What is Key Information memorandum?

Key Information Memorandum (KIM)

KIM is a concise version of SID. As the name hints, KIM contains the key information about the scheme which is necessary for an investor to know. It comes attached along with the application form of the scheme. In short it is said that KIM is a summary of SID & SAI.

What is Key Information memorandum ?

Read the following important aspects in ‘Scheme Related Documents’ to make an informed decision in mutual funds:

  1. Investment Objective: The investment objectives and plans of the scheme are provided in the mainstay of the ODs. The objectives of the scheme along with the way of achieving that are described here which the investor should be aware of. Before investing in any scheme, investor must match his/her own financial goals with that of the scheme given in the documents.
  2. Past Performance: Before making commitment to something, it is better to analyse its history. Same is in the case of mutual fund investment. To be on the safe side, it is needed to view the past performance, total AUM, and the inception date of the fund.
  3. Risk Factors and Risk Mitigation Mechanism: Not all the investors are same, they differ in investment style, size of investment, exposure and risk profile. Upon all, risk is an important factor which the investor wishes to reduce to the minimum level. The ‘Offer Documents’ specify the market risks contained by a particular scheme and the process to be followed to reduce the same. Do not get worried by so much of risks shown in the documents, mutual fund companies are specified by law to highlight every type of financial risk to you. You may be exposed to them if investments are made in that particular scheme.
  4. Fees, Loads and Taxes: Exit loads are the charges which are deducted from the withdrawn amount at the time of redemption and entry load is the fee charged at the time of investment. There are other expenses as well which include Transaction Charges, Securities Transaction Tax (STT), etc. All these expenditures are combined to be known as Total Expense. The expense ratio is the annual fee that all mutual funds charge from their shareholders. Different funds vary in their expense charges as they are different in asset size an carry varying expenditures due to which they have inconstant NAV.
  5. Investment and Redemption Criteria: This is one more important point one must read in the documents. Every scheme has a different investment limit which describes the minimum and the maximum amount which can be invested in them. You must read the details carefully to set your investment plan in an effective manner. On the other part, liquidity is a major factor which most of the investors want in their investments. Moreover, there are certain charges on the redemption of the money before the maturity of a predetermined period, which should be known to the investor.

Hence, it can be said that an investor should know the where about of the fund which is available in the form of ‘Scheme Related Documents’. They are provided for the purpose of gaining detailed knowledge about the fund and related terms & policies. The ‘Scheme Related Documents, i.e., SID, SAI & KIM of any particular mutual fund are available on the website of SEBI and particular AMC.

All mutual fund ads contain a message: “Read all scheme related documents carefully.” What are these documents?

There are 3 important documents: Key Information Memorandum (KIM), Scheme Information Document (SID) and Statement of Additional Information (SAI).

These are prepared by the Asset Management Company (AMC) about a particular scheme, and submitted to the Securities and Exchange Board of India (SEBI) for approval.

The SID has information like:

  1. All Fundamental Attributes like Investment Objective and Policies, Asset Allocation Pattern, Fees and Liquidity Provisions.
  2. Fund Management Team details
  3. All Risk Factors in the scheme as well as risk mitigation mechanisms.
  4. Scheme details like load, plans and options, past performance, benchmark.
  5. General Unitholder information.
  6. Other details like list of AMC branches, Investor Service Centres, Official Points of Acceptance.

The SAI has information like:

  1. The constitution of the Mutual Fund – Sponsors, Asset Management Company and Trustees.
  2. All information on key personnel of the AMC and associates such as Registrars, Custodians, Bankers, Auditors and Legal Counsel.
  3. All Financial and Legal issues.

The concise version of  SID  is the KIM, that is attached with the application form. As the name suggests, it contains all the Key Information that an investor must know before investing in the scheme. The KIM must be made available with every application form.

Kim pdf download