MF addendums, notices: Why you should not avoid them?

An AMC issues an addendum whenever there are any changes in the offer document

June 03, 2013 9:40 IST | India Infoline News Service
When an asset management company (AMC) launches a mutual fund scheme, it issues an offer document that contains details of the scheme.

An offer document covers all the relevant information to help an investor to make his/her investment decision. Draft offer document means the offer document is in the draft stage. It includes information about the AMC, its sponsor company, trustees and registrar and transfer agents. The document also includes details of the risk factors about the fund, fund manager, benchmark of the product, among other things.

However, in a scheme’s lifetime, most of these details may change. How do you come to know about them?

An addendum, in general, is an addition required to be made to a document subsequent to its publication. An AMC issues an addendum whenever there are any changes in the offer document. For instance an addendum may include any change in the scheme’s objective, fund manager, benchmark, etc.

Addendums are approved and signed by the trustees since it is the fiduciary responsibility of the trustees to ensure that the investors’ money, which lies in a trust and managed by fund managers, is managed according to the mandate specified in the offer document.

A notice is just something that an AMC wants its investors, in general, to know. For instance, if a scheme declares a dividend, the AMC announces the same by issuing a notice. The dividend declaration notice cannot be put out more than five days before the record date.

Addendums and notices are mandatorily published on the AMCs' websites. When AMCs update offer documents of existing MF schemes every year, addendums get included in the offer document itself. 

Notices are also available in business newspapers and news websites. These notices are usually mentioned in brief.

Read more:

Understanding the basics of mutual fund deadlines 

What does your MF account statement include?

Should you renew your SIP and how? 

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