NetAssetValueCalculation-PractisingLawInstitute.docVIP

From PLI’s Course Handbook ABCs of Mutual Funds 2009 #18809 2 Pricing and valuation of mutual fund shares Allen M. Goldstein PricewaterhouseCoopers LLP Prepared March 26, 2009 The sections below, “Net Asset Value Calculation” and “Valuation” are excerpted from Chapter 30 “Mutual Fund Accounting and Financial Reporting” of the Practising Law Institute Publication “Mutual Fund Regulation”; this chapter was authored by Martin Jennings and Richard Grueter, Partners and Allen Goldstein, Managing Director at PricewaterhouseCoopers LLP. The ABCs of Mutual Funds 2009 Pricing and Valuation of Mutual Fund Shares June 10, 2009 ( Prepared March 26, 2009) Allen M. Goldstein, PricewaterhouseCoopers LLP The sections below Net Asset Value Calculation and Valuation are exerpted from Chapter 30 Mutual Fund Accounting and Financial Reporting of the Practicing Law Institute Publication Mutual Fund Regulation; this chapter was authored by Martin Jennings and Richard Grueter, Partners and Allen Goldstein, Managing Director at PricewaterhouseCoopers LLP. Net Asset Value Calculation An open-end investment company stands ready to redeem its capital shares as described in its prospectus and in accordance with Rule 2a-4 (and, for money market funds, Rule 2a-7), normally on business days when the New York Stock Exchange is open. Rule 2a-4 defines “current net asset value” for use in computing the current price of a redeemable security as follows: Net Asset Value (NAV) = (market value in dollars of fund’s assets minus fund’s liabilities) number of investor shares outstanding The Rule specifies that current NAV be an amount that reflects the following items, with estimates used where necessary or appropriate. Valuation/Timing Guidance Other Comments 1. Portfolio securities market quotations are readily available Current market value. The SEC staff has provided guidance to the industry that market quotations that are readily available should also be reliable, and thus should