Eagle's mutual fund accounting solution allows you to set up and accrue preferred shares distributions when you track preferred shares ownership for closed-end funds.
Like a mutual fund, a closed-end fund is a publicly-traded investment company that invests in a variety of securities, such as stocks and bonds, and is actively managed by an investment advisor. A closed-end fund raises capital by selling a fixed number of shares at one time through an initial public offering (IPO). Once the initial capital is raised, the fund is “closed” and no longer directly offers shares for sale. Instead, the fund’s shares trade like stock on a secondary market, such as the NYSE or the NASDAQ. Unlike a typical mutual fund, closed-end funds do not generate subscription or redemption shares as a result of investor related activity. Instead, to raise capital or generate cash, the funds issue preferred series of shares to investors that act as a short term loans. These shares pay dividends based on a fixed or variable rate in the form of distributions to the shareholder at periodic intervals. Preferred series owners are entitled to payment on their investment in advance of common shareholders. For general information, see Manage Preferred Shares Processing.
To accrue preferred series distributions, you must set up a distribution rate. You can create, edit, delete, and list preferred shares distribution rates. You can also enter the ex-date, reinvestment date, record date, and pay date to the preferred series distribution rate record.
The system calculates the distribution by multiplying the value of the preferred series by the daily distribution rate. You can use the Post Preferred Distributions panel to manually post preferred shares distributions. In the Automated Event Wrapper, preferred distributions post in a corresponding event in the default Transaction Close event group with a step name of Trigger Preferred Stock Distribution. You can cancel preferred shares distributions manually using the Cancel Preferred Distributions panel. The corresponding event is included in the Transaction Re-Open event group with a step name of Cancel Preferred Stock Distribution. This ensures that the system process preferred shares distributions automatically when closing or re-opening transaction periods.
Distribution transaction adjustments occur when the system processes distributions. A distribution transaction adjustment occurs when you book a preferred stock transaction as a continuous issuance or a buyback, or when the system cancels a buyback or an issuance. Because the booking of preferred shares transactions affects the total value of the preferred shares, the system needs to automatically adjust the distribution amount to account for the change in the total preferred stock value. You can also make a manual adjustment to a preferred shares distribution using the Post Distribution Adjustment panel.
The Preferred Distribution Accrual Query report allows you to track preferred shares distributions.
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