Voluntary Exchange Offer Corporate Action Example

Account DEMOEXCH holds a 1,000,000.00 Position in Convertible Bond XYZ, and wishes to participate fully in a voluntary corporate action. The convertible security has the following attributes.

Long Term Debt Coupon Periods

Coupon	5.000000
Coupon Type Code	Fixed Rate
Day Count Basis	30/360
Payment Frequency	Semiannual
Issue Price	100.00000000
Issue Date	19990115
Dated Date	19990115
First Coupon Date	19990715
Last Coupon Date	20120115
Maturity Date	20120115
Maturity Price	100.00
Convertible Indicator	Yes
Underlying Asset ID	XYZ CORP EQUITY
Index Offset	42.1052

The security has the following values as of the close of business on 2/1/04:

Par = 1,000,000.00
Amortized Cost = 1,633,193.83
Accrual PTD = 2,361.11
On 2/2/04, the holder of the debt partakes in a voluntary corporate action to convert the bond into the underlying common stock shares.

You have three options when setting up the corporate action record. You can:

Allocate the accrued interest to the cost of the underlying security
Reverse the interest earned
Transfer the interest receivable to the resulting debt security and continue to accrue interest. This option can apply to a fixed income to fixed income exchange offer, but cannot apply to a fixed income to equity exchange offer.

The setup of the Exchange Offer corporate action is similar to those above except for the information contained in the Treatment of Interest Indicator field. To Allocate the interest to the cost of the underlying security, select Allocate for this field; otherwise, select Reverse.

The following table shows the resulting record for each available value in the Treatment of Interest Indicator field.

Field	Record if Allocating Interest	Record if Reversing Interest

Field	Record if Allocating Interest	Record if Reversing Interest
Sweep Date	20040202	20040202
Ex Date	20040202	20040202
Record Date	20040202	20040202
Announcement Date	20040202	20040202
Pay Date	20040202	20040202
Treatment of Fractional Shares	Post Fractional Shares	Post Fractional Shares
Treatment of Interest Indicator	Allocate	Reverse
Corporate Action Status	Released	Released
Corporate Action Sub Priority	1	1
Share Taxability	No	No
Mandatory/Voluntary Indicator	Voluntary	Voluntary
Cost/Proceed Flag	Proceed	Proceed
To Asset ID	XYZ CORP EQUITY (EQ) (USD)	XYZ CORP EQUITY (EQ) (USD)
To Issue Currency	USD	USD
To Post Action Price	0.04210520	0.04210520
Rate Of Action	0.042105200000	0.042105200000
Corporate Action Type	EXCHANGE OFFER	EXCHANGE OFFER
Proration Percent	1	1

When selecting a voluntary corporate Exchange Offer, you must enter Proration Percent (tag 8081). This field is used as an addendum in the creation of a corporate action, when certain voluntary corporate actions are oversubscribed. Eagle Accounting uses this field in conjunction with the shares elected (to participate in the voluntary corporate action), to determine the amount of shares/percentage of shares that are applied.

The calculation follows:
# of Shares Subscribed * Proration Percent = # Shares Participating in Voluntary CA

If you select Allocate for the Treatment of Interest Indicator, assume the following applies for this example:

Entity ID	DEMOEXCH
Entity Name	DEMOEXCH
Asset ID Type	INTERNAL
Asset ID	Convertible Bond XYZ
Issue Name	Convertible Bond XYZ
Corporate Action Type	EXCHANGE
CA Election Type
Position Quantity	1,000,000.00
Sweep Date	20040202
Ex Date	20040202
Trade Date	20040202
Pay Date	20040202
Elected Shares	1,000,000.00
Elected Shares Percent
Entity Election Status	Released
Entity Election Notes
Consent Information
Eligible for Consent	No
Elected Shares For Consent
Effective Date On Consent
Rate Of Action (Consent)

If you select Allocate for the Treatment of Interest Indicator:

When the global corporate action is invoked, Eagle Accounting sells off the convertible bond at cost and interest accrued (Cost is 1,633,193.83 and Interest is 2,361.11), thus bringing the convertible bond down to zero par and zero cost.

The common stock is created with 42,105.200000 Shares vs. a Cost of 1,635,554.94 (Amortized Cost + Interest).

The Trade Date of both transactions is the Ex-Date of the corporate action, and
The Settlement Date is the Pay Date of the corporate action.

If you select Reverse for the Treatment of Interest Indicator, Eagle Accounting:

Sells off the convertible bond at cost and interest accrued (Cost is 1,633,193.83 and Interest is 2,361.11), thus bringing the convertible bond down to zero par and zero cost.

The common stock is created with 42,105.200000 Shares vs. a Cost of 1,633,193.83 (Amortized Cost).

The Trade Date of both transactions is Ex-Date of the corporate action, and

The Settlement Date is the Pay Date of the corporate action.