Total Expense ratio or TER represents the annual fund operating expenses of a scheme, expressed as a percentage (%) of the fund’s daily net assets. All expenses of an AMC must be managed within the maximum limits of TER as per SEBI Mutual Fund Regulations. As per the current regulations, the TER allowed is 2.25% for the first Rs.500 crore of average weekly total net assets, 2.00% for the next Rs. 250 crore, 1.75% for the next Rs. 1,250 crore, 1.60% for the next Rs. 3,000 crore, 1.50% for the next Rs 5,000 crore and thereafter TER reduction of 0.05% for every increase of Rs 5,000 crore on daily assets or part thereof on the next Rs. 40,000 crore. Beyond Rs 40,000, it is 1.05% of the assets (AUM). For example - An expense ratio of 2% per annum means that, each year 2% of the schemes’ total assets (AUM) can be used to cover operating expenses like administration, management, advertising and brokerage payment etc.