4.2 Rights of Accumulation

This topic provides information on rights of accumulation section of setting up load groups stage.

The AMC may give investors benefits based on the history of their investment in the funds of the AMC. This benefit would typically be a fee benefit, such as reduced transaction charges or reduced commissions, and is offered based on the history of investments.

This benefit facility given to the investor is known as the Rights of Accumulation facility.

Investors are given the option of availing of the Rights of Accumulation, at their discretion. Thus, when an investor transacts in a fund of the AMC, the history of the investor’s transactions in the fund is considered when the fee is applied for the transaction, if the investor has chosen to avail of the Rights of Accumulation facility.

The AMC reserves the discretion to interpret the history of investment of each investor on the basis of which, the Rights of Accumulation benefit would be available. Also, the AMC reserves the discretion to identify a single fund or a group of funds for which it would offer the Rights of Accumulation facility to investors, as well as the method of interpretation of investments, to be applicable for each group. The AMC can also specify whether the holdings across all the investors under a CIF account are to be considered for ROA.

Any individual fund for which the AMC designates Rights of Accumulation as applicable are called ROA funds, and any group of such funds is called an ROA group. An investor that opts to avail of the Rights of Accumulation is called an ROA investor. Also, the investor can override the AMC option of availing ROA at a CIF account level

Interpreting the History of Investments

The interpretation of the past investments of an investor in the case of Rights of Accumulation, for any ROA group of funds, would be based on any of the following aspects, at the AMC’ choice:

• Option (1): The total amount invested by the investor in all the funds in an ROA group of the AMC as on the transaction date
• Option (2): The product of the current holdings in all funds of the ROA group and the prevalent NAV for each fund in the ROA group on the transaction date.
• Option (3): The product of the current holdings in all funds of the ROA group and the prevalent subscription price for each fund in the ROA group on the transaction date.
• Option (4): Option (1) or (2), depending upon which of the two values is higher
• Option (5): Option (1) or (3), depending upon which of the two values is higher
• Option (6): The total value of the transactions entered into on the current business day in all individual funds, as well as funds forming part of a load group or a plan or policy portfolio. This option is known as the current day transactions value.

Depending upon the option chosen by the AMC for each ROA group of funds, any new transaction for the investor in the ROA group would take into consideration the value of the past investments, when the slab for loading is considered.

The following example will make this clearer:

For instance, let us suppose that an ROA investor, Mr. Colin White, would like to invest 10000 currency units in the Carey Bugle Growth Fund, which is part of an ROA group of funds known as LGROA, on 02-01-2003.

Before 02-01-2003, he has invested in the LGROA group of funds of which the Carey Bugle fund is a constituent, as follows:

Table 4-1 Fund of ROA Group (LGROA)

Fund of ROA Group (LGROA)	Fund of ROA Group (LGROA)	Total Amount Invested in ROA Group (TA1)
Carey Bugle Growth Fund (CBGF)	10000	100000
Farley Income Fund (FIF)	5000	50000
-	15000 (sum)	150000 (sum)

The worth of the holdings in the LGROA group in terms of NAV prevalent on 02-01-2003:

Table 4-2 LGROA Group in terms of NAV Prevalent on 02-01-2003

Fund	Present holdings (units)	NAV on 02- 01-2003	Total worth of holdings (TA2)
CBGF	10000	12	120000
FIF	5000	12	60000
-	15000 (sum)	-	180000(sum)

The worth of the holdings in the LGROA group in terms of subscription prices on 02-01-2003:

Table 4-3 LGROA Group in terms of Subscription Prices on 02-01-2003

Fund	Present holdings (units)	Subscription price on 02-01-2003	Total worth of holdings (TA3)
CBGF	10000	11	110000
FIF	5000	12	60000
-	15000 (sum)	-	170000(sum)

The AMC has chosen Option (4) as the basis for applicability of Rights of Accumulation for the LGROA group. Since the value TA2 is higher than TA1, the value taken for identifying the loading slab for any new transactions for Mr. White in the LGROA group is taken to be TA2.

The load slabs defined for the LGROA group, of which the two funds are a part, are as follows:

Table 4-4 Slab for Any New Transactions

Slab	From Amount	To Amount	Return Value (%)
001	0	10000	5
002	10000	20000	4
003	20000	40000	3
004	40000	80000	2
005	80000	1600	1
006	160000	320000	0.25

Now for Mr. White’s subscription transaction of 10000 currency units on 02-01-2003, the amount considered for identifying the slab, according to the ROA option chosen by the AMC for the LGROA group = Transaction Amount + TA2 = 10000 + 180000 = 190000 currency units.

This would fall in slab 006 for the fund and so, the applicable return value percentage would be 0.25%.