Fund Operations & NAV

5

Analyze the overall impact on NAV.

4

Understand their impact on Assets, Liabilities, and NAV.

3

Calculate daily accrual amounts.

2

Differentiate income and expense accruals.

1

Understand daily income and expense accruals.

Income and expenses are recorded in the fund every day, even if the cash has not yet been received or paid. The daily amount is usually calculated as:

Daily Amount= Annual Amount ÷ 365 days

1. Interest Income

Interest Income is the interest earned on investments such as bonds, treasury bills, and fixed deposits. It is recorded daily, even if the actual payment has not yet been received, and increases the fund's Total Assets.

2. Dividend Income

Dividend Income is the dividend earned on equity shares held by the fund. It is recorded when the fund becomes eligible to receive the dividend (on the Record Date), even if the cash is received later.

3. Management Fees

Management Fees are the fees paid to the Asset Management Company (AMC) for managing the fund. They are recorded every day as an expense, even though the actual payment is made later. These fees increase Total Liabilities and reduce the fund's Net Assets and NAV.

4. Daily Expense Accruals

Daily Expense Accruals are the total daily expenses of a fund, including management fees, trustee fees, custodian fees, audit fees, RTA fees, and other operating costs. These expenses are recorded every day instead of all at once, so each investor pays a fair share based on how long they hold the fund.

5

NAV changes with daily income and expenses.

4

Daily accrual = Annual Amount ÷ 365.

3

Expense accruals increase liabilities and reduce NAV.

2

Income accruals increase assets and NAV.

1

Record income and expenses daily.

A. Interest Income

B. Dividend Income

C. Management Fees

D. Bonus Shares

A. Interest Income

B. Dividend Income

C. Management Fees

D. Bonus Shares