The Business Master (3rd Edition)

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%%30,3,63%% %%B-%% 43 PFROI User Manual - Copyright (C) 1985-1991, Techserve, Inc. Client Group ──────────────────────────────────────────────────────────── PFROI's Client Records provide a means for defining groups of portfolios which may be processed together. Access these records by selecting Clients on the main PFROI menu to obtain records with the following format: CLIENTS.STD Note=Off 258K Esc Pg Ins Del Alt+ File Prn Sort Dial seeK Note Cspecs Help Getpf Bat Client Name/Addr Phone Number Portfolio File Account Number Tax ID Num. ==================== ============== ============== ============== ============ Joe E. Demo\123 Main 321-4334 DEMOPF 1234-1139 666-44-8888 Michael D. Reinke\P. 1-319-334-2927 REINKE.MD 1234-2345 325-22-2635 Pauline C. Issacs\42 342-8834 ISSACS.PC 1234-2876 422-49-2352 Client records are edited in much the same fashion as Trans- action records. Use the Home or End keys to initiate editing of a text field such as the Name/Addr field with existing data. The Client Name/Addr, Account Number and Tax ID fields are used on PFROI reports. The Phone Number field is used for auto- dialing. Moving the cursor to the Name/Addr. field expands the field to accommodate up to 120 characters (with horizontal scrolling) as shown in one of the records in the preceeding example. The character "\" embedded in this Name/Addr field initiates a new line when the account title is printed on CAPTOOL's Client Statement report or used for memo merge or label generation. Angle brackets "<>" are used to specify the salutation for memo merge, e.g. <Mr. Smith>. Client record command functions operate as follows: Alt+F - File functions. Accesses file load, save, directory and rename functions. Alt+P - Print. Prints account records, generates mailing labels and merges name and addresses into correspondance ("memo merge") prepared with your word processing software. Key Words and client security holdings (specify ticker symbol mask) may be used to limit print output to only accounts meeting the specified criteria. Key word combinations are described below in the seeK function description. Printing starts with the record at the current position of the cursor. To merge names and addresses into an ASCII text file you have prepared separately with your word processor, embed the notation "{NAZ}" at the location of the name/address/zip and the notation "{SAL}" at the location for the salutation. 44 Alt+D - Dial. Auto-dials the telephone number in the current record through your modem. Check your communication configurations if if auto-dial appears to be inoperative. Alt+S - Sort. Sorts client records by last name or zip code, depending on user's response to prompt. If Name sort is specified, the name in the salutation brackets e.g. <Mr. Smith> is used for the sort. If no salutation brackets exists, then the last word in the first field of the client name field is used for the sort. Alt+K - Record seeK. Prompts for a Key Word and seeks the next record containing the Key Word or combination of key words. Key words may be combined using the following operators: | : "Or" operator. E.g. 'CPA | Bonds' will cause the function to search for a record containing the word 'CPA' or the word 'Bonds'. & : "And" operator. E.g. 'CPA & Bonds' will cause the function to search for a record containing both the word 'CPA' and 'Bonds'. Key word combinations using these operators are evaluated from left to right, with lower/upper case status ignored. Alt+G - Get portfolio. Loads portfolio file indicated in the current record and returns to main PFROI menu. Loading portfolio files in this manner ensures that portfolio Account Number and Tax ID information will be picked up and printed on report headers. Alt+B - Batch. Accesses batch valuation records from which you may execute the batch valuaton process. (CAPTOOL only). Alt+N - Note. Toggles display of the Note field between "On" and "Off". When "On", the note field is displayed. When "Off", the note field is hidden from view, but an asterisk at the right margin of a record indicates an active note. Auxiliary Records ─────────────────────────────────────────────────────────── As previously noted, PFROI has a number of support record types designated as Auxiliary Records. Some of these records are portfolio-specific, i.e. each portfolio has its own set of records. Other auxiliary records apply to all portfolios in the current sub-directory. 45 To access auxiliary records, select Auxiliaries on the main PFROI menu to obtain the following sub-menu: ╔═══════════════════════════════ Aux. Records ═══════════════════════════════╗ ║ ║ ║ C) Portfolio Config. : DEMOPF ║ ║ T) Tax Rate Table : DEMOPF ║ ║ L) Limit Prices : DEMOPF ║ ║ M) Master Sec. List : MSTRLIST.STD ║ ║ G) Group Types : MSTRLIST.STD ║ ║ D) Distributions : DISTRIBS.STD ║ ║ P) Price History : PRICES.STD ║ ║ ║ ╠══════════════════════════════ Alt + Dir Help ══════════════════════════════╣ ║ ║ ║ > ║ ║ ║ ╚════════════════════════════════════════════════════════════════════════════╝ Note that the menu shows the name of the currently active file associated with each record type. The first three record types are portfolio-specific. If a portfolio file has not yet been loaded, the associated filename will be blank, however you will be prompted for a portfolio filename upon selecting one of these records from the auxiliary sub-menu. A description of each record type follows. You should become familiar with each type. Portfolio Configure The Portfolio Config. selection permits you to configure some PFROI operating parameters separately for each individual portfolio: ╔════════════════════════════ DEMOPF Configure ═════════════════════════════╗ ║ ║ ║ A) Fiscal Year : 12/31/90 ║ ║ B) Tax Adj. : On ║ ║ C) Loss Carryover: On ║ ║ D) C.G. Indexing : Off ║ ║ E) Distributions : Off ║ ║ F) Twtd ROI/Beta : Off ║ ║ G) Val. Base : First ║ ║ H) Client Rpts : TAGDIPS ║ ║ I) Misc. Specs. : ║ ║ J) Indices ║ ║ ║ ╠══════════════════════════ Alt + saVe Reset Help ═══════════════════════════╣ ║ ║ ║ > ║ ║ ║ ╚════════════════════════════════════════════════════════════════════════════╝ 46 Note that the filename of the portfolio to which the configuration parameters apply appears at the top of the configure screen. Upon creation of a new portfolio or loading of an existing portfolio the default values for these parameters are drawn from an identical set of parameters which appear on the Configure sub-menu accessed from the PFROI main menu. The Portfolio Config. parameters and their operation are as follows: Fiscal Year - Designates the fiscal year-end to be used for the portfolio in generating Capital Gain, Dividend and Interest reports. Tax Adjustment - In computing estimated taxes for portfolio transaction records, the sum of the estimated taxes may fall below that of actual taxes if losses exceed gains. This occurs due to the maximum loss limitation imposed by U.S. Federal (and perhaps other) tax laws. PFROI automatically inserts Tax Adjustment and Loss Carryover entries, if necessary, so as to adjust for this differential. Setting the Tax Adjustment parameter to "Off" disables the automatic insertion of the Tax Adjustment record. Loss Carryover - A Loss Carryover is that portion of Capital Losses which exceed the maximum allowable capital loss (see "Tax Adjustment" above). U.S. tax laws allow such "excess losses" to be carried forward into future years. When this parameter is set to "On", if necessary, a loss carryover transaction record is automatically inserted at the beginning of the following year to reflect this carryover. In general, Tax Adjustment and Loss Carryover parameters should both have the same setting. C.G. Indexing - If this parameter is set "On", PFROI will adjust taxable cost bases upward using the factor in the Index field in a portfolios tax rate records. Under current U.S. tax laws this parameter should be set to "Off". Distributions - If this parameter is set "On", PFROI will automatically insert dividend, interest and split shares transaction records into a portfolio during creation of a portfolio position. (Inactive in shareware due to size constraints). Twtd ROI/Beta - The setting of this parameter determines whether a time-weighted ROI and Beta value are computed and reported when the Portfolio ROI Report is generated. The ROI time period must span at least twelve valuations for Beta to be computed. ROI is computed quicker with this parameter set to "Off". Val. Base - This parameter determines whether the default valuation base date is the date of the first portfolio 47 transaction, less one day, or is the date of the last previous valuation. If set to "First", each new portfolio position is computed starting from the first portfolio transaction. If set to "Last", a new portfolio position is computed starting with the last previous position and subsequent transactions. This latter approach is quicker, but requires that the last valuation position is accurate, that is, that no transactions prior to that position shall have been modified since the position was created. Client Reports - This parameter specifies reports which are to be included in a client statement. Letters in the specifica- tion correspond to selections in the report menu. Misc. Specs. - This field may contain a number of entries which control various aspects of portfolio operation. An entry of "C+" in this field for an individual portfolio protects existing configuration from being reinitialized when the portfolio is reloaded or when modifications are made to PFROI Config. parameters (see later this chapter). Market Indices - This selection allows you to specify market indices to be tracked with a portfolio. Up to seven indices may be tracked. The eighth selection is used to select the index against which portfolio and security beta are to be computed. The specification screen appears as follows: ╔════════════════════════════ Configure Indices ═════════════════════════════╗ ║ ║ ║ T Symbol Description ║ ║ = ========= =========== ║ ║ 1) S SP 500 S&P 500 ║ ║ 2) S DJ 30 DJ 30 ║ ║ 3) S COMP NASDAQ ║ ║ 4) ║ ║ 5) ║ ║ 6) ║ ║ 7) ║ ║ ║ ║ 8) SP 500 Beta Index ║ ║ ║ ║ ║ ╠════════════════════════════ Alt + saVe Help ═════════════════════════════╣ ║ ║ ║ > ║ ║ ║ ╚════════════════════════════════════════════════════════════════════════════╝ Tax Rate Records Tax Rate records are used by PFROI to compute "estimated taxes" and to classify capital gains as "long" or "short term". Tax rate records are stored as a part of each portfolio file and appear as follows: 48 AutoTax Parameters: DEMOPF 258K Esc Pg Ins Del Alt+ File Prn Sort Imp Help Mo/Dy/Yr T Hold Prd CG Rate Max Loss Tax Rate Lng/Sht Loc Rate Index IdxHld == == == = ======== ======= ======== ======== ======= ======== ====== ====== 01/01/70 6.00 0.500 3000 0.280 0.500 0.000 1.0000 12.00 01/01/77 9.00 0.500 3000 0.280 0.500 0.000 1.0000 12.00 01/01/78 12.00 0.400 3000 0.280 0.500 0.000 1.0000 12.00 06/23/84 6.00 0.400 3000 0.280 0.500 0.000 1.0000 12.00 01/01/87 6.00 1.000 3000 0.280 1.000 0.000 1.0000 12.00 01/01/88 12.00 1.000 3000 0.280 1.000 0.000 1.0000 12.00 / / Tax record fields are as follows: T - Type field. Setting a Type character in this field signifies that the tax rate record applies only to securities of that particular type. Leaving this field blank signifies that the record applies to all other securities. Hold Prd - Minimum Holding Period (in months) to be eligible for long term capital gains treatment. CG Rate - Fraction of long term capital gains subject to ordinary income tax. Prior to 1987, U.S. taxpayers only had to pay tax on only a portion of long term gains. Currently, however, all of capital gains are taxed. A CGRate of 1.0 also forces the current hold period requirement to be used in determining whether a gain is short or long term as opposed to using the hold requirement when the security was purchased. Max Loss - Maximum loss deductible in any one year. Under current U.S. tax laws, the maximum allowable loss which can be deducted in any one year is $3000. The remainder of any loss above this amount may be carried over for use in future years. Fed Rate - Portfolio owner's marginal Federal income tax rate. This field may be set to zero for a portfolio which is a tax-exempt account. Lng/Sht - Weighting ratio of long to short term gain or loss ratio for purpose of computing loss carryovers. This ratio is specified by federal tax law. Loc Rate - Portfolio owner's marginal state and local income tax rate. Index - This field contains an inflation index for the period since the prior tax period. Although not currently allowed by U.S. tax law, this feature is provided to permit inflation indexing of an investment cost basis. For example, if the prior tax rate record is dated 01/01/89, and the current record is dated 01/01/90, and inflation in 1989 was 5.5%, then the index field entry would be 1.0550. The "C.G. Indexing" 49 switch must be set to "On" in the portfolio configuration parameters for indexing to be active in computing estimated taxes on capital gains. IdxHld - Specifies the minimum holding period before indexing kicks in. Tax rate records may be imported from an ASCII text file using the Alt+I (Import) command. The text file must contain data in the following format: MM/DD/YY,Type,HoldPrd,CGRate,MaxLoss,FedRate,Long/Short,LocRate,Index,Idxhld Upon creation of a new portfolio file, tax rate records are initialized using parameters imported from the text file TAXRATES.STD. This file contains U.S. tax rates for the past two decades, however it may be easily modified using a text editor program. Limit Prices Limit Price records are used to establish high and low prices against which actual market prices are compared. This is so as to remind you that a security should be sold or perhaps further accumulated on weakness or strength, depending upon your investment strategy. Limit price records are stored as a part of each portfolio file and appear as follows: Limit Prices: DEMOPF 258K Esc Pg Ins Del Alt+ File Prn Sort Dst Help Symbol Lo Price Hi Price Distribs. MMF Symb. Description ========= ========= ========= ========= ========= ========================== INTC 38.0000 Intel Corp NIKE 63.0000 Cr. Cash Nike "B" PAC 40.0000 65.0000 Buy MMF MMF$-1 Pacific Telesis PKD 9.0000 Buy MMF MMF$-1 Parker Drilling XICO 2.0000 Xicor, Inc. FMAGX Buy MMF SPAR$ Fidelity Magellen USCRX Reinvest USAA Cornerstone VWNFX Reinvest Vangrd WindsorII VWIGX Reinvest Vangrd Wrld/Int'l @$0.43 When a limit price is equaled or exceeded, an asterisk will appear next to the market price on the position screen. If the "Lo Price" limit is broken on the downside, the asterisk appears to the left of the market price, and if the "Hi Price" limit is reached the asterisk appears to the right of the market price. Limit Price records also serve one other purpose, that is to specify the reinvestment status of distributions which can be automatically inserted into the portfolio transactions from the Distribution Records whenever a portfolio position 50 is created. Five reinvestment designations are available as follows by toggling the Alt+D key while positioned on the limit price record: "Blank" - The transaction code (TAC) in the distribution record is directly copied in the inserted transaction record. Withdraw - The transaction code in the distribution record is modified to a "withdraw" variant in the inserted transaction record. For example a DV+ transaction code is converted to a DVW transaction code. Cr. Cash - The transaction code in the distribution record is modified as necessary to a "credit cash" variant in the inserted transaction record. For example, a DRI transaction code is converted to a DV+ transaction code. Reinvest - The transaction code in the distribution record is modified as necessary to a "reinvest" variant in the inserted transaction record. For example, a DV+ transaction code is converted to a DRI transaction. Buy MMF - The cash proceeds from a distribution are reinvested in the money market fund indicated in the adjacent field. Note: Due to size constraints the distribution feature is inactive in the PFROI shareware. The Limit Price description field is cross-referenced from the master security list and therefore is not editable. Master (Security) List Master List records are used to store security-specific information which is referenced by PFROI when performing calculations or generating reports. Master List records are stored in the file MSTRLIST.STD and appear as follows: Master Security List: MSTRLIST.STD 258K Esc Pg Ins Del Alt+ File Prn Sort seeK Distr Type Help SYMBOL Auxiliary Description CUSIP T SIC "$" Beta ========= ========================================== ============ = === === ==== PAC Pacific Telesis\@@2/1*4 @$1.88 S $ 0.9 T AT&T \@@2/2*4 @$1.20 S $ 0.8 TAN Tandy Corp. \(Radio Shack)@@3/1*4 @$0.60 S $ 1.2 TCOR Tandon Corp. S $ 2.3 TNOTEA94 #TNote##5/15/94 @@5/15*2 @$13.125 912827QU9 T $ 0.0 TNOTED93 #TNote##11/15/93 @@5/15*2 @$11.75 912827QD7 T $ 0.0 USCRX USAA Cornerstone\@@12/1*1 @$.71 M $ 0.0 VFINX Vanguard Index 500 Fund\@@12/28*1 @$1.95 M $ 1.0 51 Master List fields are used as follows: SYMBOL - Used to uniquely identify security. Aux. Description - Extended description, may be used to indicate interest & dividend rates and dates and bond maturity dates and redemption prices as in the following examples: "@@2/15*4@$5.32" - indicates that a $5.32 annual dividend or interest is paid in 4 quarterly installments (the "*4" indicates this), with the first payment of the calendar year on 2/15. "##10/15/94#$100" - indicates that a bond matures on 10/15/94 at a par price of $100/unit. If the price is omitted, 100 is the default. Aux. Descriptions may be copied into a portfolio transaction description field by using the Alt+C command on the Trans- action screen when the cursor is at the beginning of an empty description field (hint: move the cursor to the description field with an arrow key, then hit Alt+C). Embedding the character "\" in the auxiliary description field will cause only the portion of the decription up to the "\" character to be copied into the transaction description. Cusip - Security Cusip number. The Cusip number may be referenced in lieu of Symbol for price retrieval into the price records by toggling the Alt+# key (Alt+3) to mark the record with a "#" sign next to the symbol field. Re-toggling Alt+# clears the mark. Toggling Alt+! (Alt+1) marks the record with "!" indicating that price downloads are to be suppressed. T - Security Type. This value will be automatically imported onto position screen records when the Create valuation command is executed. SIC - Standard Industry code. Use first three chararcters of federal "SIC" code. "$" - Cash symbol. Use to indicate the base denomination of security in a multi-currency portfolio. Beta - This value will be automatically imported onto position screens when the Create valuation command is executed. Group Types Group Type records allow you to assign a description to each security Type you define. This description is used in the description field of "sub-total" records on portfolio position screens and reports. 52 Group Type records are stored in the file MSTRLIST.STD and appear as follows: Security Group Types: MSTRLIST.STD 258K Esc Pg Ins Del Alt+ Help T Description = ==================== A Annuities B Bonds, Corporate C Collectables F Fixed Income (CD's) G Ginnie Maes L Ltd. Partnership M Mutual Funds N Municipal Bonds P Precious Metals R Real Estate T U.S. Treasuries S Common Stocks V Variable Rate Funds Z Zero Coupon Bonds Any character from "A" to "Z" or from "0" to "9" may be used as a "Type" specifier. The records shown above are for example only and may be redefined using whatever categories suit your particular needs. Distribution Records Distribution records are used to automatically insert trans- action records for dividends, interests and splits when valua- tion positions are generated using the Create valuation com- mand. The Distributions item on the Portfolio Configure record must be set to "On" for this feature to be operative. This feature is of particular use with multiple portfolios. Due to program size constraints this feature has been excluded from the shareware version of PFROI. 53 Price History Price History records store a historical database of prices which may be drawn upon by PFROI to price portfolios. These records are also used by the CAPTOOL Time-Trend module to plot price/volume trends and compute moving averages. These records appear as follows: *ALL***** Price Histories: PRICES.STD 258K Esc Pg Ins Del Alt+ File Prn Sort Mask Grph Dscr dLnk Imp Aux aRc Help Mo/Dy/Yr Symbol T Volume Open High/Ask Low/Bid Close Description == == == ========= = ====== ======== ======== ======== ======== ============= 03/31/90 USCRX M 0 18.60937 18.60937 18.60937 USAA Cornerstone 03/31/90 VFINX M 0 32.37500 32.37500 32.37500 Vanguard Index 5 03/31/90 VLSI S 639.0 0 7.750000 7.375000 7.625000 VLSI Technology 03/31/90 VWIGX M 0 11.39062 11.39062 11.39062 Vangrd Wrld/Int' 03/31/90 VWNFX M 0 14.29687 14.29687 14.29687 Vangrd WindsorII 03/31/90 XICO S 393.0 0 3.125000 3.000000 3.000000 Xicor, Inc. 03/31/90 XON S 9077.0 0 46.75000 45.75000 46.12500 Exxon\@@3/1*4 @$ 04/02/90 HRB S 1405.0 37.00000 35.62500 36.37500 H&R Block Corp\@ 04/03/90 HRB S 1436.0 0 36.87500 36.37500 36.75000 H&R Block Corp\@ 04/03/90 IBM S 10504. 0 106.7500 106.0000 106.6250 Int'l Bus. Mach. 04/03/90 XON S 11213. 0 47.25000 46.50000 47.12500 Exxon\@@3/1*4 @$ / / Price History data may be manually input, imported from an ASCII text file, or updated by downloading prices from one of the supporting services using the DataLink module. Price History fields are used as follows: Mo/Dy/Yr - Quote date. Symbol - Security ticker symbol. You should use the standard ticker symbols published by the stock exchanges so that you will be able to download prices using the DataLink module. T - Security Type. An entry is needed in this field for some pricing services (e.g. Dow Jones) in order to identify the type of security being priced. Volume - The trade volume for the date, usually in terms of number of 100 share blocks traded. Open - Market opening price for the date. This data is not currently used. High/Ask - The High price or the Ask price, depending on the type of pricing quotes provided for the security. Low/Bid - The Low price or the Bid price, depending on the type of pricing quotes provided for the security. Close - The price of the last or closing trade on the quote date. 54 When you import prices into portfolio Position records from the price history records, the prices are preferentially taken from the Close price field. If there is no Close price or if the Close price is zero, PFROI Position record prices are imported from the Bid field, then the Ask field, and then from the Open field until a non-zero value is retrieved. Available Price Quote Alt commands operate as follows: Alt+S - Sort records by date. Important!: Price records must be in date order to permit price retrieval into portfolio position records. Alt+M - Masks by symbol, to isolate a particular security. Alt+G - Generates graphics of price, volume & moving averages. Due to space constraints this command is available only for CAPTOOL and the registered versions of PFROI. Alt+D - toggles Description field display on/off. Descriptions are retrieved from the Master List. Alt+L - accesses DataLink communications module for data download. The record on which the cursor resides when this command is executed determines the starting record for a price download See Chapter 9, DataLink for details on downloading prices from data services. Alt+I - Import data from ASCII comma delimited text file of format: mm/dd/yy,Symbol,Type,Volume,Open,High,Low,Close Prices can also be directly imported from PRODIGY Quote Track files. See IMPORT.TXT for more detail. Alt+A - Aux. accesses Master List records. In addition to these commands, Ctrl+F6 will generate a full set of new records dated the same date as the current record and with symbols drawn from the Master List. This is a useful command to set up price records prior to downloading of price quotes or entering prices manually. 55 PFROI Configurations ──────────────────────────────────────────────────────────── Selecting Configuration on the PFROI main menu displays a menu of configurations items as follows: ╔═════════ PFROI1.CFG <-------- Configure -------- > PFROI2.CFG ═══════════╗ ║ ║ ║ A) Color Setups P) Fiscal Year : 12/31/90 ║ ║ B) Printer Specs. Q) Tax Adjust. : On ║ ║ C) Comm. Parameters R) Loss Carryover: On ║ ║ D) Set User ID S) C.G. Indexing : Off ║ ║ E) Work File Path : T) Distributions : Off ║ ║ F) Sys. Mhz : 8.00 U) Twtd ROI/Beta : Off ║ ║ G) Sys. Sound : On V) Val. Base : First ║ ║ H) Mono. HiVideo : LowVid W) Client Rpts : TAGDIPS ║ ║ I) Block Cursor : Off X) Misc. Specs. : ║ ║ J) Date Feed : Off Y) Market Indices ║ ║ K) File Backup : On ║ ║ L) Base Currency : $ ║ ║ M) Decimal Type : . ║ ║ N) Amt Decimals : 2 ║ ║ O) Date Format : Mo/Dy/Yr 1951 ║ ║ ║ ║ ║ ╠════════════════════════════ Alt + saVe Help ═════════════════════════════╣ ║ ║ ║ > ║ ║ ║ ╚════════════════════════════════════════════════════════════════════════════╝ <ESC> to prev. screen The items on the left side of the PFROI Config. menu apply to all program modules and operate as described in Appendix A. The items on the right side of the menu contain default values which are used to initialize the Portfolio Config. records of a portfolio when it is created. These parameters will also override the Portfolio Config. records of existing portfolios unless a "C-" is included in the Misc. Specs. field of the PFROI Config. record or a "C+" is included in the Misc. Spec. field of the individual Portfolio Config. record. ─────────────────────────────────────────────────────────── Important!: Do not confuse PFROI Config. parameters with Portfolio Config. parameters! The PFROI Config. parameters provide initialization values for the portfolio parameters at the time the portfolio is loaded (except when "C+" or "C-" are set as previously noted). However, it is Portfolio Config. parameters and not the PFROI Config. parameters which actually control portfolio operations. ─────────────────────────────────────────────────────────── 56 Utilities ─────────────────────────────────────────────────────────── Selecting Utilities on the PFROI main menu displays the following sub-menu, from which various PFROI supporting utilities may be run: ╔═══════════════════════════════ Utilities ════════════════════════════════╗ ║ ║ ║ ║ ║ 1) Merge portfolio files ║ ║ 2) Change portfolio symbol ║ ║ 3) Archive Old Portfolio Records ║ ║ 4) Create Demo version of PFROI ║ ║ 5) Software Purchase Information ║ ║ ║ ║ ║ ╠══════════════════════════════ Alt + Dir Help ══════════════════════════════╣ ║ ║ ║ > ║ ║ ║ ╚════════════════════════════════════════════════════════════════════════════╝ These utilities perform the following functions: Merge - Merges up to 25 portfolio files into a single portfolio file. Some investors with multiple portfolio files representing different brokerage accounts find it useful to temporarily merge these at year-end so as to gen erate unified year-end reports. Due to size constraints this utility has been excluded from the PFROI shareware. Symbol Change - Changes specified ticker symbol in the specified portfolio(s) or price file to a new ticker symbol. This is sometimes necessary when a company changes its symbol or if the incorrect symbol was originally used. The Client Group option of this utility causes the ticker symbol to be changed for all portfolio files in the currently loaded client group. The Price History record option changes the symbol for all records in the currently loaded Price History file. Archive - This utility removes "closed out" portfolio transactions which occur before a specified date and stores them in a user specified Archive file. This utility is seldom needed and due to size constraints has been excluded from the shareware version of PFROI. Demo Creation - This utility copies a Demo version of PFROI to a floppy disk for passing on to others for trial use. Since PFROI shareware may be freely copied this utility is not applicable. Purchase Information - Provides information on the avail- ability of TECHSERVE, Inc. software. 57 4 PFROI - New Portfolio ──────────────────────────────────────────────────────────── If you completed chapter 3 while working with the demo port- folio DEMOPF you should now be familiar with the mechanics of operating PFROI. This chapter is intended to get you started with your own portfolios. The basic procedure is: 1) Enter your transactions, 2) Create valuations & price resulting position records, and 3) run Performance calculations and/or generate Reports. Defining the Portfolio ──────────────────────────────────────────────────────────── Before starting a portfolio file, you should mentally 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. 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 mutual fund and/or money market account held directly with the fund company. d) A stock subscription account (e.g., a utility dividend reinvestment plan). e) A savings account or certificate of deposit. f) Partnership interests or real estate holdings. g) Gold or valuables which may be assigned a value. Our experience has been that it is usually best to set up a separate portfolio for each account at a financial institution or brokerage house, plus at least one more portfolio to hold all other assets such as valuables, real estate and securities held in a safe deposit box. 58 Deposit/Withdrawal Rules ──────────────────────────────────────────────────────────── Once a portfolio is defined, you can determine what trans- actions 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. b) Enter a Withdraw transaction whenever the portfolio owner (you) removes funds from a portfolio. Note that if funds are transferred from one account to another within the same portfolio such as might be the case for a mutual fund group, it is not necessary to enter Withdraw and Deposit transactions. This type of "exchange" transaction can usually be handled by a Sell and Buy pair of transactions. In this case the proceeds of the Sell transaction are used to fund the Buy transaction resulting in a zero net change in the portfolio cash position. The following are some examples of transactions requiring Deposit or Withdraw transactions: 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 Corp." 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. (Buy and Deposit transactions occuring on the same date may be combined by using a BYD transaction code). 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 Corp". In this case you must also enter a Sell transaction. The Sell transaction 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". (Sell and Withdraw transactions occuring on the same date may be combined by using a SLW transaction code. c) You send a check for $7000 written against your money market fund to your broker to credit your brokerage 59 account. This requires a Sell and a Withdraw transaction from the portfolio containing the money market fund and a Deposit transaction to the portfolio containing the brokerage account. 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 any portfolio you've defined). 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 safe deposit box portfolio. However, since this situation occurs frequently, PFROI provides a transaction code, DVW, which combines both of these transactions. A similar code, INW, 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. 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 or mutual statements and transaction slips. Use Load Portfolio on PFROI's main menu to create the new portfolio, then select Transactions to enter the transaction screen. 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 Chapter 6 if uncertain about the proper transaction code to use, or to Chapter 8 if you have a special situation such as inherited stock. When finished entering transactions, use the Sort command (Alt+S) to sort the transactions in case some were entered out of date order. Omitting Portfolio History ─────────────────────────────────────────────────────────── 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 60 position and the purchase dates and costs associated with securities currently held. The process is as follows: 1) Determine the purchase date and cost of all securities currently in the portfolio. (This is not redundant effort, you will need this information for the Internal Revenue Service when you sell). Enter the data using the RCV (Receive) transaction. 2) Enter your portfolio's latest reported cash position as a DPF (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 Valua- tion screen and execute an Create valuation command. Check the results versus your latest broker statements 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. Your broker may be rounding fractional prices before computing valuations. To get the exact same valuation you may move the cursor to the valuation column, and enter the valuation amount, forcing the price to be back-computed. If you find a discrepancy in share position, a share trans- action such as a buy, sell or split was probably inadvertently omitted or was entered with the wrong sign. Review your transactions carefully to detect such errors. Tax Rates ──────────────────────────────────────────────────────────── Before you start using PFROI's Est. Tax calculation feature, you should update PFROI's initial default tax rate records (access from Auxiliary sub-menu) to reflect your own marginal tax rates. If your personal tax rate changes from year to year, you should insert a tax rate record for the year in in which the new rates take effect. The date of this record should be January 1st. The reason for this is that whenever the tax calculation is invoked, PFROI searches for the first tax rate record chronologically the same as or prior to the transaction. Setting the record date to "01/01" thus ensures that the record applies for the whole year. If the tax rates change due to a tax law change, the new tax rate record should be dated the date that the new law takes effect. Often this is also January 1st, however occasionally, such as in 1984, a new law becomes effective mid-year. If you trade in commodities, futures or options you may need to insert separate tax rate records to reflect variations in the tax laws for these investment types. Entering a Type specifi- cation designates these tax rate entries to apply only to securities of that type. 61 5 PFROI - Transactions ────────────────────────────────────────────────────────────── Transactions are the most important portfolio records because it is from these records that portfolio positions and security cost bases are computed. This chapter describes how each field in a transaction record is used. Date Field (Mo/Dy/Yr) ────────────────────────────────────────────────────────────── The transaction date field defines when a transaction occurred. It is also used during ROI computations to determine the timing of "cash flows" into and out of a portfolio or security. Trans- action dates thus must be correct for accurate ROI's to result. To ensure transactions are in date order, PFROI sorts them by date upon exiting the transaction module. If a transaction appears to have "disappeared" after exit and re-entry into the transaction module it is likely that an incorrect date was entered, e.g. "77" instead of "87" for the year, resulting in the transaction being sorted away from its expected location. You should occasionally review "early" transactions for the occurance of mis-dated transactions. Transaction Code (TAC) ────────────────────────────────────────────────────────────── The transaction code or "TAC" defines how PFROI handles a transaction when performing position, cost base, estimated tax and ROI computations. The TAC is also employed by PFROI to determine which other data fields in a transaction also require data. All transactions require a TAC to be considered "active". If a TAC is blank ("Nul"), PFROI treats the record as inactive. The remainder of this section describes available transaction codes and how they should be used. Note that some TAC's represent the combination of two transactions. Using these in lieu of the separate transactions saves data entry and disk and memory space. In the following examples where the term "shares" is used, it is meant to refer to the unit quantity of whatever asset is being accounted for. Thus "shares" might represent units of corporate "common stock", bond units, or units of some commodity such as bushels of corn. We've placed the transaction codes in logical groupings, however in the case of dual-function TAC's, cross-references are made where necessary. When using a TAC for the first time you should review the examples in this section to see how it is properly used. 62 Deposits / Withdrawals Deposits represent an investment of funds into a portfolio by the portfolio owner, while Withdrawals represent a return of investment and profits to the portfolio owner. DPF DePosit Funds - Use to indicate cash funds added to a portfolio. Example: You send a $3500 check to your broker to credit to your account: Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 07/08/88 DPF Chk #345 3500.00 Example: You tell your broker to buy 50 shares of IBM, then send him a check for the purchase: Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 08/ 8/86 BUY IBM 1 IBM Corp. 50 -6475.25 08/14/86 DPF for IBM purch. 6475.25 WDF WithDraw Funds - Use whenever portfolio owner removes cash funds from a portfolio. Example: You have your broker send you a check for $5000 for a down-payment on a new auto: Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 12/ 7/88 WDF brkr acct -5000.00 Receive / Deliver Receive and Deliver transactions are similar to Deposit and Withdraw transactions in that they add value to or remove value from the portfolio. They are different however in that they involve security shares and not cash. RCV ReCeiVe shares - Use to indicate shares received into portfolio at no cash cost to the portfolio. Both quantity and amount entries are made, with the amount entry the market value of the security at the time received. Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 06/01/85 RCV USBC 3 US Bancorp 300 7500.00 The original acquisition date and cost basis of the stock should be specified in the description field using the format "&&5/25/84 $5400.25". This enables PFROI to 63 correctly report the security's taxable cost basis and purchase date. For example: Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === =================== =========== ============ ======== 06/ 1/85 RCV USBC 3 US Bancorp &&5/25/84 $5400.25 7500.00 Note: The Quantity field is overlayed in the prior example by the Description field. The currency symbol used should be that of the Base Currency as defined on the PFROI configuration screen. If not specified in the description field, the acquisi- tion date and cost basis are assumed to be the trans- action date and amount entries. A RCV transaction may also follow a sell (SLL) trans- action by up to one month, such as when you instruct your broker to sell a security held in your deposit box and then send the certificate to your broker. For example: Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === =================== =========== ============ ======== 05/27/85 SLL USBC 3 US Bancorp -300 7500.00 06/ 1/85 RCV USBC 3 US Bancorp &&5/25/84 $5400.25 7500.00 DLV DeLiVer shares - Use to indicate shares delivered out of the portfolio. The amount entry should be the value on delivery date. If the delivery is a tax-free gift or you maintain ownership of the security in another portfolio, a manual tax entry of zero is made to suppress reporting on the capital gains report: Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 12/ 1/85 DLV T 4 Char. Gift -300 -6125.00 0m The RCV and DLV may be used in combination to indicate the transfer of shares from one portfolio to another. A DLV transaction is entered in the portfolio which is giving up the shares and a RCV transaction is entered in the portfolio receiving the shares. Buy / Sell "Buy" transactions represent the spending (reduction) of portfolio funds in exchange for security shares. Conversely, "Sell" transactions represent the reduction of security shares in return for the increase in cash. BUY BUY security - Use whenever a security (stock, bond, T- bill, option, etc) is purchased into the portfolio. 64 Example: 100 shares of IBM is purchased at $110. The broker charge plus local transaction taxes is $180.25. You deposit the purchase amount with your broker several days later. This is your second purchase of IBM: Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 11/14/87 BUY IBM 2 IBM 100 -11180.25 11/19/87 DPF for IBM purch. 11180.25 BYD BuY and Deposit - This transaction combines a buy and deposit transaction into a single transaction. Use whenever the buy and deposit occur on the same date, such as often occurs for mutual funds and money market funds. Example: You remit $4000.00 to Vanguard for investment in their international mutual fund. The Net Asset Value (price) at remittal is $10.95 Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 11/14/87 BYD VWIGX 1 V-grd World Int. 365.2968 -4000.00 Note: In this example a lot number of "1" is used even though this presumably is not the first purchase in the fund. This is because first-in, first-out (FIFO) tax lot accounting is being used as further described later in this chapter. BYC BuY-to-Cover - Use whenever a security is purchased to cover a "short" position. Example: A short-sale (see SLS below) is covered at 61 with a broker charge of $134.00. Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 02/25/85 BYC ABC 3 AmBroad 100 -6234.00 IMPORTANT! : BYC must only be used to "close" an open position created by a short sell transaction (SLS). The BYC transaction must always follow its opening SLS transaction!. SLL SelL security held Long - Use whenever a security is sold from the portfolio. 65 Example: The 100 shares of IBM purchased in 1979 are sold at 137. The broker charge plus local transaction taxes are $210.35: Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 02/03/79 BUY IBM 5 IBM 100 -7925.25 : 01/29/85 SLL IBM 5 IBM -100 13489.65 In this example the original buy transaction is shown. SLW SelL and Withdraw - This transaction combines the Sell (SLL) and Withdraw (WDF) transactions. Use whenever the SLL and WDF occur on the same date, such as often occurs when withdrawing funds from mutual funds and money market funds. Example: You direct your mutual fund to sell sufficient units so they may send you a check for $20,000 for a downpayment on a new home. The NAV is $15.10 and FIFO tax lot accounting is used: Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 01/30/89 SLW MFND 1 -1324.5033 20000.00 SLS SelL Short - Use whenever a security is sold short. Example: 200 shares of ABC is sold short at $75/share. The broker charge plus transaction taxes is $250.00. This is the third short sale transaction in ABC: Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 01/27/85 SLS ABC 3 AmBroad -200 14749.00 : 06/03/85 BYC ABC 3 Am Broadcasting 100 -5945.25 06/10/85 BYC ABC 3 Am Broadcast. 100 -6025.35 Note: In this example the subsequent matching Buy-to- Cover transactions are also shown. Note that the original short position is covered in two separate transactions. Reinvestments Reinvestment transactions represent a BUY transaction occuring in conjunction with the receipt of some form of income payment, e.g. dividend, interest, or capital gain. PFROI has a number of reinvestment transactions as follows. These are described in more detail with examples in the applicable payment category. 66 DRI Dividend ReInvestment. (see dividends). IRI Interest ReInvestment. (see interest). CGR Capital Gains Reinvestment. (see capital gains). SGR Short term capital Gains Reinvestment. (see capital gains). RCR Return of Capital Reinvestment. (see return of capital). Interest Payments Interest payments are payments received by the portfolio in connection with bond or fixed-income securities held by the portfolio. These payments may be from corporate or munici-pal bonds, federal treasury securities, certificates of deposit, savings accounts, brokerage cash balances, mortgages held or other loans, etc. Interest payments may also be paid out by the portfolio on bond-type securities sold "short", on a negative cash balance due to margin account borrowing, or upon the purchase of a bond carrying accrued interest. 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 Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 08/19/82 IN+ ML-1 MLynch Acct#1 33.18 09/02/82 IN+ ATT AT&T 3/90 77.25 Example: Your account receives an interest payment on a tax-free municipal bond: Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 08/15/89 IN+ MYTWN MyTown RBonds 255.75 0 m Note in this case an entry of "0" is manually entered in the Est. Tax field to reflect the tax-free status of the interest. This causes the payment to be tabulated in the Tax-Free section of PFROI's Interest Report. Example: You sell a bond on 12/1 carrying $333.33 accrued interest since 6/30. You receive $9850 for the 67 bond ($9900 less $50 commission) plus the $333.33 accrued interest: Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 12/31/85 BUY CBOND 1 Corp. Bond 100 -10100.00 : 12/01/89 IN+ CBOND Corp. Bond 333.33 12/01/89 SLL CBOND 1 Corp. Bond -100 9850.00 Note that in the above example a capital loss of $400 is realized from the bond although the total proceeds from the sale exceed the original purchase price including commission. This is because $333.33 of the proceeds is interest and not principle. IN- INterest charged - Use whenever a portfolio account is debited for interest. Example: Your broker charges your margin account for interest on bonds held short and for interest on margin borrowing: Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 03/15/89 IN- XYZBND XYZ Bond Short -1114.22 03/31/89 IN- ML-1 MLynch Acct #1 -29.48 Example: You buy a bond on 4/30 that carries $400 of accrued interest since 12/31. The market price is $96.5. You pay $50 commission, plus the accrued interest for a total out-of-pocket expense of $10100: Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 04/30/88 BUY CBOND 1 Corp. Bond 100 -9700.00 04/30/88 IN- CBOND Corp. Bond -400.00 IRI Interest ReInvestment - Use for interest reinvestment. This transaction is the equivalent of an IN+ transaction followed by a BUY transaction in the same amount. It requires both quantity and amount inputs. If the security is to be redeemed in its entirety at one time as is usually the case with a certificate of deposit, then the lot number field may be left empty. Example: A certificate of deposit reinvests monthly interest payments: Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 02/15/89 BUY $CD#8 1st Savings CD$8 10000 -10000.00 02/28/89 IRI $CD#8 CD#8 reinvestment 36.44 36.44 03/31/89 IRI $CD#8 CD#8 reinvestment 79.25 79.25 68 Note that the quantity and amount in these entries are identical in magnitude. The "$" character is therefore included as a part of the symbol to indicate that the cost basis is always $1/unit. This allows PFROI to skip cost basis calculations for this investment, thus speeding generation of valuations and certain reports. This assumption is only valid provided the investment will be redeemed at $1/unit, which is usually the case for C.D.s, savings accounts, and money market funds. IOB Interest On Balance - Use for interest received or paid on portfolio cash balance without symbol entry (i.e. without attribution to a particular source). The amount may be entered as a positive or negative value depending upon whether received (positive) or paid (negative). Example: Your broker charges you $110.25 for a negative cash balance you are carrying due to margin borrowing in your account: Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 8/30/89 IOB Margin Interest -110.25 In lieu of the treatment in this example, you may prefer to use the IN-TAC and make a symbol entry so as to keep a record of the payee. INW INterest Withdrawn - Interest earned, but withdrawn 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 Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 03/31/90 INW TB-1 T-Bill #1 300.00 Dividend Payments Dividend payments are payments received by the portfolio in connection with equity securities held by the portfolio. These payments may be from "common" or "preferred" stock or shares, or from mutual funds. Dividend payments may also be paid out by the portfolio when dividends are declared on shares sold "short". DV+ cash DiVidend earned - Use whenever the portfolio is credited with a cash dividend. Example: A quarterly dividend of $58.50 on RCA shares held 69 in the portfolio is received: Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 01/01/83 DV+ RCA RCA 58.50 DV- cash DiVidend charged - Use whenever the portfolio is debited for a dividend on shares held short. Example: The portfolio is charged for the $40 quarterly dividend on 100 shares of ABC held short: Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 10/15/84 DV- ABC ABC -40.00 DRI Dividend ReInvestment - Use for dividend reinvestment. This combines both a DV+ and BUY transaction and thus requires lot number, quantity and amount inputs. The amount value is positive for a "long" position. Example: Your mutual fund reinvests quarterly dividends of $345.34 for 31.45 shares: Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 04/04/89 DRI MFUND AVG Mut. Fund 31.45 345.34 Note that eventually each DRI transaction must be closed with a corresponding sell type transaction. See the section entitled "Tax Lot Numbers" later in this chapter for examples of use of lot numbers with DRI type transactions. DVW DiVidend Withdrawn - Dividend earned, but withdrawn 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 Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 03/15/82 DVW T AT&T div 73.25 Note that a DVW transaction is the equivalent to a DV+ transaction followed by a WDF transaction. 70 Capital Gains Distributions Capital gains distributions are payments received by the portfolio usually in connection with mutual funds held by the portfolio. These payments represent the mutual fund share- holder's portion of capital gains that were realized by the mutual fund over a specific period. Occasionally, but rarely, capital gain distributions may also be paid to corporate shareholders when a corporation divests an asset at a profit and decides not to retain the gain. U.S. Tax law has vacillated over the years regarding short versus long term treatment of capital gains and capital gains distribution. At this writing current law lumps capital gains distributions into a single "long" category. However, for purpose of past transactions and to allow for possible future changes, PFROI provides for both "short" and "long" categories of capital gains distributions. Capital gains distributions are reported on the Capital Gains report. CGD Capital Gains Distribution - Use when a long term capital gains distribution is received, such as from a mutual fund. Long term capital gains distributions are taxed at long term capital gains rates. Example: You receive $640 year-end capital gains distribu- tion from your mutual fund. Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 12/31/87 CGD MFUND Mut. Fund 640.00 CGR Capital Gains distribution Reinvested - Use for a rein- vested long term capital gain distribution. This trans- action is equivalent to entering a CGD transaction followed by a BUY transaction in the same amount. Example: Your mutual fund reinvests long term capital gains in your account: Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 12/31/87 CGR MFUND 1 Mut. Fund 869.3841 9867.51 CGW Capital Gains distribution Withdrawn - Use for a capital gains distribution received, but withdrawn rather than retained in portfolio. The CGW transaction is the equivalent to a CGD transaction followed by a WDF transaction. Example: You receive a capital gains distribution check on a mutual fund in which you have requested that all dividends and distributions be sent to you by check rather than be reinvested or placed in a money market fund. You 71 deposit the check in a bank account which is not part of your portfolio. Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 12/15/89 CGW MFUND Cap.Gains Distrib 505.79 SGD Short Term capital Gains Distribution - Use when a short term capital gains distribution is received, such as from a mutual fund. Short term capital gains distributions are taxed at short term capital gains rates. Example: You receive a $125.13 year-end short term capital gains distribution from your mutual fund: Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 12/31/86 SGD MFUND Mut. Fund 125.13 SGR Short term capital Gains Reinvestment - Similar to the CGR transaction except gets short term capital gains tax treatment. Example: Your mutual fund reinvests short term capital gains in your account: Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 12/31/84 SGR MFUND 1 Mut. Fund 30.234 374.83 SGW Short term capital Gains distribution Withdrawn - Use for a short term capital gains distribution received, but withdrawn rather than retained in the portfolio. Example: You receive a capital gains distribution check on a mutual fund on which $85.48 is designated short term. You deposit the check in a bank account which is not part of your portfolio. Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 12/15/79 SGW MFUND Short CGDistrib 85.48 Return of Capital Return of Capital represents payments received from a company in which no profit has accumulated from which to make the payment. The payment is assumed to come from investors' paid-in capital and thus is usually not taxed. The payment does however reduce the cost base of the investment. Return of Capital received by mutual funds is usually passed through to mutual fund holders and is designated as Return of Capital or Return 72 of Principal on your fund statement. ROC Return Of Capital - Use to indicate return of capital. Cost bases are automatically re-adjusted in capital gains, position and open lot reports for this transaction. Lot number usage is optional. 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 Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 03/15/87 ROC UTIL Util. ROC 45.00 0 m 03/15/87 DV+ UTIL Util. Div. 55.00 Note: The manual entry of "0" in the "Est. Tax" field suppresses the ROC transaction from reports of taxable interest. RCR Return of Capital Reinvested - Use to indicate return of capital which is being reinvested. Example: You receive a statement from your mutual fund indicating that $15.37 of reinvested distributions were non-taxable return of capital and were used to purchase 1.2670 additional units: Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === ============== =========== ============ ======== 12/15/89 RCR MFUND 1 Mut. fund ROC 1.2670 15.37 0 m RCW Return of Capital Withdrawn - Use to indicate return of capital which is withdrawn from the portfolio. Example: A utility in which you own shares pays a dividend of $100 check of which they advise you 45% is return of capital. You cash the check to buy groceries. Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 03/15/87 RCW UTIL Utility ROC 45.00 0 m 03/15/87 DVW UTIL Util. Div. 55.00 Splits and Share Dividends From time to time a company will declare a share "split" or will issue a non-cash "share dividend". This means that the shareholders receive additional shares for each share they currently hold. For example in a "2 for 1" split, a shareholder receives one additional share for each share currently held. A "100% share dividend" also produces the same result. Occasionally some companies also declare a "reverse split". These reduce the number of shares held by each shareholder. 73 PFROI provides "split" transactions to account for splits and share dividends. No lot number or amount should be entered for split transactions. SP+ SPlit Long - Use when stock held long in the portfolio splits or issues 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 trans- action, with a manual Est. Tax entry of zero, provided the pay- ment is tax free under current law. Use the "declaration" or "X-date" for the split date (the split must be placed PRIOR to any buys or sells not included in the pre-split quantity calc.). 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 Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 08/15/85 SP+ RCA RCA 112 08/15/85 DV+ RCA RCA 15.25 0m Example: XYZ company declares a "5 for 1 reverse split", voiding old shares and issuing one new share for each five shares a shareholder previously held. You previously held 100 shares: Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 11/15/87 SP+ XYZ -80 Note that the SP+ transaction code is used for a reverse split, but a negative quantity is entered. In this example the "-80" reduces the original 100 shares held to 20 shares. In order to enter the minus 80 you must temporarily turn the siGn function "Off" with the Alt+G command. Turn it back on by toggling Alt+G a second time once you have completed the entry. SP- SPlit short - Use whenever stock held short in the portfolio splits or issues 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 Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 06/15/78 SP- ABC AmBroad -100 If a stock held short declares a reverse split the the SP- transaction code should be used, but a positive quantity is entered. In order to enter the positive quantity the siGn function on the transaction screen must be temporarily toggled "Off". As soon as the entry is made be sure to restore the siGn function to the "On" setting. 74 Bond Discounts and Premiums Some bonds do not pay cash interest, but are purchased at a substantial discount from face value and then are redeemed at face value on the maturity date. These bonds are often called "Original Issue Discount" ("OID") or "Zero Coupon" bonds. Other bonds do pay cash interest, however when they are purchased on the open market they are priced at either a discount or premium to face value. U.S. tax laws require that taxes be paid on accrued income on discount bonds. The laws also permits the amortized deduction of any premiums paid above face value. PFROI provides two transactions for this purpose. PIN Phantom INterest - Use for imputed interest earned on zero coupon or "OID" bonds. This entry is required to get correct tax reporting, but does not affect valuations or before-tax ROI. PFROI automatically adds phantom interest on the bond to its cost basis in order to generate correct capital gains and open lot positions. You may calculate and enter "phantom interest" amounts yourself or alternatively use the Calc command (Alt+C) to calculate phantom interest. For the Calc command to work, the original BUY (or BYD or RCV) transaction for the bond must indicate the maturity date in the transaction description field using the format "##1/15/94". A maturity price of "100" is automatically assumed unless another price is indicated by appending a price after the maturity date, e.g.: "##1/15/94 $1000". Lot numbers must be assigned to the original purchase transaction and subsequent PIN transactions if the same issue of a ZCB bond is purchased on several different dates. To execute the Calc command, move the cursor to the start of the Amount field of the PIN transaction and key Alt+C. You should see the proper PIN amount appear there. Example: You are holding a ten year original issue zero coupon bond purchased at $5000 on 1/1/80 and maturing at $10000. The imputed interest rate is thus 7.1773% and the imputed interest through the seventh year (1987) is: Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === ================== =========== ============ ======== 01/01/80 BYD ZCB - 1 ZCB ##1/1/90 $100 100 -5000.00 12/31/80 PIN ZCB - 1 ZCB 357.86 100 12/31/81 PIN ZCB - 1 ZCB 384.55 108 12/31/82 PIN ZCB - 1 ZCB 412.15 115 12/31/83 PIN ZCB - 1 ZCB 441.74 124 12/31/84 PIN ZCB - 1 ZCB 473.44 133 12/31/85 PIN ZCB - 1 ZCB 507.42 142 12/31/86 PIN ZCB - 1 ZCB 543.84 152 12/31/87 PIN ZCB - 1 ZCB 582.87 163 75 Note: In general, unrealized gains on a "coupon" bond purchased at a market discount may be, but does not need to be reported to the IRS as "phantom interest". See Chapter 8, Special Situations for further examples of bond treatment. ACR ACcRetion - This transaction operates identically to the PIN transaction discussed above, but merely provides an alternative TAC code. AMT AMorTization - Use this transaction to amortize a premium paid on purchase of a bond. The amortization amount may be entered manually or calculated using the Alt+C command in a manner identical to that used for the PIN transaction described above. Example: A bond purchased on 10/30/87 at a 3% premium, paying a 10% coupon interest, and maturing 12/15/92 would have the following transactions: Mo/Dy/Yr TAC Symbol-Lot Description Quantity Amount Est. Tax == == == === ====== === ==================== ======== ============ ======== 10/30/87 BYD BONDX - 1 BONDX ##12/15/92 $100 100 -10300.00 10/30/87 IN- BONDX - accrued int. pmt. -125.00 -35 12/15/87 IN+ BONDX - BONDX semi-an. int. 500.00 140 12/31/87 AMT BONDX - 1 BONDX amortization -10.05 -3 06/15/88 IN+ BONDX - BONDX semi-an. int. 500.00 140 12/15/88 IN+ BONDX - BONDX semi-an. int. 500.00 140 12/31/88 AMT BONDX - 1 BONDX amortization -59.16 -17 06/15/89 IN+ BONDX - BONDX semi-an. int. 500.00 140 12/15/89 IN+ BONDX - BONDX semi-an. int. 500.00 140 12/31/89 AMT BONDX - 1 BONDX amortization -58.82 -16 06/15/90 IN+ BONDX - BONDX semi-an. int. 500.00 140 12/15/90 IN+ BONDX - BONDX semi-an. int. 500.00 140 12/31/90 AMT BONDX - 1 BONDX amortization -58.49 -16 06/15/91 IN+ BONDX - BONDX semi-an. int. 500.00 140 12/15/91 IN+ BONDX - BONDX semi-an. int. 500.00 140 12/31/91 AMT BONDX - 1 BONDX amortization -58.15 -16 06/15/92 IN+ BONDX - BONDX semi-an. int. 500.00 140 12/15/92 IN+ BONDX - BONDX semi-an. int. 500.00 140 12/15/92 AMT BONDX - 1 BONDX amortization -55.33 -15 12/15/92 SLL BONDX - 1 BONDX redeemed -100 10000.00 -0 Note that the amortization amount is negative and sums to the total amount of the purchase premium ($300) at the date of sale. Note also that accrued interest paid to the seller of the bond is not considered part of the premium, but is entered as a separate negative interest transaction which is immediately tax-deductible. Commission fees paid on purchase are assumed to be included in the purchase amount and amortized, but may be entered as a separate fee transaction to maximize immediate deductibility. 76 Partnership / Direct Investment Transactions Limited Partnerships or direct investments not involving corporate or government securities require several additional transaction types as follows: DST DiSTribution - Use for partnership cash distributions. Is summarized on the Other Income Report. Use separate entries for taxable and non-taxable portions, with a "0" entry in the Est. Tax field for the non-taxable portion. Example: Your portfolio receives a $742.00 cash distri- bution from an oil and gas limited partnership in which you own units. Five hundred and ten dollars of this distribu- tion is tax protected by depletion and depreciation allowances: Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 09/15/87 DST OGP1 Oil&Gas Partners 510.00 0 m 09/15/87 DST OGP1 Oil&Gas Partners 232.00 Note: In this case the $232.00 will appear on the Other Income report, but the $510 will be reported separately as non-taxable. An alternative treatment of this situation would be to include all $742 in a single taxable DST transaction along with a depreciation transaction (DPR) for the amount of $510. The DPR transaction is described below. 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. Lot numbers may be optionally used to attribute depreciation to a specific lot holding. Example: Your portfolio receives a $742.00 cash distri- bution from an oil and gas limited partnership in which you own units. Five hundred and ten dollars of this distribu- tion is tax protected by depletion and depreciation allowances: Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 09/15/87 DPR OGP1 Oil&Gas Partners -510.00 09/15/87 DST OGP1 Oil&Gas Partners 742.00 Note: In this treatment of the partnership, the distri- bution and depreciation amounts will appear respectively as "Long" and "Short" amounts on the Other Income report. 77 BRW BoRroW - Use for transactions involving borrowing of funds, such as a mortgage to finance a house. The BRW and repay (see RPY below) transactions are similar to SLS and BYC transactions. Example: You borrow $185,000 to buy a $240,000 commercial property, closed on 11/15/87: Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 11/15/87 BRW BLDG3 1 Bldg3 Mortgage -185000 185000.00 11/15/87 BYD BLDG3 2 Bldg @12th&Elm 1 -240000.00 Note: The same symbol but different lot numbers are used for the borrow and buy transactions so as to prevent combination of cost bases. 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. Example: You sell another commercial property for $155,000 and use the proceeds to pay off the remainder of its mortgage: Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 12/15/86 SLL BLDG2 1 Bldg2 Mortgage -1 155000.00 12/15/86 RPY BLDG2 2 Bldg2 @8th&Oak 1 -72583.24 See Chapter 8, Special Situations, for additional examples of BRW and RPY transaction used in conjunction with a depreciable asset. RNT ReNT - Use to indicate rent receipts from an asset. It functions similar to a DV+ or IN+ transaction. It is reported in the Other Income report. See Chapter 8, Special Situations, for an example of RNT usage. EXP EXPense - Use to indicate expenses associated with an asset. See Chapter 8, Special Situations, for an example of EXP usage. Other Transactions FEE Management FEE - Use for charge to portfolio for managment fee or other maintenance expense not associated with a particular security or transaction. The fee amount should be entered in the Amount field, not the Com/Fee field. Example: You manage several portfolios for which you charge 78 a monthly fee of $100. You deduct the fee as follows: Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 03/31/89 FEE monthly fee -100.00 Example: A mutual fund you own charges you a $25 fee by reducing your units when the net asset value (NAV) is $10/unit: Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== == =============== =========== ============ ======== 09/30/88 SLL MFUND 1 for Fund Fee -2.5 25.00 09/30/88 FEE MFUND Mutual fund fee -25.00 Note: In this example a symbol is used for the FEE tran- saction. This causes this transaction to be included during ROI calculation by security. Note also that the SLL transaction reduces the cost basis of the security and will result in a capital gain or loss (This is proper, the fund sells your shares to generate the fee purely as a convenience versus billing you for the fee. The fact that you are "forced" to sell does not relieve you of having to pay taxes on the gain). CBA Cost Basis Adjustment - Use to adjust the cost basis of a security in your portfolio. Although rare, in some instances such an adjustment may be necessary to maintain consistancy with tax laws. Example: You receive a one-time return of capital of $5000 on a drilling partnership interest which you purchased for $4000 when paid-in capital in the partnership was $10000/unit: Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 01/29/88 ROC DRILL 1 Drill Ptnrs 1 5000.00 0m 01/29/88 CBA DRILL 1 Drill Ptnrs 1 1000.00 Explanation: The CBA transaction is a taxable non-cash transaction and prevents your cost basis from going negative (not allowed by IRS) as a result of the ROC transaction. Important!: Although the cost basis adjustment in the prior example is positive, in some cases the adjustment will be negative. In these instances you will have to explicitly enter the negative sign for the entry in the amount field. 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 79 "After Tax ROI" and do not affect portfolio valuation or the Income Summaries reports. 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 the AutoTax calculation (Alt+C with cursor in Est. Tax field) so normally there should be no need for manual entries. The TAX transaction is inserted on the last day of the default fiscal year (set in PFROI Configurations) while the SCO and LCO are inserted on the first day of the following fiscal year. If manual entries of SCO and LCO transactions are needed, be sure not to use first day of the fiscal year (use the second day) so as to avoid deletion during subsequent auto-tax calculations. Note also that the loss carryover amounts are placed in the Quantity field of the transaction record. Some users may wish to disable automatically generated TAX, SCO and LCO transactions by setting a portfolio's Tax Adj. and Loss Carryover parameters to "Off" so as to prevent the year-end adjustment from "distorting" after-tax ROI on performance reports. Security 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 DataLink communications to download prices, symbols used must be compatible with those used by your pricing service. You may search for a transaction with a particular symbol using the Alt+K ("seeK") command. If a symbol is omitted from a transaction which requires a symbol the transaction will be treated as "inactive". Tax Lot Number (Lot) ─────────────────────────────────────────────────────────── PFROI uses the tax lot number, along with the security symbol, to match buy and sell transactions and short sale and cover transactions in computing capital gains. Depending on tax lot assignments, cost bases are computed on a "first-in, first-out" (FIFO), Last-in, First-Out (FIFO), average cost, or lot- specific basis. 80 FIFO Cost Basis Cost bases are computed on a "first-in, first-out" or FIFO basis if the same tax lot number is re-used 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 Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 02/04/87 BUY XYZ 1 XYZ 2000 -110000.00 04/01/87 DRI XYZ 1 XYZ dri 25.503 1279.25 07/01/87 DRI XYZ 1 XYZ dri 27.824 1301.20 10/01/87 DRI XYZ 1 XYZ dri 30.120 1912.34 01/02/88 DRI XYZ 1 XYZ dri 33.225 2000.30 04/01/88 DRI XYZ 1 XYZ dri 27.780 1722.36 06/01/88 SLL XYZ 1 XYZ -2100 126400.00 The cost basis of the sale in the prior example will be the cost of the original 2000 shares plus the cost of the first 100 shares purchased through dividend reinvestment ($115489.36 total). You may alternatively use the notation "FFO" in the "Lot" field to indicate "FIFO" tax lots as follows: Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 02/04/87 BUY XYZ FFO XYZ 2000 -110000.00 04/01/87 DRI XYZ FFO XYZ dri 25.503 1279.25 07/01/87 DRI XYZ FFO XYZ dri 27.824 1301.20 10/01/87 DRI XYZ FFO XYZ dri 30.120 1912.34 01/02/88 DRI XYZ FFO XYZ dri 33.225 2000.30 04/01/88 DRI XYZ FFO XYZ dri 27.780 1722.36 06/01/88 SLL XYZ FFO XYZ -2100 126400.00 Warning: Don't mix the "FFO" notation with numerical lot indicators for a given security; if you do cost bases will be incorrectly computed. Average Cost Basis A "running average" cost basis may be generated by omitting use of tax lot numbers altogether. For example: Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 02/ 4/87 BUY XYZ XYZ 2000 -110000.00 04/01/87 DRI XYZ XYZ dri 25.503 1279.25 07/01/87 DRI XYZ XYZ dri 27.824 1301.20 10/01/87 DRI XYZ XYZ dri 30.120 1912.34 01/02/88 DRI XYZ XYZ dri 33.225 2000.30 04/01/88 DRI XYZ XYZ dri 27.780 1722.36 06/01/88 SLL XYZ XYZ -2100 126400.00 81 This results in a "running average" cost such as required by Canandian tax law and allowed for U.S. taxpayers for mutual fund holdings (equivalent to "single catagory" treatment). The cost basis of the sale in this example is the average cost of all shares acquired ($55.12652/share or $115764.98 total). You may alternatively use the notation "AVG" to indicate average lots as follows: Mo/Dy/Yr TAC Symbol Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 02/ 4/87 BUY XYZ AVG XYZ 2000 -110000.00 04/01/87 DRI XYZ AVG XYZ dri 25.503 1279.25 07/01/87 DRI XYZ AVG XYZ dri 27.824 1301.20 10/01/87 DRI XYZ AVG XYZ dri 30.120 1912.34 01/02/88 DRI XYZ AVG XYZ dri 33.225 2000.30 04/01/88 DRI XYZ AVG XYZ dri 27.780 1722.36 06/01/88 SLL XYZ AVG XYZ -2100 126400.00 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 Lot Description Quantity Amount Est. Tax == == == === ====== === =============== =========== ============ ======== 02/ 4/87 BUY XYZ 1 XYZ 2000 -110000.00 04/01/87 DRI XYZ 2 XYZ dri 25.503 1279.25 07/02/87 DRI XYZ 3 XYZ dri 27.824 1301.20 10/02/87 DRI XYZ 4 XYZ dri 30.120 1912.34 01/02/88 DRI XYZ 5 XYZ dri 33.225 2000.30 04/01/88 DRI XYZ 6 XYZ dri 27.780 1722.36 06/01/88 SLL XYZ 1 XYZ -2000 120380.95 06/01/88 SLL XYZ 2 XYZ -8.875 534.19 06/01/88 SLL XYZ 4 XYZ -30.120 1812.94 06/01/88 SLL XYZ 5 XYZ -33.225 1999.82 06/01/88 SLL XYZ 6 XYZ -27.780 1672.09 The cost basis in this example is $116080.18, providing the most favorable tax result. Note however that the I.R.S. requires you to have acquisition dates noted by your broker on sales transaction slips for this method to be allowed. Tax lots which have been closed-out may be re-used. Last-In, First Out (LIFO) Last-In, First Out tax lots may be implemented by using "LFO" in the tax lot field. Consult your tax advisor concerning acceptability of LIFO treatment. 82 Description Field ───────────────────────────────────────────────────────────── The PFROI transaction description field is used primarily to allow you to identify a security by name rather than just symbol. You may also use it for a brief note, such as to note the source of funds or check number in connection with a transaction. The description field is also occasionally used for data entry for certain transactions such as noted in the prior section covering transaction codes. Quantity ────────────────────────────────────────────────────────── The transaction Quantity field should only be used for trans- actions which require a Quantity entry. Transaction types which do not require a quantity entry will skip this field during horizontal cursor movement. This field will take fractional input of up to four decimal places. Amount ────────────────────────────────────────────────────────── The transaction Amount field should only be used for trans- actions which require a Amount entry. Transaction types which do not require an amount entry, for example a Split transaction, will skip this field during horizontal cursor movement. Amount entries should contain the total net amount of the subject transaction, including any commission charges, fees and transaction taxes applied at the time of the transaction. For example, you buy 100 shares of XYZ priced at $10/share. Your broker charges a $50 commission. In addition, a $2 local transaction tax is imposed. The "amount" entry for this transaction is thus $1052.00. If in the prior example you sold the shares for $10/share instead of buying them, but had the same transaction costs, the net "amount" entry would be $948. Sign Assignment ────────────────────────────────────────────────────────── Both Quantity and Amount entries are assigned the proper sign during data entry based upon the TAC type of the transaction whenever the siGn function (see top of trans-action screen) is turned On. In general, transactions which add shares or units to the portfolio have a positive quantity sign, and those which remove shares from the portfolio have a negative quantity sign. The sign assignment for the Amount field is somewhat more complex. Non-combined transactions such as pure SLL or BUY transactions are assigned signs according to the direction of cash flow into or out of the portfolio. For example a BUY removes cash from the portfolio and thus has a negative sign, whereas a SLL raises cash and thus has a positive sign. 83 Many PFROI transactions however are the combination of several transactions, e.g. BUY plus DPF equals BYD (Buy and Deposit). The amount signs for these transactions appear somewhat arbitrary, however they follow an internally consistent convention. WARNING: You will inadvertantly defeat the sign assignment process if you change the TAC code of a transaction without re- entering data in both the Quantity and Amount fields. As a general rule, if you want to change a TAC code, first delete the transaction (Del key), then insert a blank transaction (Ins key) and proceed with data entry. Estimated Tax ─────────────────────────────────────────────────────────── The values in the Est. Tax field normally are computed for the year by executing the Alt+C (Calc) function while the cursor resides in this field. Occasionally, however, there are special situations due to the complexity of U.S. tax laws which require manual calculation and tax input in this field. One such situation are transactions which are tax-free such as interest on a municipal bond. You may designate this by making a manual tax entry of "zero". Transactions so indicated are reported separately in a tax free category on the dividend, interest, and capital gains reports. Commission and Transaction Fees ─────────────────────────────────────────────────────────── As previously noted, commission charges and transaction fees and taxes should be netted in the Amount entry for Buy, Sell, Buy to Cover, and Sell Short type transactions. The Coms/Fee field (toggle Alt+D for alternate display fields) does allow you to enter and track these expenses separately, however: *ALL***** Transactions: DEMOPF #2 ($) siGn=On 258K Esc Pg Ins Del Alt+ File Prn Sort Aux Mask Dspl Calc seeK Tot Imp Bal Help Mo/Dy/Yr TAC Symbol -Lot Description Quantity $ Amount Com./Fees == == == === ========= === ================ =========== ============ ========= 12/31/89 SLL FFZCB - 1 Redeem 1st Fed. -100 10000.00 12/31/89 IN+ BRKR* - Broker int. 67.89 12/31/89 TAX - C.G. Tax Adj. 01/03/90 SLL DIA - 1 Diasonics @4 -1000 3930.00 70.00 01/11/90 BUY VWIGX - Vngrd World Int' 1449.2754 -15000.00 01/11/90 BYD VGDMMF$ - Vngrd MMF 15000 -15000.00 01/31/90 DRI VGDMMF$ - MMF reinv 210.97 210.97 01/31/90 IN+ BRKR* - Broker Int. 64.10 02/01/90 BUY XICO - 2 Xicor Corp @3 600 -1835.00 35.00 02/02/90 DV+ T - AT&T div 90.00 02/28/90 DRI VGDMMF$ - MMF reinv 232.31 232.31 02/28/90 IN+ BRKR* - Broker Int. 57.32 03/01/90 DV+ F - Ford div 450.00 84 (Page intentially blank) 85 6 PFROI Valuations ─────────────────────────────────────────────────────────── Valuation Frequency ─────────────────────────────────────────────────────────── PFROI now has no limit on the total number of valuations dates and the underlying positions which may be stored, though only 64 valuations may be viewed on screen at any one time. It is recommended that valuations be kept on at least a yearly basis although you may wish to keep more frequent valuations. "Create" vs "Review" Commands ─────────────────────────────────────────────────────────── The Review command merely displays existing position records and does NOT recompute a portfolio position after edits have been made. In order to create a new valuation or re-compute an already existing valuation subsequent to transaction edits you MUST use the Alt+C (Create) command. New or re-computed valuations generated using the Create command are computed starting from the valuation date indicated by the Base Date displayed in the valuation screen display header. The default base date may be set on the Portfolio Configure menu as either the last previous valuation date (Last setting) or the day before the first transaction date (First setting). The advantage of using the First setting for the base date is that all transactions from the first entry in the portfolio are included in the position calculations. This assures that all edits are reflected in the computed position. The advantage of the Last setting for the base date is that valuation computations will execute more quickly. However, if you use the Last setting, you must be certain that you have not modified any transactions prior to the last previous valuation. ─────────────────────────────────────────────────────────── IMPORTANT! : Whenever a transaction is modified or a new trans- action inserted, all subsequent valuations must be regenerated using the Create command to incorporate the change. This is a good reason to be careful to not overlook transactions or make entry errors when entering original transaction data. Fortun- ately, when valuations must be regenerated, market prices in the original valuation are retained and thus do not need to be re-entered or re-downloaded. ─────────────────────────────────────────────────────────── 86 Cash and Position Reconciliation ─────────────────────────────────────────────────────────── A common user difficulty is reconciling share quantities and cash positions on the Position screen with broker statements and other records. Usually the difficulty is that a transaction entry was omitted, the wrong transaction code was used, or the sign on an Amount or Quantity entry is reversed. The best way to resolve these errors is to go back to an earlier position screen on which cash and share positions did reconcile and then Create or re-Create the position for each subsequent month. Verify each result against a broker statement or other record. If the results do not match, you then know that your errors must have occured in that month's trans- actions. Search for and correct these errors. Proceed forward, repeating the process until your portfolio is up-to-date.