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6.0 Using PFROI
You should now be familiar with the mechanics of
operating PFROI. This section is intended to give
you the information needed to get useful results.
6.1 Return on Investment
Return on investment (ROI) is one of the most common
measures of investment performance. It is computed
by PFROI using the internal rate of return method.
If not familiar with using or computing ROI, it is
easiest to think of it as the effective annual
interest rate on an investment. The effective annual
interest rate you receive on a savings account or
money market fund is in fact the ROI on that
account or fund.
PFROI computes the return on investment on a port-
folio by determining the annual interest rate which
would generate an identical ending value in a savings
account with the same history of deposit and with-
drawal of funds as the portfolio. The ROI on an
individual security is computed in a similar fashion
except that in lieu of deposits and withdrawals,
security transactions are reduced to "cash flows" and
the resulting cash flows (plus start valuation and
ending valuation) are used to compute the ROI.
In reviewing ROI results you should be aware that
over short periods (e.g. a day, week, or month),
seemingly small price movements (e.g. $2 on a $20
stock) can result in a large absolute ROI values when
annualized. The lowest possible ROI is -100% (loss
of all your investment). You should also note that a
meaningful ROI cannot be computed for individual
securities involved in short sale transactions, and
may result in a "Convergence failure" message. This
is because short transactions have open-ended
investment risk. Short transactions generally
however will not impede portfolio ROI computations.
6.2 Defining the Portfolio
Before starting a portfolio file, you should define
the portfolio to yourself. This will help to prevent
errors in determining the correct entries to make to
the portfolio file. The transactions most
susceptible to error in this regard are "deposit" and
"withdraw" transactions.
2-23
_
6.2 Defining the Portfolio (cont'd.)
To define the portfolio, first consider it as a
separate financial entity from yourself. Now define
which of your assets are to be included in the
portfolio. It may include a single brokerage account
or may include several types of accounts. Some
possibilities include:
a) Securities (stocks, bonds, T-bills, etc) and
funds held in an account with a broker.
b) Securities held in a safe deposit box.
c) A money market account.
d) A mutual fund account/holdings.
e) A stock subscription account (e.g., a dividend
reinvestment plan).
f) A savings account or C.D.
g) Partnership interests or real estate holdings.
6.3 Deposit/Withdrawal Rules
Once the portfolio is defined, you can determine what
transactions involve "deposit" or "withdrawal" of
funds to or from the portfolio. The basic rules to
follow are:
a) Enter a "deposit" transaction whenever the
portfolio owner (you) adds funds to a portfolio
account.
b) Enter a "withdraw" transaction whenever the
portfolio owner (you) removes funds from a
portfolio account.
Note that if funds are transferred from one account
within the portfolio to another account within the
portfolio, it is good practice to enter a "withdraw"
transaction from the first account and a "deposit"
transaction to the second account. This may seem
unnecessary because the value of the overall
portfolio remains unchanged. However it ensures
accurate recording of any time lag that might occur
between the withdrawal and deposit transaction. It
also facilitates any later reconciliation with
account statements.
2-24
_
6.3 Deposit/Withdrawal Rules (cont'd.)
As an example, assume that the portfolio is defined
to consist of a brokerage account, securities in a
safe deposit box, and a money market account
(separate from the brokerage account). Some possible
"deposit" and "withdraw" transactions with this
portfolio are as follows:
a) You send a $2000 personal check to your broker
to credit to your account. This is a "deposit"
transaction because new funds are being added
to the portfolio.
Note: This is a "deposit" transaction even if the
$2000 is to pay for 100 shares of "XYZ " you just
bought. In this case you must also enter a "buy"
transaction. The "buy" transaction will debit
the portfolio for the $2000 and credit it for the
100 shares. The net effect is that the $2000
credit of the "deposit" offsets the $2000 debit
of the "buy" leaving the portfolio with a net
gain of 100 shares.
b) Your broker sends you $3000 from your account.
This is a "withdraw" transaction because funds
are being withdrawn from the portfolio.
Note: This is a "withdraw" transaction even if
the $3000 are proceeds from the sale of 100
shares of "XYZ". In this case you must also
enter a "sell" transaction. The "sell" trans-
action credits the portfolio for the $3000
received from the sale, and debits the portfolio
for the shares sold. The net effect is that the
$3000 debit of the "withdraw" transaction offsets
the $3000 credit of the "sell" transaction. The
cash balance is unchanged, but the portfolio now
has 100 fewer shares of "XYZ".
c) You send a check for $7000 from your money market
fund to your broker to credit your brokerage
account. This is a "withdraw" transaction from
the money market fund (enter fund name in
security field) and a "deposit" transaction to
the brokerage account (enter broker name in
security field).
2-25
_
6.3 Deposit/Withdrawal Rules (cont'd.)
d) You receive a $60 quarterly dividend check from
AT&T for the 200 shares you hold in your safe
deposit box. You deposit the check in your
checking account (not part of your portfolio!).
Ordinarily two transaction entries would be
needed:
1) A "dividend earned" (DV+) transaction to
indicate that the dividend was received.
2) A "withdraw" (WDF) transaction to indicate
that the funds were removed from the
portfolio.
However, since this situation occurs frequently,
a transaction code, "DV$" is provided which
combines both of these transactions. A similar
code, "IN$", is also provided for interest
payments (e.g. on bonds) which are not retained
in your portfolio. Note, however, that if the
stock in this example was in your brokerage
account and the dividend was received and
retained in your brokerage account, only a "DV+"
transaction would be required.
6.4 Starting the Portfolio
To start the portfolio file, gather records of
portfolio transactions you've made to date. Old tax
schedules B and D are good sources for these if your
cannot find all of your old broker statements or
transaction slips.
Use "Load Portfolio" on PFROI's main menu to create
the new portfolio, then select "Transactions" to
input your transaction records.
The first transaction entered generally should be a
"deposit" or "receive" transaction to initialize the
portfolio at a positive value. Enter subsequent
transactions until the portfolio is up to date.
Refer to section 6.5.2 if uncertain about the proper
transaction code to use, or to section 6.8 if you
have a special situation such as inherited stock.
2-26
_
6.4 Starting the Portfolio (cont'd.)
When done entering transactions, use the "Sort"
command (Alt+S) to sort the transactions in case some
were entered out of date order.
It is possible to simplify the startup process if you
are willing to dispense with portfolio history. To
do this, however, you must still establish your
current portfolio position and the purchase dates and
costs associated with securities currently held. The
process is as follows:
1) Determine the "buy" date and purchase cost of all
securities currently in the portfolio. (This is
not redundant effort, you will need this
information for the IRS when you sell). Enter
the data using the "RCV" (Receive) transaction.
2) Enter your portfolio's latest reported cash
position as a "deposit" transaction using the
date on which the cash position was reported as
the transaction date.
On completion of initial portfolio data entry, go to
the "Valuation" screen and do an "add valuation".
Check the results versus your latest broker state-
ments or other records. If you find a valuation
discrepancy, check to see that prices in the
valuation are the same as on the broker statement
being used for comparison. If there is a discrepancy
in share position, a share transaction such as a buy,
sell or split was probably inadvertently omitted.
6.5 Transactions
6.5.1 Update Frequency
The normal frequency for PFROI portfolio updates is
monthly, when you receive your broker statement. The
typical investor should not require much more than
five to fifteen transactions per month, involving no
more than ten to fifteen minutes per month. More
time will be required if you have several brokers,
multiple portfolios or are a heavy trader.
2-27
_
6.5.2 Transaction Codes (TAC)
Valid transaction codes and their use are as follows:
DPF DePosit Funds - Use whenever portfolio owner adds
funds to a portfolio account.
Example: You send a $3500 check to your broker
to credit to your account:
Mo/Dy/Yr TAC Symbol L# Description Quantity Amount Est. Tax
== == == === ====== == =============== =========== ============ ========
7/ 8/84 DPF Chk #345 3500.00
WDF WithDraw Funds - Use whenever portfolio owner
removes funds from a portfolio account.
Example: You have your broker send you a check
for $5000 for a down payment on a new auto:
Mo/Dy/Yr TAC Symbol L# Description Quantity Amount Est. Tax
== == == === ====== == =============== =========== ============ ========
12/ 7/83 WDF brkr acct -5000.00
IN+ INterest earned - Use whenever interest is
credited to and retained in a portfolio account.
Example: Your broker credits $33.18 interest to
your account for the cash balance in your
account, and you receive a $77.25 interest
payment on an AT&T bond held in your account.
Mo/Dy/Yr TAC Symbol L# Description Quantity Amount Est. Tax
== == == === ====== == =============== =========== ============ ========
8/19/82 IN+ ML MLynch 33.18
9/ 2/82 IN+ ATT AT&T 3/90 77.25
IN- INterest charged - Use whenever a portfolio
account is debited for interest.
Example: Your broker charges your margin account
for $29.48 interest on margin borrowing:
Mo/Dy/Yr TAC Symbol L# Description Quantity Amount Est. Tax
== == == === ====== == =============== =========== ============ ========
3/31/79 IN- ML MLynch -29.48
2-28
_
6.5.2 Transaction Codes (TAC) (cont'd)
IN$ INterest ca$hed - Interest earned, but cashed
rather than retained in portfolio.
Example: You receive a semi-annual interest
payment on a T-bill in your portfolio and deposit
it in your checking account, which is not part of
your portfolio.
Mo/Dy/Yr TAC Symbol L# Description Quantity Amount Est. Tax
== == == === ====== == =============== =========== ============ ========
3/31/90 IN$ TB-1 T-Bill #1 300.00
BUY BUY security - Use whenever a security (stock,
bond, T-bill, option, etc) is purchased into the
portfolio.
Example: 100 shares of IBM is purchased at $120.
The broker charge plus local transaction taxes is
$180.25. This is your first purchase of IBM:
Mo/Dy/Yr TAC Symbol L# Description Quantity Amount Est. Tax
== == == === ====== == =============== =========== ============ ========
9/14/84 BUY IBM 1 IBM 100 -12180.25
BYD BuY & Deposit - Combines "BUY" and "DPF"
transactions.
SLL SelL security held Long - Use whenever a security
is sold from the portfolio.
Example: The 100 shares of IBM in the previous
example are sold at 137. The broker charge plus
local transaction taxes are $210.35:
Mo/Dy/Yr TAC Symbol L# Description Quantity Amount Est. Tax
== == == === ====== == =============== =========== ============ ========
1/29/85 SLL IBM 1 IBM -100 13489.65
SLW SelL and Withdraw - Combines SLL & WDF
transactions.
DV+ cash DiVidend earned - Use whenever the port-
folio is credited with a dividend.
Example: A quarterly dividend of $58.50 on 225
shares of RCA in the portfolio is received:
Mo/Dy/Yr TAC Symbol L# Description Quantity Amount Est. Tax
== == == === ====== == =============== =========== ============ ========
1/ 1/83 DV+ RCA RCA 58.50
2-29
_
6.5.2 Transaction Codes (TAC) (cont'd)
DV- cash DiVidend charged - Use whenever the port-
folio is debited for a dividend on a stock held
short.
Example: The portfolio is charged for the $40
quarterly dividend on 100 shares of ABC held
short:
Mo/Dy/Yr TAC Symbol L# Description Quantity Amount Est. Tax
== == == === ====== == =============== =========== ============ ========
10/15/84 DV- ABC ABC -40.00
DV$ DiVidend ca$hed - Dividend earned, but cashed
rather than retained in portfolio.
Example: You receive a dividend payment on AT&T
stock you hold in your deposit box. You deposit
the payment in a bank account which is not part
of your portfolio.
Mo/Dy/Yr TAC Symbol L# Description Quantity Amount Est. Tax
== == == === ====== == =============== =========== ============ ========
3/15/82 DV$ ATT AT&T div 73.25
SP+ SPlit Long - Use whenever stock held long in the
portfolio splits or has a stock dividend.
Fractional shares may be entered up to 4 decimal
places. If given cash in lieu of a fractional
share, the cash amount should be entered as a
dividend transaction, with a manual "est. tax"
entry of zero, if you determine the payment is
tax free under current law.
Example: The portfolio receives 112 shares plus
cash in lieu of .5 shares from RCA as a result of
a 3 for 2 stock split on your holding of 200
shares:
Mo/Dy/Yr TAC Symbol L# Description Quantity Amount Est. Tax
== == == === ====== == =============== =========== ============ ========
8/15/85 SP+ RCA RCA 112
8/15/85 DV+ RCA RCA 15.25 0m
2-30
_
6.5.2 Transaction Codes (TAC) (cont'd)
SP- SPlit short - Use whenever stock held short in
the portfolio splits or has a stock dividend.
Example: Your broker debits your portfolio 100
shares of ABC as a result of a 100% stock
dividend declared while the portfolio holds a 100
share short position:
Mo/Dy/Yr TAC Symbol L# Description Quantity Amount Est. Tax
== == == === ====== == =============== =========== ============ ========
6/15/78 SP- ABC AmBroad -100
SLS SelL Short - Use whenever security sold short.
Example: 100 shares of ABC is sold short at
$75/share. The broker charge plus transaction
taxes is $125.50. This is the third short sale
transaction in ABC:
Mo/Dy/Yr TAC Symbol L# Description Quantity Amount Est. Tax
== == == === ====== == =============== =========== ============ ========
1/27/85 SLS ABC 3 AmBroad -100 7374.50
BYC BuY to Cover - Use whenever a security is pur-
chased to cover a short position.
Example: The short sale in the above example is
covered at 61 with a broker charge of $134.00.
Mo/Dy/Yr TAC Symbol L# Description Quantity Amount Est. Tax
== == == === ====== == =============== =========== ============ ========
2/25/85 BYC ABC 3 AmBroad 100 -6134.00
CGD Capital Gains Distribution - Use when a long
term capital gains distribution is received,
such as from a mutual fund. Capital gains
distributions are taxed at capital gains rates.
Example: You receive $640 year-end capital gains
distribution from your mutual fund.
Mo/Dy/Yr TAC Symbol L# Description Quantity Amount Est. Tax
== == == === ====== == =============== =========== ============ ========
12/31/85 CGD MFUND Mut. Fund 640.00
SGD Short term Capital gains Distribution - Use
for short term capital gains distributions.
2-31
_
6.5.2 Transaction Codes (TAC) (cont'd)
DRI Dividend ReInvestment - Use for dividend rein-
vestment. This combines both a "DV+" and "BUY"
transaction and thus requires lot number,
quantity and amount inputs. For a long position
the amount value is positive.
Example: Your mutual fund reinvests quarterly
dividends of $345.34 for 31.45 shares:
Mo/Dy/Yr TAC Symbol L# Description Quantity Amount Est. Tax
== == == === ====== == =============== =========== ============ ========
4/02/85 DRI MFUND 15 Mut. Fund 31.45 345.34
Note that eventually each "DRI" transaction must
be closed with a corresponding "SLL" transaction.
See section 6.5.4 for examples of use of lot
numbers with "DRI" type transactions.
IRI Interest ReInvestment - Use for interest rein-
vestment. Like the DRI transaction this requires
lot number, quantity and amount inputs. Lots
must also be eventually closed.
Example: A tax exempt bond fund reinvests
interests payments:
Mo/Dy/Yr TAC Symbol L# Description Quantity Amount Est. Tax
== == == === ====== == =============== =========== ============ ========
5/22/85 IRI BF 2 Bond Fund 11.135 1285.25 0m
CGR Capital Gains Reinvestment - Similar to the "DRI"
transaction except gets capital gains distri-
bution tax treatment.
Example: Your mutual fund reinvests capital gains:
Mo/Dy/Yr TAC Symbol L# Description Quantity Amount Est. Tax
== == == === ====== == =============== =========== ============ ========
12/31/85 CGR MFUND 19 Mut. Fund 869.3841 9867.51
SGR Short term Gains Reinvestment - Use for short
term gains reinvestment.
2-32
_
6.5.2 Transaction Codes (TAC) (cont'd)
ROC Return Of Capital - Use for return of capital.
Cost bases are automatically readjusted in
capital gains and position reports for this
transaction.
Example: A utility in which you own shares pays a
dividend of $100 of which they advise you 45% is
return of capital:
Mo/Dy/Yr TAC Symbol L# Description Quantity Amount Est. Tax
== == == === ====== == =============== =========== ============ ========
6/15/85 ROC UTIL Util. ROC 45.00 0m
6/15/85 DV+ UTIL Util. Div. 55.00
FEE Management FEE - Use for charge to portfolio for
managment fee or other maintenance expense.
Example: You manage several portfolios for which
you charge a monthly fee of $100:
Mo/Dy/Yr TAC Symbol L# Description Quantity Amount Est. Tax
== == == === ====== == =============== =========== ============ ========
3/31/84 FEE monthly fee -100.00
RCV ReCeiVe shares - Use to indicate shares received
at no cost, such as in an inheritance. Both
quantity and amount entries are made, with the
amount entry the value at the time received.
Mo/Dy/Yr TAC Symbol L# Description Quantity Amount Est. Tax
== == == === ====== == =============== =========== ============ ========
6/ 1/85 RCV USBC 1 US Bancorp 300 7500.00
The acquisition date and cost basis of the stock
may be specified in the description field using
the format "&&5/25/84 $5400.25". If not so
specified, the acquistion date and cost basis are
assumed to be the transaction date and amount
entries. SLL transactions may be matched with
RCV transaction occuring up to one month later to
account for delivery of shares to a broker after
sale.
2-33
_
6.5.2 Transaction Codes (TAC) (cont'd)
DLV DeLiVer shares - Use to indicate shares delivered
out of the portfolio. Both quantity and amount
entries are made, with the amount entry the value
on delivery date. If a a tax-free gift, a manual
tax entry of zero is made.
Mo/Dy/Yr TAC Symbol L# Description Quantity Amount Est. Tax
== == == === ====== == =============== =========== ============ ========
12/ 1/85 DLV ATT 4 Char. Gift -300 -6125.00 0m
PIN Phantom INterest - Use for imputed interest
earned on zero coupon ("original issue discount")
bonds. This entry is required to get correct tax
reporting, but does not affect valuations. PFROI
automatically adds phantom interest on the bond
to its cost basis in order to generate correct
capital gains. See section 6.8.8 for example of
PIN code usage. PFROI V3.2+ and CAPTOOL provide
automatic computation of PIN interest and support
amortization and accretion transactions.
DPR DePReciation - Use for depreciation on an asset.
DPR transactions do not affect portfolio value,
cash balances or before-tax ROI, but a negative
amount decreases an asset's cost basis and
positively affects after-tax ROI. A positive DPR
transaction increases an asset's cost basis and
may be used to reflect capital improvements. See
section 6.8.11 for example of DPR usage.
BRW BoRroW - Use for transactions involving borrowing
of funds, such as for a mortgage. The BRW and
repay (see RPY below) transactions are similar to
SLS and BYC transactions. See section 6.8.11 for
example of BRW usage.
RPY RePaY - Use to close out a BRW transaction. In
the case of a mortgage, RPY is used whenever
principal is paid off. A RPY transaction
requires a lot number which matches the
associated BRW transaction. See section 6.8.11
for example of RPY usage.
RNT ReNT - Use to indicate rent receipts from an
asset. It functions similar to a DV+ or IN+
transaction. See section 6.8.11 for example of
RNT usage. Appears on Misc. Inc. report.
2-34
_
6.5.2 Transaction Codes (TAC) (cont'd)
EXP EXPense - Use to indicate expenses associated
with an asset. See section 6.8.11 for example of
EXP usage.
DST DiSTribution - Use for cash distributions from
partnerships. Appears with rent on Misc. income
report.
TAX TAX adjustment - Use whenever a tax adjustment at
year-end is needed to force total taxes in the
"Est Tax" field for the year to equal Schedule
D taxes on portfolio capital gains. Entries in
the "Est Tax" field only affect the "After Tax
ROI" and do not affect portfolio valuation or the
"Income Summaries".
SCO Short term loss CarryOver - Use whenever tax
schedule D indicates a short term loss carryover.
LCO Long term loss CarryOver - Use whenever tax
schedule D indicates a long term loss carryover.
TAX, SCO, and LCO records are automatically inserted
by "AutoTax" so normally there should be no need for
manual entries. However, if a manual entry is
needed, the date 1/2/Yr must be used since 1/1/Yr is
reserved for autotax generated carryovers. Note that
the loss carryover amount is placed in the "Quantity"
field of the transaction record. Note also that you
may disable automatically generated "TAX" transac-
tions in PFROI's "Configure" module. This may be
desired to prevent the year-end adjustment from
"distorting" after-tax ROI on performance reports.
(CAPTOOL & PFROI V3.+ permit non-calendar fiscal
years for automatic insertion of TAX, LCO, and SCO
transactions.
6.5.3 Security Symbol (Symbol)
PFROI uses the security symbol in the transaction
record to uniquely identify a security. In general,
the trading symbol of a security should be used in
this field. If you are using CAPTOOL's communica-
tions to download prices, symbols used must be
compatible with those used by your pricing service.
2-35
_
6.5.4 Tax Lot Number (L#)
PFROI uses the tax lot number, along with the stock
symbol, to match buy and sell transactions and short
sale and cover transactions in order to compute
capital gains. Depending on tax lot assignments,
cost bases are computed on a "first-in, first-out"
(FIFO), average cost, or lot specific basis.
FIFO Cost Basis - Cost bases are computed on a FIFO
basis if the same tax lot number is reused for
multiple BUY, SLS, DRI, IRI or CGR transactions. The
I.R.S. generally requires this approach when you
didn't specify acquisition dates to your broker when
you sell a security. This situation typically may
occur when you've reinvested dividends and thus have
many acquistion dates. For example:
Mo/Dy/Yr TAC Symbol L# Description Quantity Amount Est. Tax
== == == === ====== == =============== =========== ============ ========
2/ 4/81 BUY XYZ 1 XYZ 2000 -110000.00
4/02/81 DRI XYZ 1 XYZ dri 25.503 1279.25
7/02/81 DRI XYZ 1 XYZ dri 27.824 1301.20
10/02/81 DRI XYZ 1 XYZ dri 30.120 1912.34
1/02/82 DRI XYZ 1 XYZ dri 33.225 2000.30
4/02/82 DRI XYZ 1 XYZ dri 27.780 1722.36
6/01/83 SLL XYZ 1 XYZ -2100 126400.00
The cost basis of the sale in this example will be
the cost of the original 2000 shares plus the cost of
the first 100 shares purchased through dividend
reinvestment ($115489.36).
Average Cost Basis - An average cost basis may be by
omitting use of tax lot numbers altogther. This
results in a "running average" cost such as required
by Canandian tax law. For example:
Mo/Dy/Yr TAC Symbol L# Description Quantity Amount Est. Tax
== == == === ====== == =============== =========== ============ ========
2/ 4/81 BUY XYZ XYZ 2000 -110000.00
4/02/81 DRI XYZ XYZ dri 25.503 1279.25
7/02/81 DRI XYZ XYZ dri 27.824 1301.20
10/02/81 DRI XYZ XYZ dri 30.120 1912.34
1/02/82 DRI XYZ XYZ dri 33.225 2000.30
4/02/82 DRI XYZ XYZ dri 27.780 1722.36
6/01/83 SLL XYZ XYZ -2100 126400.00
The cost basis of the sale in this case will be the
average cost of all shares acquired ($115764.97),
resulting in a more favorable tax result. (Note:
the IRS states this method is not allowed in U.S.)
2-36
_
6.5.4 Tax Lot Number (L#) (cont'd)
Lot-Specific Cost Basis - Lot-specific cost bases may
be generated by assigning a new lot number to each
acquisition transaction as follows:
Mo/Dy/Yr TAC Symbol L# Description Quantity Amount Est. Tax
== == == === ====== == =============== =========== ============ ========
2/ 4/81 BUY XYZ 1 XYZ 2000 -110000.00
4/02/81 DRI XYZ 2 XYZ dri 25.503 1279.25
7/02/81 DRI XYZ 3 XYZ dri 27.824 1301.20
10/02/81 DRI XYZ 4 XYZ dri 30.120 1912.34
1/02/82 DRI XYZ 5 XYZ dri 33.225 2000.30
4/02/82 DRI XYZ 6 XYZ dri 27.780 1722.36
6/01/83 SLL XYZ 1 XYZ -2000 120380.95
6/01/83 SLL XYZ 2 XYZ -8.875 534.19
6/01/83 SLL XYZ 4 XYZ -30.120 1812.94
6/01/83 SLL XYZ 5 XYZ -33.225 1999.82
6/01/83 SLL XYZ 6 XYZ -27.780 1672.09
The cost basis in this case is $116080.18, providing
the most favorable tax result for the example. Note
however that use of lot-specific cost bases requires
documentation of acquisition dates on your broker
trade notices for the I.R.S.. Tax lots which have
been closed-out may be re-used.
Disabling Cost Basis - Inclusion of "=C-" in the
description field of transactions disables cost
cumulation such as may be desirable in IRA and other
tax-deductible/tax free portfolios.
6.5.5 Transaction Charges
Commission charges and transaction taxes should be
included in the "Amount" entry for "Buy", "Sell",
"Buy to Cover", and "Sell Short" transactions.
6.5.6 Manual Tax Input
Most PFROI users will not need to manually input
estimated taxes for transactions. Occasionally,
however, there are special situations due to the
complexity of our tax laws which require manual tax
input. One of these, for example, involves a tax
exemption on dividend reinvestment in public
utilities (now expired). You may have other special
tax situations where a manual tax input is required
to produce the correct estimated tax. Note that a
manual tax entry of "zero" may be entered to
designate a transaction as tax free. These "tax
free" transactions will not be reported on the
dividend, interest, or capital gains reports.
2-37
_
6.6 Tax Rates
Before you start using PFROI's "AutoTax" feature, you
should update PFROI's initial default tax rate
records (Alt+R from transaction screen) to reflect
your own marginal tax rates. Since your personal tax
rate may vary from year to year, you should insert a
tax rate record for each year in which your portfolio
is active. The date of this record should be January
1st. The reason for this is that whenever AutoTax is
invoked, PFROI searches for the first tax rate record
chronologically prior to the transaction. Setting
the record date to 1/1 thus ensures that the record
applies for the whole year. An exception to this
rule is whenever there is a mid-year tax law change,
as occurred in 1984.
6.7 Valuations
PFROI stores a total of 64 valuations. It is
recommended that valuations be kept on a yearly basis
except for the current year, for which you may wish
to keep more frequent valuations. Use the "Delete"
valuation command to delete old valuations.
Valuations are normally computed from the valuation
indicated by the "Base Date" displayed in the display
header. The base date accordingly must preceed any
new valuation added using the "Add" valuation command
(Alt+A). The base date may be changed by using the
Alt+B command. The default base date may be selected
from the "Configure" menu as either the last valua-
tion date or the day before the first transaction
date.
******************** Important ********************
Whenever a transaction is modified or a new
transaction inserted, all subsequent valuations must
be regenerated using the "Add" command to incorporate
the change. This is a good reason to be careful to
not overlook transactions or make entry errors when
inputting original transaction data. Fortunately,
when valuations must be regenerated, market prices in
the original valuation are retained and thus do not
need to be re-keyed.
2-38
_
6.8 Special Situations (included with licensed disk)
6.8.1 IRA's and Keogh Accounts
6.8.2 Mutual Funds
6.8.3 Stock Options (Puts and Calls)
6.8.4 Employee Stock Options
6.8.5 Gifts/Inheritance
6.8.6 Wash and Short Sale Tax Rules
6.8.7 Exchanges of Securities (Mergers/Divestitures)
6.8.8 Money Market Funds
6.8.9 Zero Coupon Bonds
6.8.10 Premium Amortization
6.8.11 Split Shares Received After Sale
6.8.12 Depreciable Assets
6.8.13 Margin Accounting
6.8.14 GNMA's
2-39
_
7.0 Update Order Information
New users may obtain licensed PFROI (V3.3+), or other
Techserve, inc. software (described below) using
order form contained in shareware program. Add $2 for
3 1/2" disk. Prices subject to change.
PFPRO - Professional/Institutional Client
& Portfolio mgmt
STOCKPAR - Risk-adjusted DCF Stock valuation
(a.k.a. STOCKPRO)
BONDPRO - Bond swap evaluation.
CAPTOOL - Integrated PFROI(V3.x)/STOCKPAR/
BONDPRO plus communications including
Dow Jones, Compuserve, Genie updates,
batch operations, multiple portfolio
ROI, client mgmt. and other features.
Send payment with name and address to:
Techserve, inc., POBox 70056, Bellevue, WA 98007, USA
or call (206) 747 5598. (Chk, VISA or MC accepted).
(Checks must be drawn on US/Canadian bank in $US)
Licensed (registered) users may obtain PFROI (or
CAPTOOL, if applicable) update disks for $5 in first
year following registration and for $14 thereafter
($10 for PFROI). Add $2 for order by phone or from
outside N. America. Notice of updates and update
software which may be unlocked by registrant's
keycode may also be available on Compuserve's
Investors Forum or other electronic media. Inquire
also about foreign language versions (French version
now available) and dealer terms.
8.0 Purchase Terms and Limited Warranty
Purchase of diskettes containing software described
above licenses purchaser to use software and make
multiple backup copies provided only one copy is used
at any one time. "Shareware" or "demo" versions may
be copied and transferred provided they are unaltered
and provided any charges to recipient are limited to
cost of media and handling.
Software contained on diskettes purchased is provided
"as is". Purchasers should ascertain to their own
satisfaction that software produces acceptable results
and performs to expectations. If not satisfied, return
diskettes and manuals (if included) in original
condition to dealer, or to Techserve, Inc., if purchased
direct, within guarantee period for refund of purchase
price. Refund excludes shipping and handling charges,
is subject to a 10% restocking charge and voids user
license. This warranty is in lieu of all others,
express or implied.
Refund does not apply to shareware or demo versions.
2-40
_
Appendix
A-1 Record Structure
PFROI version 2.20 and higher use the following record
structure (70 bytes):
Field # bytes Description
------ ------- -------------------------
RecType 1 Record Type (0=Tax;1=TA;2=Pos/Prc;3=Val)
Month 1 Month
Day 1 Day
Year 2 I Year
TAC 1 Transaction code index
Symbol 7 S Security symbol (6 char string)
Remainder of record depends on type:
RecType=0 RecType=1 RecType=2 RecType=3
--------- --------- --------- ---------
Tax Type 1 Lot 2 I Cost Base 6 R Val Cost 6 R
Flags 1 Quantity 6 R Position 6 R Valuation 6 R
HldReqt 6 R Amount 6 R Price 6 R Fill 6
CGrate 6 R Tax 6 R Flags 2 I Cash 6 R
LossLim 6 R Decimal 1 IC code 1 Fill 6
TaxRate 6 R Flags 2 Sec Type 1 Fill 6
Filler 31 S Descrip. 34 S Descrip. 23 S Fill 6
Beta 6 R Flags 2
Valuation 6 R Fill 13
I=Integer, R=Real, S=String (Turbo Pascal formats)
******************* IMPORTANT! ********************
The maximum number of records (of all types) which
can be contained in one portfolio is dependent upon
your PC's installed memory. About 2000 records can
be handled with 256K-bytes RAM, and about 5000
records with 640K-bytes RAM. Old records may be
archived using the "Archive" command (Alt+A) from the
transaction screen (CAPTOOL and PFROI V3.x).
A-2 Merging Portfolio Files
Some users may find it convenient to keep trans-
actions from separate accounts in separate portfolio
files. CAPTOOL and PFROI V3.x provide a utility in
the PFROI "Configure" module which permits you to
merge these separate files into a single file for
income reporting and ROI calculation. (Note:
"Merging" physically merges porfolios into one file.
"Batch Valuations" sum the combined position of
several portfolios without actually combining the
portfolios.)
2-41
_
A-3 Error Check List (Common PFROI mistakes)
---------------------------------------------------
Symptom : Valuation doesn't include some
transactions.
Possible causes:
1) You failed to re-do the "Add" (Alt+A) valuation
command after entering or modifying the
transaction(s). Portfolio positions are only
recomputed by doing an "Add" command; they are
NOT re-computed with a "Review" (Alt+R) command.
2) Transaction(s) are incomplete (missing data).
Incomplete transactions are excluded from
portfolio position calculations. Check for
incomplete transactions by sorting (Alt+S),
they will go to the bottom of the transaction
list.
3) Transactions are out of date order. This can
occur when editing dates or when inserting or
editing transactions with the "Symbol Mask" set
"On". Set the mask to "ALL***", sort, then try
the "Add" valuation command.
4) The "Base Date" when doing an "Add Valuation"
was set AFTER transactions which where inserted
or modified. The "Base Date" must be set to
a date before a transaction for that transaction
to be picked up by an "Add Valuation"
calculation.
----------------------------------------------------
Symptom : Valuation appears to have reversed signs
in summing some transactions.
Possible Cause : You changed transaction codes (e.g.
a BUY to a SLL) without re-entering quantity or
amount. As a result signs are reverse of what they
should be. Recheck transactions for proper signs.
-----------------------------------------------------
Symptom : Reports are missing transactions.
Possible Cause : Transactions out of date order: Sort them.
2-42
_
A-3 Error Check List (Cont'd)
----------------------------------------------------
Symptom : Very large ROI result.
Possible Causes:
1) The result may be real if a security experienced
a large jump in value over a short period of
time. For example, a 10% rise in one week
generates an annualized ROI of about 13700%.
In general, drawing conclusions from ROI results
over short periods is meaningless.
2) You are trying to compute ROI for a short sale
type of transaction on an individual security.
There is no meaningful ROI for such a transaction
because there is no amount initially "invested".
3) You are doing an ROI without specifying a start
or end date for which there is a valuation. In
such case PFROI attempts to computed an estimated
valuation, but results are unpredictable.
-----------------------------------------------------
Symptom : Reports won't print.
Possible Causes :
1) You haven't specified "Base" or "Close" dates for
which the portfolio has valuations.
2) Invalid portfolio name. Portfolio filename must
consist of a prefix of no more than 8 characters
and an extension of no more than 3 characters,
with no spaces. (Path may preceed filename).
3) You are trying to print valuation graphics and
your printer is not set on "Program".
-----------------------------------------------------
Symptom : Valuations and open lot reports take too long.
Possible Causes:
1) You are not using most recent valuation as base date.
2) You are not including cash symbol (e.g. "$") in money
market transaction symbol, thus PFROI is spending time
re-computing cost base for every money market transaction.
(Hint: Money market transactions may also be eliminated
entirely by letting sales proceeds, dividends, etc. flow
to "Cash" and recording an interest transaction whenever
(without symbol) whenever a money market dividend is
received.)
2-43
_
24 Pin Printer Setups
---------------------
Toshiba 321 (CGA/EGA)
-----------
5) Graphics Setup : "Esc",";","0640"
6) IPL Setup : "Esc",";L07"
7) IPL Reset : "Esc",";L08"
8) Graphics Width : 640
For Hercules change 640 to 720 (2 places)
Epson LQ850 (CGA/EGA)- provisional
-----------
5) Graphics Setup : "Esc","*",Alt+33,Alt+128,Alt+2
6) IPL Setup : "Esc","3",Alt+20
7) IPL Reset : "Esc","2"
8) Graphics Width : 640
For Hercules change use Alt+208 in lieu of Alt+128
and also graphics width should be 720.
Note: Items in quotes above are keyed in directly
(do not key in quotes or separating commas). "Alt"
items are keyed in by depressing "Alt" key and keying
following number from keyboard.
**** Shareware Support Required! ****
-------------------------------------
If you've gotten this far, chances are that you are
going to give this program a serious try. This
message is for you.
Most useful shareware, with few exceptions, represent
the effort of one or a few individuals who've forsaken
secure employment to perfect a software idea they
feel has not been adequately addressed in the
commercial market. Besides living expenses, expenses
involved in this kind of effort easily can run well
into mid five figures (telephone, office, printing,
postage, equipment, supplies, advertising) annually,
even before the developer starts receiving any
returns.
Many promising shareware efforts have foundered or
ceased to progress beyond initial versions due to
inability to cover these expenses. With the advent
of a new PC operating system (OS/2) and a new
generation of hardware (386 machines), you the
shareware user, through your support (or lack
thereof) have a say in determining whether the
shareware you use will also make the next step up in
capability. If your collective support is
forthcoming through registrations, this author is
certain that reasonably priced upgrades will be
available, including from this author. If not,
welcome back to expensive, buy-before-you-try,
no-money-back computing!
Robert N. Hobbs, Pres.
Techserve, Inc.
Bellevue, WA 12/87
P.S.: Please don't telephone if you are not a
registered user unless you intend to register with
the call. This just hinders development of new
products and increases costs to those who do
register. Written inquiries for information, however
will be responded to promptly.
P.P.S.: In addition to registering, we also apprec-
iate any efforts you make to further spread the word
about PFROI to others, either directly, or via
messages or shareware uploads to BBS's (U.S. & Canada
only). Letters noting PFROI to the editor of your
favorite computer or professional publications and
newsletters are also appreciated and very helpful.
Thanks!
"PFROI", "CAPTOOL", "PFPRO", "BONDPRO", "STOCKPAR" and
"READ & RUN" are trademarks of Techserve, inc.