Mutual Fund Accounting

An investor bought 3000 units of mutual fund at Rs.12.25 per unit on 31-3-2020. As on
31-3-2021 he received Rs. 1.25 as dividend and Re. 1 as capital gain distribution per
unit
a) Calculate the return on the investment as on 31-3-2021 if the NAV on 31-3-2021 is
Rs. 13 and
b) Calculate the return on the investment as on 31-3-2021 if all dividend are
reinvested into additional units of the fund at Rs. 12.50.
Solution (a)
Change in Price 0.75 (13 – 12.25)
Dividend 1.25
Cap. Gain Distri. 1 Total = 3
Distribution
Return on Investment = 3 / 12.25 = 24.49%
Solution (b) if all dividend are reinvested into additional units of the fund at Rs.12.50
then total amount reinvested is
1.25 + 1 = 2.25 x 3000 = 6750 / 12.50 = 540 additional units
Total Units will become 3000 + 540 = 3540 * 13 (NAV) = 46020
Purchase Price 3000*12.25 = 36750 Return = 46020-36750/36750 = 25.22%
Calculation of Net Asset Value (NAV)
Net Asset Value (NAV) refers to the amount which a unit holder will receive for
units if the fund is wound up.
NAV means market value of total assets of the fund minus total liabilities related
to those assets

NAV (per unit) = Market Value of Assets – Outside Liabilities

No. of Units outstanding

NAV = Market Value of Assets – Outside Liabilities

OR
NAV = Net value of Assets
No. of Units
Find out NAV per unit from the following information of Scheme Flexi Plan
Name of the Scheme Flexi Plan
Size of the Scheme 200 lakhs
Face value of the shares 200 lakhs
No. of outstanding shares 2 Lakhs
Market value of the
fund’s investments 360 lakhs
Receivables 4 lakhs
Liabilities 2 Lakhs

Solution :
Mkt value of Assets (360 + 4) 364
(-) Liabilities 2 =
Net Assets Value 362

NAV per unit = Net Value of Assets / No. of Units

362/2 = 181
Consider the following data of Sun India Mutual (Growth Plan) In crs
Value of Investments 2,759
Receivables 220
Other current Assets 545
Liabilities 410
Accrued exps. 85
If the number of outstanding units is 125 cr and sales charge is 2.20% on
the NAV, what would be the public offering price ?

Computation of NAV
Total Assets
Value of Investments 2,759
Receivables 220
Other current Assets 545
3524
Liabilities 410
Accrued exps. 85
NAV 3029

NAV = 3029 / 125 = 24.23

A mutual fund co. has the following assets under it on the close of business
as on
Co. No. of 1-4-2019 2-4-2019
Share MP/share MP/share
A Ltd. 20000 20 20.50
B Ltd. 30000 312.40 360
C Ltd. 20000 361.20 383.10
D Ltd. 60000 505.10 503.90

Total No. of Units 6,00,000

1) Calculate net asset value of the fund
2) Following information is given
Assuming Mr. Rohit, submits a cheque of Rs.30,00,000 to the Mutual Fund
and the Fund Manager of this company purchases 8000 shares of B Ltd.
and the balance amount is held in Bank. In such a case what would be the
position of the Fund ?
3) Find new NAV of the Fund as on 2nd April, 2019
Particulars NAV of Securities on Revised NAV of
1-4-2019 Securities on
1-4-2019
Assets
A Ltd. (20,000* 20) 4,00,000 4,00,000
B Ltd. (30000*312.40) 9372,000
Revised
B Ltd. (38000*312.40) 1,18,71,200
C Ltd. (20000*361.20) 72,24,000 72,24,000
D Ltd. (60000*505.10) 3,03,06,000 3,03,06,000
Cash Balance
(30,00,000 – 8000*312.40) 5,00,800
Total Assets 4,73,02,000 5,03,02,000
(-) Liabilities Nil Nil
Net Assets 4,73,02,000 5,03,02,000

NAV = Total Net Assets / No. of Units

outstanding
= 47302000 / 600000 = 78.84

In second case, no. of units will increase

600000 + (3000000 / 78.84) = 638052
 Calculation of NAV of the fund 2nd April, 2019

Particulars NAV of Securities on

2-4-2019

Assets
A Ltd. (20,000* 20.50) 4,10,000
B Ltd. (38000*360) 1,36,80,000
C Ltd. (20000*383.10) 76,62,000
D Ltd. (60000*503.90) 3,02,34,000
Cash Balance 5,00,800
Total Assets 5,24,86,866
(-) Liabilities Nil
Net Assets 5,24,86,866

NAV = Total Net Assets / No. of Units

outstanding
= 52486866 / 638052 = 82.26
Mr. Sunil can earn a return of 15% by investing in equity shares. But he is
thinking to invest in equity based mutual funds scheme with initial expenses
of 5% and annual recurring expenses of 3%. How much the mutual fund earns
to provide 15% to Mr. Sunil.
Hint: You need to think from the point of view of Mutual Fund Company.
Investor expecting 15% from Mutual Fund, now the question is where to
invest the money of investor where mutual fund company is incurring some
initial expenses and 3% recurring expenses.
Investors Return + Recurring Expenses
Invested by Investors – initial expenses
Or
1 x Return + Recurring Expenses
1 - initial Expenses
15 + 3%
100-5
18.78%
Mr. Sunil can earn a return of 15% by investing in equity shares. But he is
thinking to invest in equity based mutual funds scheme with initial expenses of
5% and annual recurring expenses of 3%. How much the mutual fund earns to
provide 15% to Mr. Sunil.

Initial Expenses Investor

Annual recurring Fund Manager Operating Exp

Co. Profit / return earned by co. so that co. can given 15% return to mr. sunil

Investors Return + Recurring Expenses

Invested by Investors – initial expenses

[15 ] + 0.03 3/100

100 – 5

0.187 *100 = 18.7%

Mr. Amar can earn a return of 18% by investing in equity shares. But he is
thinking to invest in equity based mutual funds scheme with initial expenses of
6% and annual recurring expenses of 4%. How much the mutual fund earns to
provide 18% to Mr. Amar.
Problem
A mutual fund made an issue of 10,00,000 units of Rs. 10 each as on 1-1-2019. No entry load was charged. It
made the following investments
50,000 Eq. Shares of Rs. 100 each @ Rs. 160 80,00,000
7% Government Securities 8,00,000
9% Debentures (unlisted) 5,00,000
10% Debentures (listed) 5,00,000
Total 98,00,000

During the year dividend of Rs. 12,00,000 were received on equities. Interest on all type of debt securities was
received as and when due. At the end of the year equity shares and 10% debentures are quoted at 175% and
90% respectively. Other investments are at par.
Find out the NAV per unit given that the operating expenses during the year amounted to Rs. 5,00,000.
2)Also find out the NAV, if the mutual fund had distributed a dividend of Rs. 0.80 per unit during the year to the
unit holders.

BV MP MP
BV - BV

Note- Quoting is for listed shares / debentures

FV 100 160 FV > IP = Premium 160-100 = 60

Listed and unlisted

Working Note If Dividend distributed per unit is 0.80 per unit
Op. Cash Balance (1 Cr-98L) 200000
(+) Dividend Received 1200000 NAV per unit is Rs. 11.55
(+) 7% Govt. Sec (7%*800000) 56000 (-) Dividend per unit (Rs. 0.80)
(+) 9% Debentures (unlisted) 45000 = NAV Rs. 10.75
{(9%*500000)}
10% Debentures (Listed) 50000 OR
{10%*500000)
(-) Operating Expenses (500000) 1,15,51,000 – (10,00,000*.80)
Cl. Cash Balance 10,51,000 10,00,000

1,07,51,000
Calculation of Net Asset Value (NAV) 10,00,000
Equity Shares (50,000 x 175%) 87,50,000
7% Govt. Securities 800000 = 10.75
9% Debentures unlisted 500000
10% Debentures (listed) @ 90% 450000
Cash Balance (*) 1051000
Total Assets (A) 1,15,51,000
(-) Total Liabilities (B) Nil
Net Assets (A - B ) 1,15,51,000
Net Assets 1,15,51,000

NAV per unit = NAV 1,15,51,000 = 11.55

No. of units 10,00,000
Note Eq. Share 175% of FV 100 not 160 as 160 is the premium amount.

NAV per unit = Total Net Assets Value = 11551000 = Rs. 11.55
No. of Units 10,00,000

(ii) If the Mutual Fund is distributed a dividend of Rs.0.80 per unit

Net Assets 1,15,51,000
(-) Amt. of dividend (10,00,000x0.80) 800000
Net Assets 1,07,51,000

NAV per unit = Total Net Assets Value = 1,07,51,000 = Rs. 10.75
No. of Units 10,00,000
Problem

A mutual fund made an issue of 10,000 units of Rs. 10 each on 1-1-2018 and no entry load was charged.
Following investment was made –

Details Rs.
5000 Eq.sh.of 10 each @ 16 80000
8% Govt. Bonds 8000
10% Unlisted Debentures 50000
10% Listed Debentures 50000
98000

During the year Rs. 1,20,000 was received as dividend on share. Interest is on all types of debt securities were
received as and when received. At the end of the year equity shares and 10% debentures are quoted at 175%
and 90% respectively. Other investments are considered at par. Find out the NAV per unit given that operating
expenses paid Rs. 50,000. Also find out NAV if dividend distributed of 0.90 per unit during the year
 Cash Balance (10000*10 – 98000) 2000
Dividend Received 120000
Int. on 8% Govt. Bonds (8%*80000) 6400
Int. on 10% unlisted Deb. (10%*50000) 5000
Int. on 10% listed Deb. (10%*50000) 5000
138400
Less- Operating Exps 50000
Net Cash Balance 88400

Calculation of NAV
Cash Balance 88400
Eq. Shares (175%10) [17.5*5000] 87500
8% Govt. Bonds 80000
10% Unlisted Debentures 50000
10% Listed Debentures 90%*100 [90*500) 45000
Total 350900

NAV = AMOUNT / NO. OF UNITS

350900/10000 = 35.09

If the dividend is paid Rs. 0.90

350900-9000 = 341900
341900/10000=34.19

OR 35.09 – 0.90 = 34.19

Textbook Q.6
Mr. Ratan invested in three mutual fund schemes as follows
Details Scheme 1 Scheme 2 Scheme 3
Date of Investment 1-12-2018 1-1-2019 1-2-2019
Amount 50,000 1,00,000 5,000
NAV at entry 1.50 1.00 1.00
Dividend Received 50 150 Nil
NAV on 31-3-2019 1.40 1.10 0.98
No. of Days 122 90 30

Calculate the effective yield on per annum basis in respect of each of three schemes.

Solution : Return on Investment =

Scheme 1 Return x 100
No. of units = Investment Initial Investment
NAV per unit (3283) * 100
= 50000 = 33,333 50000
1.50 = (6.566)%
Calculation of Return on Investment
Dividend per unit 50 (6.566%) 122 days
Change in Price ? 365 days
(1.40-1.50)*33,333 (3,333)
Return (3283) = (19.64%) per annum
Example 9 Textbook
Particulars Rs. In
lakhs
Ex-dividend listed share at cost 20.00
Cash in hand 1.23
Bonds 4.30
Not listed 1.00
Fixed Interest fund 4.50
Dividend 0.80
Amount payable on share liabilities 6.32
Expenditure 0.75
No. of units at Rs. 10 20,000
Value of fixed income securities at face value of Rs. 100 106.50
Listed share purchased when index was 1,000
Present index is 2,300
Value of listed bond and debenture at NAV date 8.00

There is diminution (decrease) of 20% in unlisted bonds. Other fixed interest

securities are at cost.
Solution
Particulars Rs. In Working
‘Lakhs
Equity Share Capital 46.00 No. of shares x index price (cl.)
2,000 * 2300 = 46 Lakhs
Cash in hand 1.23
Bonds 8.00 (new value given)
Unlisted Bonds 0.80 1.00 - (1.00*20%)
Fixed Interest securities 4.50 Given in question take at cost
Dividend 0.80
Total Assets 61.33
Less liabilities
Amount payable on share (6.32)
Expenditure (0.75)
Total (7.07)
Net Assets [61.33 – 7.07) 54.26

Calculation of NAV per unit

NAV per unit = NAV = 54,26,000 = Rs. 271.30
No. of Units 20,000

Calculation of No. of Eq. Shares = Amount 20,00,000 = 2,000

Index when purchased 1000