The Statement of Additional Information (SAI) is a supplementary document provided along with the mutual fund’s prospectus. The document contains additional information about the mutual fund. It also contains multiple disclosures regarding the functionality of the mutual fund. The document is not a mandatory attachment and does not need to be sent to prospective investors except upon request. The statement of additional information helps the mutual funds expand on the details about the funds that are not disclosed within the prospectus. Regular updates take place within the Statement of Additional Information. Details like the fund’s financial statements, information about the officers, directors, and other key personnel related to the mutual fund are updated.
Details covered in the Statement of Additional Information:
As mentioned, multiple additional details about the fund are covered in the Statement of Additional Information. The constituents of the same are mentioned below:
Sponsor, Trustee and AMC:
The Statement of Additional Information initially covers the information about the constituents of the mutual funds. These constituents are the fund’s Sponsors, the Asset Management Company (AMC), and the Trustee Companies.
A sponsor is comparable to a promoter of a listed company. The sponsor gets the mutual fund registered with the SEBI. The sponsor is defined under SEBI regulations as a person who establishes a mutual fund, acting alone or is combined with other corporate body. The sponsor is the initiator of the fund. The sponsor forms a mutual fund trust and has the right to appoint the board of trustees. The sponsor also decides upon the asset management company or a fund manager who would manage the capital within the mutual fund.
While a sponsor initiates the mutual fund, managing the mutual fund is handled by the board of trustees or a trusted company. The Indian Trust Act governs the incorporated board, whereas the Companies Act, 1956, governs the trust company. The trustees have to protect the interest of the unitholder. They also have to ensure that the AMC or the fund manager decides in the interest of the unitholders. If the AMC aims to float additional or different schemes within the mutual fund, it will be needed to be approved by the trustees.
The Asset Management Company takes the daily management of the capital within the fund. The AMC functions under the supervision of the trustees, SEBI, and its own board of directors. The AMC must ensure that the investments comply with the investment strategy/objective listed in the prospectus. The AMC must adhere to the risk management guidelines listed by the Association of Mutual Funds in India and SEBI. They should provide timely disclosures to unitholders on the sale and repurchase, net asset value, portfolio, and other details.
The Statement of Additional Information also mentions the service providers of the mutual fund. The details about the fund’s custodian, the legal counsel, the registrar and transfer agents of the funds, auditors, fund accountants, and collecting bankers are details of some service providers mentioned in the SAI.
Financial Disclosures:
An Asset Management Company can function multiple mutual funds. The NAVs of each mutual fund has to be disclosed in the Statement of Additional Information. The mutual funds also have to disclose their condensed financial statements in the Statement of Additional Information. These disclosures assist an investor in tracking the historical performance of the respective funds that the Asset Management Company runs. It also assists an investor in deciding the optimal fund to invest in based upon the investor’s financial objectives. Details about the net assets held by mutual funds and their expenses related to the net assets are also disclosed in the financial segment of the Statement of Additional Information.
Rights of Unitholders:
The Statement of Additional Information also assists an investor in investing in their respective mutual funds with a complete guide mentioned within the same. The rights of the unitholders of the mutual funds are also mentioned in the scheme. The unitholders of the scheme have a proportionate right in the beneficial ownership of the scheme’s assets. The unitholders are entitled to dividend warrants within 42 days of the date of declaration of the dividends. The redemption cheques would be received by them within ten working days from the date of redemption. The unitholders have the right to terminate the AMC of the fund if 75% of unitholders pass the resolution for the same with prior approval of SEBI. 75% of the unitholders can also be resolute to wind up the mutual fund.
Compliance with multiple norms:
The AMCs also have to comply with the investment value norms that SEBI and the same have established. They must be listed down in the Statement of Additional Information itself. The valuation methodologies are the investment strategies that the mutual fund aims to operate. Their respective funds have to be mentioned in the Statement of Additional Information. The specifications must be listed for investments made in equity, debt, and other investment instruments within the SAI. The Statement of Additional Information will also list down the legal and tax compliances that the mutual fund must adhere to in its daily functioning. The details about the different forms of taxability, the deductions under income tax sections, short-term and long-term gains taxability, and other compliances are mentioned in the document.
Summing it up
The Statement of Additional Information is a handy document that the mutual fund companies provide. The document extends the details mentioned in the prospectus and gives detailed and additional information about the same. The investors could find multiple information about the mutual fund in the Statement of Additional Information. This information can assist the investor in making optimal financial decisions if his / her financial objectives align with that of the mutual fund company and its program.
