Understand Dividend Distributions

Eagle's Mutual Fund Accounting solution supports the following dividend distribution methods:

• Fixed rate

• Periodic

• Net investment income (NII)

• Accumulating

• Set rate

• Preferred shares

You can base the distributions on outstanding or settled shares, and the system also supports breakage and mil rate adjustments. The system calculates and stores dividend rates in the NAV table. For daily distributions, the system calculates, stores, and reports a daily yield, 7 day effective yield, 7 day average yield, 30 day effective yield, and 30 day average yield.

Fixed Rate Distributions

Fixed rate distributions distribute using a constant rate over a definite period of time. You can base the distributions on outstanding or settled shares. The system stores the fixed rates by fund, class, and effective date in the fixed rate distribution tables, and posts the distributions based on the share election and stored rates. You can manually add and maintain fixed rate distributions. 

Periodic Distributions

Periodic distributions allow the fund to make distributions to shareholders on a periodic, or ad hoc, basis. The system stores the periodic capital gain distribution rates by fund, class, and effective date in the periodic distribution tables. You can base the capital gain distributions on settled or outstanding shares. You can trigger the postings using the system's data entry panels or through Automation Center's Schedules. The system does not calculate capital gain rates, but stores them and uses them in capital gain distribution calculations. 

Net Investment Income (NII) Distributions

When you use net investment income (NII) as your fund's daily distribution method, the system automatically distributes income less expenses based on a user defined income and expense general ledger account range. You can base the calculation on shares outstanding or settled shares. The system supports the actual income available method with a user defined income and expense range. This is defined for each fund. Eagle Accounting can split mil rates when ex-dates occur on non business dates.

The income distribution is typically scheduled to run at the appropriate time of the business day. The calculation of the associated mil rates is also automated and typically scheduled to run at the appropriate time of the business day. You can use net asset value (NAV) or public offer price (POP) to calculate yield. The system can handle income smoothing with distribution adjustment transactions or mill rate adjustment transactions. Both are unique transactions with a full audit trail. You can manually add and maintain net investment income. 

Accumulating Distributions

Accumulating distributions are useful for money market funds that act as daily distributing funds, but do not necessarily distribute across all share classes. For example, suppose a fund has six share classes named A through F. Share classes A, C, and E distribute daily. However, share classes B, D, and F do not. This distribution method ensures the appropriate share classes distribute daily and calculate yields. It also ensures the non-distributing share classes calculate yields.

When you use net investment income as a fund's daily distribution method, you can identify the share classes that accumulate net investment income and can post the accumulated income distributions to the ledger and subledger.

Set Rate Distributions

The fixed rate distribution method requires you to add all class rates prior to processing. With set rate distributions, the system can calculate and report a set distribution rate for each class of a multi-class fund based on a base class rate. You can add a defined distribution period and set rate to the base class. The system also calculates a class specific expense differential and applies it to the non-base class rate. You can specify the basis in which the expense differential process is retrieved. If a class's set rate is negative, the system allocates that class's negative income across the other positive classes. On the final day of a distribution period, the system sums the base class daily rates for the period to ensure that they are equal to the total set rate established for the period. If not, an adjustment is made to the final day's rate. A manual override set rate panel allows you to query the final daily rate for each class and manually override the rate if an adjustment is needed.

Set rate funds do not distribute income on the days following the last distribution payment date at the end of a calendar year, but they still accrue expenses. These non-distribution periods can be pre-established by setting up a distribution schedule for non-distribution periods. The expense differentials are proportionately absorbed over the next user defined calendar days. Additionally, you can calculate a pre-post expense absorption to help you determine if that absorption should be spread across multiple days to minimize the impact to the fund.

Preferred Shares Distributions

Closed-end 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 share holder at periodic intervals. Preferred series owners are entitled to payment on their investment in advance of common shareholders. Closed-end funds generate or create a distribution to investors in the closed-end fund. These distributions are called preferred shares distributions.

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