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When you create or edit master funds that use a daily distribution method of Net Investment Income, ensure you review the master fund's Fund Distribution Fields settings. You can use the Create Master Fund panel or the Edit Master Fund/Sector panel to set up master funds for NII distributions.

To set up a master fund for NII distribution processing:

  1. In Accounting Center, in the left navigation pane, click Setup > Portfolio Setup > Mutual Funds > Create Master Fund.
    You see the Create Master Fund panel where you can add a master fund. Otherwise, you can select the Edit Master Fund/Sector option to change a master fund.

  2. In the Daily Distribution Method list, click Net Investment Income. 

  3. Complete the Fund Distribution group of fields on the Create Master Fund panel that affect NII processing.
    A description of these options follows.

  4. Complete the remaining fields in the panel, as appropriate.

  5. Click Submit.

The following are the Fund Distribution Fields options in the Master Fund Setup panel that affect NII distributions. For a complete list of panel options, see Create Master Fund Panel Options.

Create Master Fund Panel Options - Fund Distribution Fields That Affect NII Distributions

Option

Tag

Description

Fund Distribution Fields

Daily Distribution Method

3904

Specifies the method the system uses to calculate the daily income distribution amount. Options include:

  • Fixed Rate. Default. Identifies the daily distribution as a fixed rate distribution. The system distributes a specified percentage of cap stock as income. If you select this option, the Fixed/NII Distribution Shares fields becomes available.

  • Net Investment Income. Identifies the daily distribution as net investment income. The system distributes all of the entity's net income daily. If you select this option, the Fixed/NII Set Rate Distribution Shares, Net Investment Income Rule, Late Activity Distribution Adjustment, Distribution Absorption Method, and Net Investment Income Split Method fields become available. 

  • No Processing. Identifies the daily distribution as needing no processing. 

  • Set Rate. Identifies the daily distribution as a set rate. The system calculates and reports a set distribution rate for each class of a multi class fund based on the base class rate that is established when you set up set rate processing. If you select this option, the Fixed/NII Set Rate Distribution Shares becomes available. Use this field to enter the distribution share type for the set rate.

Fixed/NII/Set Rate Distribution Shares

3906

Specifies the share base of the fixed, net investment income (NII), or set rate distribution. This option is required if you set the Daily Distribution Method field to Fixed Rate, Net Investment Income, or Set Rate. Options include Outstanding Shares and Settled Shares.

Net Investment Income Rule

3909

Specifies a valid net investment income rule. For more information, see Manage NII Distribution Rules.

Late Activity Distribution Adjustment

11959

Flags late activity distribution adjustments. For example, if you set the Daily Distribution Method field to Net Investment Income and you set this field to Yes, you have the option of reversing late activity and reprocessing net investment income to include late distribution activity. For more information, see Understand NII Distribution Adjustments. Options include:

  • Yes

  • No

Distribution Absorption Method

4957

Determines how to allocate an income distribution when it falls under a defined threshold. Options include:

  • Waterfall Waiver. Allocates any distribution amount that falls below a minimum yield threshold using a waterfall waiver method to get that share class's distribution amount up to the target distribution yield. You can use the Minimum Yield field (tag 4992) on the Create Entity Share Class Information panel to specify the minimum yield. You can select this option if you set the Special Waiver Processing field to Waterfall Waiver Daily or Waterfall Waiver FYTD.

  • Expense Reimbursement. Allocates any distribution amount that falls below a minimum yield threshold into an expense reimbursement account to get that share class's distribution amount up to the target distribution yield. You can use the Minimum Yield field (tag 4992) on the Create Entity Share Class Information panel to specify the minimum yield.

  • Class Allocation. Allocates a share class's negative distribution by spreading it across the remaining positive classes based on a weighted share allocation percentage. After the negative distribution is reallocated, the ending result for that negative class is a zero distribution. The threshold for this method is hard coded to zero. 

  • Default - None. No reallocation is made. The system posts the distribution amount as calculated.

Net Investment Income Split Method

5045

Determines the method to use for split dividend processing. Split dividend processing allows you to split mil rates when ex-dates occur on non business dates. This option appears if you set the Daily Distribution Method field to a value of Net Investment Income. You can select a method if you set the Non Business Day Processing field (tag 3907) to a value of Process with Previous Business Day. If you use split dividend processing, you must add a distribution schedule that identifies the ex-dates. Options include:

  • Default - None. Indicates that you do not want split dividend processing to occur for an entity.

  • Mid-Month Split. Splits the mil rates based on user defined split dividend ex-dates, and is used if an entity's split dividend ex-date occurs on any calendar date other than the last calendar date of the month.

  • Pre Ex-Date Split. Allows you to calculate an estimated mil rate for post ex-date on a split dividend ex-date.

  • Post Ex-Date Split. Allows you to calculate a post ex-date mil rate with ex-date shares for a post ex-date.

  • Post Ex-Date Reinvestment Split. Allows you to calculate a post ex-date mil rate with ex-date shares for a post ex-date, and includes reinvestment shares from post ex-date in the post ex-date calculation.

Waterfall Waiver Hierarchy Rule - Fund

16730

Identifies the waterfall waiver NII hierarchy fund rule for waterfall waiver yield to minimum distribution adjustments. This field appears if you set the Daily Distribution Method to Net Investment Income, set Special Waiver Processing to Waterfall Waiver Daily or to Waterfall Waiver FYTD, and set the Distribution Absorption Method field to Waterfall Waiver.

Waterfall Waiver Hierarchy Rule - Class

7038

Identifies the waterfall waiver NII hierarchy class rule for waterfall waiver yield to minimum distribution adjustments. This field appears if you set the Daily Distribution Method to Net Investment Income, set Special Waiver Processing to Waterfall Waiver Daily or to Waterfall Waiver FYTD, and set the Distribution Absorption Method field to Waterfall Waiver.

Expense Reimbursement Tier Rule

5038

Identifies the expense reimbursement tier rule. An expense reimbursement tier rule allows a fund to waive expenses to separate waiver accounts if expenses exceed income in a fund that elects to fully distribute net investment income (NII). If you do not specify an expense reimbursement tier rule, the system reimburses expenses to one default ledger account for fund dividend expense reimbursement if expenses exceed income in a fund that elects to fully distribute net investment income (NII). This option appears if you set the Distribution Absorption Method field to a value of Expense Reimbursement.

Mutual Fund Yield Divisor

5040

Specifies the yield divisor used to calculate a yield for mutual funds that use net investment income (NII) distribution processing. Options include:

  • NAV. Net asset value.

  • POP. Public offer price.