CHAPTER 7:

NET ASSET VALUE, TOTAL EXPENSE RATIO AND PRICING OF UNITS

 VALUATION PRINCIPLES
• Investment in new type of securities/assets by the mutual fund scheme shall be made
only after establishment of the valuation methodologies for such securities with the
approval of the Board of the asset management company.
• The valuation policies and procedures shall be regularly reviewed (at least once in a
Financial Year) by an independent auditor.
• Disclosure of the valuation policy and procedures – SAI
• The responsibility of true and fairness of valuation and correct NAV shall be of the asset
management company.
• A mutual fund may value its investments according to the Valuation Guidelines notified
by SEBI. In case of any conflict between the Principles of Fair Valuation and Valuation
Guidelines, the Principles of Fair Valuation detailed above shall prevail.
VALUATION
COMPUTATION OF NET ASSETS OF
MUTUAL FUND SCHEME AND NAV
TOTAL EXPENSES IN MUTUAL FUND
SCHEME
Types of Expenses
1. Investment and advisory
2. Recuring expense
• Any expense other than investment advisory fee and recurring expenses
shall be borne by the asset management company or trustee or sponsors.
DIVIDENDS & DISTRIBUTABLE
RESERVES
CONCEPT OF ENTRY AND EXIT LOAD AND ITS
IMPACT ON NAV
 KEY ACCOUNTING AND REPORTING
REQUIREMENTS
• The accounts of the schemes need to be maintained distinct from the accounts of
the AMC. The auditor for the AMC has to be different from that of the schemes.
• NAV is to be calculated up to 4 decimal places in the case of index funds, liquid
funds and other debt funds.
• NAV for equity and balanced funds is to be calculated up to at least 2 decimal
places.
• Investors can hold their units even in a fraction of 1 unit. However, current stock
exchange trading systems may restrict transacting on the exchange to whole units.
THANK YOU