NISM-Series-V-A: Mutual Fund Distributors · Legal and Regulatory Framework

Mutual Fund NAV, Expenses and Disclosure Norms

Updated 11 October 2026 · Fact-checked

NAV is the per-unit value of a scheme: (assets + receivables + accrued income − liabilities − accrued expenses) ÷ units outstanding. SEBI caps the total expense ratio in slabs of daily net assets, requires fair valuation under a trustee-approved policy, and mandates disclosures such as monthly portfolio, factsheet and half-yearly results.

Understand Valuation, Expenses, NAV and Disclosure Norms

A mutual fund pools money and issues units. The price of one unit is the Net Asset Value (NAV). It tells you what each unit is worth today after counting what the scheme owns and subtracting what it owes. NAV is declared for each business day and published on the AMC and AMFI websites. For most schemes this is by 11 pm on the same business day. A later timeline applies to schemes that invest predominantly in overseas securities (by 10 am on the next business day). Check the current SEBI circular for the exact threshold.

NAV is only as good as the valuation behind it. SEBI requires each AMC to follow a valuation policy approved by the trustees. The aim is fair valuation: securities are valued at prices that reflect what they could really fetch. Listed equity is valued at the last traded price on the primary exchange. Debt securities are valued using prices from valuation agencies appointed by AMFI. Unlisted or thinly traded securities need a fair value approach set by the policy.

A scheme also pays costs: management fees, registrar and custodian charges, marketing and distribution costs, audit fees and more. These are charged to the scheme and reduce NAV every day. SEBI limits them through the Total Expense Ratio (TER), expressed as a percentage of the scheme's daily net assets. The limit falls in slabs as the scheme grows. Equity-oriented schemes get higher limits than other schemes.

Unitholders cannot see inside the fund unless it tells them. So SEBI mandates disclosures: a monthly portfolio and factsheet, half-yearly portfolio, half-yearly financial results, a scheme-wise annual report or its abridged summary, and daily TER on the AMC website. Exit load is separate from TER. It is charged to the investor on redemption within a stated period and is credited to the scheme, net of GST.

Key formulas to remember

NAV per unit: NAV = (Market value of investments + receivables + accrued income − liabilities − accrued expenses) ÷ number of units outstanding; Net assets divided by units. Expenses accrue daily and reduce NAV.
TER, equity-oriented schemes (daily net assets): 2.25% on first ₹500 crore; 2.00% on next ₹250 crore; 1.75% on next ₹1,250 crore; 1.60% on next ₹3,000 crore; 1.50% on next ₹5,000 crore (this band ends at ₹10,000 crore); then the limit falls by 0.05% for every ₹5,000 crore (or part) of daily net assets over the next ₹40,000 crore, which is 8 steps: 1.45% (₹10,000-15,000 crore), 1.40%, 1.35%, 1.30%, 1.25%, 1.20%, 1.15%, 1.10% (₹45,000-50,000 crore); 1.05% on the balance above ₹50,000 crore; Slabs apply to the portion of daily net assets in each band, not the whole fund.
TER, other than equity-oriented schemes (daily net assets): 2.00% on first ₹500 crore; 1.75% on next ₹250 crore; 1.50% on next ₹1,250 crore; 1.35% on next ₹3,000 crore; 1.25% on next ₹5,000 crore (this band ends at ₹10,000 crore); then the limit falls by 0.05% for every ₹5,000 crore (or part) of daily net assets over the next ₹40,000 crore, which is 8 steps: 1.20% (₹10,000-15,000 crore), 1.15%, 1.10%, 1.05%, 1.00%, 0.95%, 0.90%, 0.85% (₹45,000-50,000 crore); 0.80% on the balance above ₹50,000 crore; Debt and other non-equity schemes have limits 0.25% below the equity limits in each slab.
Effective TER: Effective TER = total permitted expense ÷ average net assets × 100; Use this when a question asks for a blended percentage.
Portfolio disclosure: Monthly portfolio: within 10 days of month end. Half-yearly portfolio: within 10 days of each half-year end; The monthly factsheet is a separate disclosure that follows the applicable SEBI/AMFI requirement. Do not memorise portfolio and factsheet as one single 10-day rule.
Half-yearly results: Unaudited financial results: within one month of 30 September and 31 March; Published on the website and in a national English daily and a regional newspaper. The scheme-wise annual report, or its abridged summary, is hosted or sent within four months of the financial year end.
Exit load: Exit load is credited to the scheme (net of GST), not kept by the AMC; It is a charge on the investor at redemption, separate from TER.

How to solve Valuation, Expenses, NAV and Disclosure Norms questions

Most questions on this topic test either a calculation or a rule. Identify which one first, then check the exact condition.

1Read the question and decide: NAV calculation, TER limit, valuation principle, or disclosure timeline.
2For NAV, list assets and add receivables and accrued income. Then subtract liabilities and accrued expenses.
3Divide net assets by units outstanding. Check that both are in the same unit, such as crore and crore.
4For TER, check whether the scheme is equity-oriented or not. Then apply each slab only to the assets inside that band.
5For valuation, pick the option that mentions fair value, the trustee-approved policy, or AMFI-appointed valuation agencies for debt.
6For disclosures, match the document to its deadline: portfolio statements within 10 days of month end or half-year end, half-yearly results within one month.
7Eliminate options with a wrong party, such as the AMC keeping exit load, or a wrong period.
8Recheck the answer against the exact wording of the question before choosing.

Quickest way: Rule-matching shortcut

When to use it: Use this for definition and rule questions where there is no calculation, or when time is short.

Link each item to one number: NAV by 11 pm for most schemes (later for schemes investing predominantly overseas), portfolio statements within 10 days of month end and half-year end, half-yearly results within one month, annual report or abridged summary within four months.
Keep the monthly factsheet apart from the 10-day portfolio rule. It follows its own SEBI/AMFI requirement.
Remember that equity limits are above non-equity limits at every slab, and both fall as assets rise.
For TER arithmetic, compute band by band on daily net assets. Never apply the top rate to the whole fund.
Treat any option saying exit load goes to the AMC as wrong.
V-A has no negative marking, so always answer after eliminating the weakest options.

Common mistakes in Valuation, Expenses, NAV and Disclosure Norms

Applying the first-slab TER rate to the whole scheme.
Students read the limit as a single percentage for the fund.
Fix: Split average net assets into bands and apply each rate only to its band. Add the amounts.
Forgetting accrued expenses and liabilities in the NAV formula.
Students focus on the market value of securities only.
Fix: Always write the full formula: add receivables and accrued income, subtract liabilities and accrued expenses.
Confusing TER with exit load.
Both are costs the investor ultimately feels.
Fix: TER is charged to the scheme daily through NAV. Exit load is charged to the investor when units are redeemed within a stated period, and goes to the scheme.
Mixing up disclosure deadlines.
Monthly, half-yearly and annual documents have different timelines.
Fix: Attach each document to its own deadline: portfolio 10 days, half-yearly results one month, annual report or abridged summary four months. Treat the monthly factsheet as a separate item, not part of the 10-day portfolio rule.
Using the equity TER slabs for debt schemes.
Students remember one table only.
Fix: Check the scheme type first. Non-equity schemes have lower limits.
Thinking NAV reflects the price you pay or receive regardless of load or cut-off.
NAV, load and applicable NAV get blended together.
Fix: NAV is the value per unit. Loads and cut-off times decide the price you actually transact at.

Worked examples

Example 1

An equity-oriented scheme has daily net assets of ₹700 crore. Using the TER slabs, what is the maximum annual expense, ignoring any additional permitted charges? Options: (a) ₹15.75 crore (b) ₹14.00 crore (c) ₹15.25 crore (d) ₹12.25 crore

Show the solution

First ₹500 crore at 2.25%: 500 × 0.0225 = ₹11.25 crore.
Next ₹200 crore falls in the 2.00% band: 200 × 0.02 = ₹4.00 crore.
Total = 11.25 + 4.00 = ₹15.25 crore.
Check: effective TER = 15.25 ÷ 700 = about 2.18%, which lies between 2.00% and 2.25%, as expected.

Answer: (c) ₹15.25 crore. Option (a) wrongly applies 2.25% to all ₹700 crore, and option (b) wrongly applies 2.00% to all of it.

Exam tips

Do the calculations band by band and write each step. Slab questions are designed to catch single-rate shortcuts.
Memorise the disclosure timelines as a short list: NAV by 11 pm for most schemes, portfolio statements 10 days, half-yearly results one month, annual report or abridged summary four months. Keep the monthly factsheet as a separate item.
Watch for options that wrongly say the AMC keeps exit load or that equity and debt TER limits are the same.
In valuation questions, the correct answer usually mentions fair value, a trustee-approved policy, or AMFI-appointed valuation agencies.
V-A has no negative marking, so never leave a question blank.

Practice questions from Legal and Regulatory Framework

Valuation, Expenses, NAV and Disclosure Norms: frequently asked questions

What are the SEBI TER limits for mutual funds?

TER limits are slab-based on daily net assets and differ for equity-oriented and other schemes. For equity-oriented schemes the first ₹500 crore is limited to 2.25%, and the limit falls in later slabs. For other schemes the first ₹500 crore is limited to 2.00%.

Which disclosures must a mutual fund make?

A scheme must publish its NAV daily and its portfolio within 10 days of each month end and each half-year end. It also publishes a monthly factsheet as required by the applicable SEBI/AMFI norms, and unaudited half-yearly financial results within one month of 30 September and 31 March. It publishes a scheme-wise annual report or its abridged summary within four months of the financial year end, and daily TER on the AMC website.