• Dates of Issue Opening, Issue Closing & Re-opening for
Sale and Re-purchase
• Plans and Options under the scheme
• Risk Profile of Scheme
• Price at which Units are being issued and minimum
amount / units for initial purchase, additional purchase
and re-purchase
• Benchmark
• Dividend Policy
• Performance of scheme and benchmark over last 1 year,
3 years, 5 years and since inception.
• Loads and expenses
• Contact information of Registrar for taking up investor
grievances
 NAV
• Net Assets of a scheme is the market value of assets of the scheme
less all scheme liabilities.
• NAV i.e. net asset value is calculated by dividing the value of Net
Assets by the outstanding number of Units.

NAV =

(Market value of investments + receivables + accured income + other

assets – accured expenses – other payables – other liabilities)/
No. of units outstanding as of valuation date
 Fund Fact Sheet
• This is a monthly document which all mutual funds have
to publish. This document gives all details as regards
• the AUMs of all its schemes
• top holdings in all the portfolios of all the schemes
• loads, minimum investment
• performance over 1, 3, 5 years and also since launch
• Comparison of scheme’s performance with the
benchmark index
• most mutual fund schemes compare their performance
with a benchmark index such as the Nifty 50) over the
same time periods
• fund managers outlook
• portfolio composition
• expense ratio
• portfolio turnover
• risk adjusted returns
• equity/ debt split for schemes
• YTM for debt portfolios and other information which the
mutual fund considers important from the investor’s
decision making point of view.
 Expenses
• There are two types of expenses incurred by a scheme
• Initial issue expenses – these expenses are incurred when
the NFO is made. These need to be borne by the AMC.
• Recurring expenses – These expenses are incurred
regularly. These include
• fees paid to trustees, custodians, auditor, registrar and
transfer agents
• selling and commission expenses
• listing fees and depository fees
• expenses related to investor communication
• service tax
 Limit of Expenses
NetAssets(Rscrs.) EquitySchemes

UptoRs.100crs. 2.50% 2.25%

NextRs.300crs. 2.25% 2.00%

NextRs.300crs. 2.00% 1.75%

ExcessoverRs.700crs. 1.75% 1.50%

• The above percentages are to be calculated on the
average daily net assets of the scheme.
• The expense limits (including management fees) for
index schemes (including Exchange Traded Funds) is
1.5% of average net assets.
• In case of a fund of funds scheme, the total expenses of
the scheme including weighted average of charges
levied by the underlying schemes shall not exceed 2.50
per cent of the average daily net assets of the scheme.
In addition to the limits specified, the following costs or
expenses may be charged to the scheme, namely
•Brokerage and transaction costs which are incurred for the
purpose of execution of trade and is included in the cost of
investment, not exceeding 0.12% in case of cash market
transactions and 0.05% in case of derivatives transactions
•Expenses not exceeding of 0.30% of daily net assets.
•Additional expenses not exceeding 0.20 per cent of daily net
assets of the scheme
•Any expenditure in excess of the limits specified above shall
be borne by the asset management company or by the
trustee or sponsors.
 Expense Ratio
• Expense Ratio is defined as the ratio of expenses incurred by a scheme to
its Average Weekly Net Assets.
• It means how much of investors’ money is going for expenses and how
much is getting invested.
• This ratio should be as low as possible.
• Assume that a scheme has average weekly net assets of Rs 100 cr. and
the scheme incurs Rs.1 cr. as annual expenses, then the expense ratio
would be 1/ 100 = 1%.
• In case this scheme’s expense ratio is comparable to or better than its
peers then this scheme would qualify as a good investment.
• If this scheme’s AUM increases to Rs. 150 cr in the next year & annual
expenses increase to Rs. 2 cr, then expense=2/ 150 = 1.33%.
• Ideally as net assets increase, the expense ratio should come down.
• Since the direct plans do not entail distributor commissions, they may have
a lower expense ratio.
 Portfolio Turnover
• A very high churning frequency will lead to higher trading
and transaction costs, which may eat into investor returns.
• Portfolio Turnover is the ratio which helps us to find how
aggressively the portfolio is being churned.
• While churning increases the costs, it does not have any
impact on the Expense Ratio.
• Transaction costs are not considered while calculating
expense ratio.
• Transaction costs are included in the buying & selling
price of the scrip by way of brokerage, STT, cess, etc.
Thus the portfolio value is computed net of these
expenses
 Cash Levels
• If the scheme is having higher than industry average cash
levels consistently, more so in a bull market, it will lead to a
inferior performance by the scheme.
• However, in a falling market, it is this higher cash level that
will protect investor wealth from depleting.
• Why the fund manager is holding high cash levels ?
• It may be so that he is expecting a fall therefore he is not
committing large portion of money.
• It may be so in a bull market or a bear market, the strategy
could be to enter once the prices correct.
• High cash levels can also be seen as a cushion for sudden
redemptions and in large amounts.
 Exit Load
• Exit Loads, are paid by the investors in the scheme, if they
exit one of the scheme before a specified time period.
• Exit Loads reduce the amount received by the investor. Not
all schemes have an Exit Load, and not all schemes have
similar exit loads as well.
• Some schemes have Contingent Deferred Sales Charge
(CDSC), where in the investor has to pay different exit loads
depending upon his investment period.
• If the investor exits early, he will have to bear more Exit
Load.
• Thus the longer the investor remains invested, lesser is the
Exit Load.