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WRITERS NOTE: should we overtly mention that you can use this rule for allocation methods used by mutual funds in Canadian markets?

You can use class allocation adjustment rules to adjust the total net assets (TNA) per share class used in certain class allocation methods.

About Adjusting Class Allocations

You can specify a class Allocation Adjustment Rule for a class Allocation Rule to exclude user-defined ledger account balances from the total net assets used in certain class allocation percentage calculations. The system modifies the class allocation percentage calculation to reduce the total net assets per share class by the ledger balances for the ledger accounts defined in the class Allocation Adjustment rule. It subtracts asset accounts from net assets and it adds liability accounts back to net assets.

You can use class Allocation Adjustment Rules only with an Allocation Rule that specifies a class Allocation Method that uses total net assets such as Relative Net Assets, Prior Night Net Asset, Relative Net Asset At Market Value, Current Day Adjusted Net Asset, and Common Assets.

WRITERS NOTE: The R&D “guide” does not say it works with the new Common Asset allocation method.The requirements document say it uses the Common Asset allocation method. The GUI indicates it works with Common Assets. Please confirm.

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Class Allocation Adjustment Example

In the following example, you create an allocation rule where you set the Class Method to Relative Net Asset and the class allocation adjustment rule excludes class-level expense payable balances. The relative net assets for class A and O are 4,000,000.00 and 2,850,000.00 respectively. The system then subtracts the excluded class-level balances from the relative net asset (RNA) amount in order to receive the correct weight balance for each share class. At this point it calculates the allocation ratios. You can view the ratios either through the View Calculated Rate panel before class allocations are posted or through the List Posted Class Rate & Activity panel after class allocations are posted.

Class

Prior Date TNA

Current Day Net Shareholder Activity

Class Level Balances to Exclude

Total Weight

RNA with Exclusion Allocation Ratio

A

3,500,000.00

500,000.00

(815.45)

3,999,184.5

0.583944269670

O

2,500,000.00

350,000.00

(612.25)

2,849,387.755

0.416055730330

6,000,000.00

850,000.00

6,848,572.30

1.00