A mutual fund can generate profits from three different sources, which are:

Dividend
Mutual fund generate income from dividends received from other joint stock companies whose shares the fund holds. A mutual fund uses this dividend income to distribute dividend to its own stock holders.

Capital Gains
As discussed earlier the portfolio manager changes the portfolio of the fund with the passage of the time and also with the changes in economic and business conditions. So due to the sale and purchase of shares, the mutual fund generates capital from the sales/ purchase of stocks. The capital gain generated by the mutual fund is also used to pay dividends to the investors of the fund.

Appreciation of Share Price
Mutual funds also increases the wealth/investment of their shareholder through appreciation's of share price of the mutual fund. For example if the subscription price of a mutual fund is Rs.11.00, and after a period of seven months the price goes upto Rs.18.00, thus the investor gets a profit of Rs.7.00 if he sell the mutual fund's shares in the market.