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A mutual fund is a pool of stocks, bonds, and other investments (or cash). Each investor (also called a shareholder) owns a proportionate interest in, or share of, the pool. A mutual fund is organized under state law either as a corporation or as a business or statutory trust. Mutual funds have officers and boards of directors (if organized as a corporation) or trustees (if organized as a business or statutory trust). In this way, mutual funds are similar to other types of operating companies. Unlike other companies, however, a fund is typically externally managed. It is not an operating company; it generally has no employees; and, usually, a fund has no assets other than its investments and cash. As a result, a fund relies on third-party service providers that are either affiliate organizations of the entity that launched the fund (such as the fund’s investment adviser) or independent contractors (such as the fund’s auditors and attorneys) to operate the fund and carry out its day-to-day affairs.

The diagram below shows the primary types of service providers usually relied upon by a fund. Following the diagram is a description for each service provider.