What is NAV ?

NAV is nothing but the total market value of all the assets held in the mutual fund portfolio less
the liabilities, divided by all the outstanding units. That amounts to nothing but the “book value”.

The NAV measures how much each share of a mutual fund is worth. So essentially, the NAV of a
mutual fund is the cost of one share of the fund.

How is it calculated ?
The total assets of a mutual fund usually falls into two categories – cash and securities. Securities
include stocks and bonds. So the total asset will include the market value of all it’s cash, stocks,
bonds. Liquid assets, dividends to be received, interest accrued also need to be included in the
total assets.

Net Asset Value (NAV) = (Assets – Debts) / (Number of Outstanding units)

Assets = Market value of the fund’s investments + Receivables + Accrued Income

Debts = Liabilities + Accrued Expenses

As an example, assume there are two investors X and Y who have invested in a mutual fund
which decided to issue out units at Rs 1/-.

X invests Rs 100/- and Y invests Rs 200/-.

The total corpus of the mutual fund will be Rs 100 + Rs 200 = Rs 300/- and X will get 100 units
and Y will get 200 units.

Now suppose the mutual fund manager invests smartly over a year and makes the investment
grow and the corpus becomes Rs 800/-.

The NAV will be calculated as :

NAV per share = (Assets – Debts) / ( Number of Outstanding Units)

= (Rs 800/- 0) / (300)

= 2.67

The NAV is 2.67.

So X’s value of investments will be 100 units * 2.67 = Rs 267/- and

Y’s value of investments will be 200 units * 2.67 = Rs 534/-.

Components

What is the NAV cycle?

 Cash is invested into a fund

 The fund issues shares to an investor.

 The fund then makes investments in various financial instruments, earns income and incurs
expenses

 The net asset valuation is calculated.

  The NAV per share is the basis upon which subsequent investments and withdrawals are
processed.

 So the NAV per share determines the number of shares issued to investors and the amount of
cash paid to investors

NAV is calculated at the end of every market day, after taking into account the closing market prices of
the securities that the fund or scheme holds.

GAV: The Gross Asset Value (GAV) is the sum of value of property a company owns.

Record Date: The record date is the cut-off date established by a company in order to determine which
shareholders are eligible to receive a dividend or distribution. ... The shareholders of record as of the
record date will be entitled to receive the dividend or distribution, declared by the company.

Ex-Date: The ex-dividend date for stocks is usually set one business day before the record date. If you
purchase a stock on its ex-dividend date or after, you will not receive the next dividend payment.
Instead, the seller gets the dividend. If you purchase before the ex-dividend date, you get the dividend.

Pay Date: A payment date is the date on which a declared stock dividend is scheduled to be paid.

Options Defined
An option gives the holder the right -- but not the obligation -- to buy or sell an asset at a specific
price on a specific date. A call option represents the right to buy, while a put option represents the
right to sell.

Forward Contracts
Forward contracts are binding agreements to buy or sell an asset at a specific price on a specific
date.

Eg: Gold or Silver

Futures Contracts
A futures contract is simply a standardized forward agreement. If you are a cereal manufacturer
and buy a lot of corn, it would be time-consuming to negotiate a different forward contract with
every corn farmer. To streamline the process, large commodities exchanges offer standardized
agreements through which corn,

Position Reconcillation

When a fund buys securities through a prime broker (“PB“) the fund will record both the
notional quantity and the cost the securities in the ledger. The PB then sends a statement at the
end of the day to confirm the positions that the fund has. The process of comparing the positions
between the ledger and the PB is what is called position reconciliation.

Reasons for breaks

A trade booked using an incorrect local or base currency

A trade booked using an incorrect local or base currency. Swaps are generally booked in the
currency in which they are traded because certain currencies are not deliverable

2. A break due to partial terms being booked incorrectly

3. Breaks due to corporate actions. Dividends, rights, Stock split can also create share or position
breaks

Fund accounting is an accounting system emphasizing accountability rather than profitability, used by
non-profit organizations and governments

Work procedure:

1. Receiving position breaks file from onshore through spreadsheet.

2. Spreadsheet contains multiple positions which are held in multiple accounts.
3. Investigate each account why breaks happened. Using macro to pull all securities
4. If it is due to incorrect currency, trades have been booked in wrong currency. So we cancelled
the trade and post again with correct currency.
5. If it is due to corporate actions and then share break will arise, then we will research the type of
corporate action happened based on the share allocation and will receive those shares to the
current quantity.
6. Price will be increase or decrease
7. Finally we will match all positions based on client request and send the worked file to the client.

Cash Reconciliation

Pending trades accounts for the majority of cash breaks. The fund might be using trade date accounting
whilst the PB is using settlement date accounting.

The PB is missing valid trades that the fund executed. Let’s assume that the fund buys the 1m Citi shares
on 5/26 with an expected settlement date of 5/30. If the broker does not post this trade on 5/30,
because the PB is missing the trade, the cash reconciliation will break by 1m. This is why cash
reconciliations are so important. The fund will have to call up the broker and have the broker post the
trade so as to avoid having the same break appearing at month end on 5/31;

Cancellation of trades can cause breaks. Sometime a fund might cancel a trade. A good example of a
trade cancellation would happen if say the broker were to buy an incorrect security that is different from
the security ordered by the fund. If the cancellation happens just before month end the PB might not
reflect the change until the beginning of the following month. In this case the cash reconciliation will
show a break

Duplication of trades, either by the fund or by the broker, can cause cash breaks. The fund needs to
investigate such duplicates and correct the ledger or have the broker correct the PB statement.

85140070247, 85236950746

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k. bindu date ofbirth: oct-22-1983 chittoor greamspet

SEC Yield

This calculation is based on a 30-day period ending on the last day of the previous month. It is
computed by dividing the net investment income per share earned during the period by the
maximum offering price per share on the last day of the period. The figure listed lags by one
month

=2*((a-b)/(c*d)+1)^6-1)

30-Day Annualized Yield = 2[((a-b/cd) + 1)6 -1]

Where:

a = dividends and interest earned during the period.

b = expenses accrued for the period (net of reimbursements).

c = the average daily number of shares outstanding during the period that were entitled to receive
dividends.

d = the maximum offering price per share on the last day of the period.