Yes, but that doesn’t matter. When buying a stock you should be paying for future earnings not past earnings and expenses. Therefore, you need to deduct from NAV the NPV of expected net expenses to get a fair value. This means that open end funds are usually overvalued BTW (unless they have positive alpha in which case they are undervalued).

The nav accounts for the mgmnt fee. All income and expenses are accrued daily for funds and are therefore included in the calculation of nav.

Take HIO, for example. According to etfconnect.com, HIO (which is a fixed-income CEF) was trading at a 13% discount to NAV as of 7/3/08. It’s current distribution rate is 10.27%. But it has an expense ratio of 0.88%, which means the underlying bonds’ distribution rate is 11.15%. Therefore, it seems to me that the fund ought to trade at a discount of 0.88/11.15 = 7.9% to NAV, to be equivalent to owning the underlying bonds without paying expenses. So I’d say HIO is a good deal at this price, but it’s more like a 5.1% good deal (13-7.9) rather than a 13% good deal.