Mutual fund unlocked: What is offer document and KIM?

We often hear and read that, “Mutual fund investments are subject to market risk. Please read the scheme related documents carefully.” in multiple languages. But has anyone read it? Do we know what is an offer document and the key information memorandum (KIM)? What does it contain?

Being a mutual fund investor, one should know that an offer document is one of the most important documents provided by the mutual fund houses. The offer document gives insight into the fund at a glance before investing. So let's just look what is an offer document and KIM.

Offer document is a prospectus provided by mutual fund houses which gives the information about the offerings of the scheme to the investors. Offer document is divided into two parts that is Scheme Information Document (SID) and Statement of Additional Information (SAI).

Scheme information document consists of all the important information about the scheme like its asset allocation patterns, scheme objectives, strategies, benchmarks, etc. Moreover, it also gives the information about the fund management, fees and expenses as well as risks involved in the investments. This document forms an integral part of the investment decision. So for investors, this is one of the must-read documents before investing.

On the other hand, the statement of additional information consists of all the statutory information about the fund house/ AMC (Asset management company) like the information of sponsors, trustees, offices, etc. Both of these statements that is SID and SAI are prepared in a predefined format which is prescribed by the market regulator SEBI (Securities Exchange Board of India).

Further, KIM is nothing but a summary of the SID. The KIM highlights key sections of the SID. KIM is prepared in a standard format which is prescribed by the SEBI.

The contents of the key information memorandum consists of the details of the mutual fund and AMC, all the scheme details including scheme name, objective, issue date, inception date, performance over the period as against the benchmark, minimum investment details, expenses, entry and exit loads and peer comparison of the said scheme.