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FAQ: Convert Share Class for Mutual Fund

Tod

In some mutual fund families, when an investor reaches some milestone of ownership in a particular fund, the investor's shares may be converted from one class of the fund to another class that typically has lower cost. Such milestones usually involve total amount invested in the fund or length of time the shares. In many cases, all the investor's shares are converted. In some circumstances, only shares that have been held for a certain period of time (perhaps 2 or 5 years) are converted. Usually the conversion only affects one account and not others (for example, shares held in your investment account are converted but not the shares of the same fund held in your spouse's IRA). The conversion may be one-for-one or may have some other conversion ratio applied. These conversions almost always tax-free and that is the context for this presentation.

Quicken does not have a specific single transaction to implement this type of conversion. The commonly accepted approach uses a Corporate Acquisition transaction. The old class shares (Class A for discussion purposes) are being acquired by the new class shares (Class B ). When the user enters this transaction, Quicken will enter one Shares Removed transaction deleting all the Class A shares for the account and usually multiple Shares Added transactions adding Class B shares to the account-- one added transaction for each lot of the Class A shares originally held. This Corporate Acquisition process maintains the original cost basis and acquisition dates for all lots being held and will properly consider the share ratio that may be applicable.

If the user chooses to enter these transactions manually, the same result will be achieved although the risk of error is greatly increased. When a user enters a Corporate Acquisition transaction in any account, the process is applied in ALL accounts that currently held the acquired shares (Class A shares). This is often not appropriate. If the conversion is not applicable in some account, the user should simply delete the newly added transactions (Shares Removed and Shares Added) in the accounts for which the conversion/acquisition is not applicable. (Continued)

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Tod

Quote:" FAQ: Convert Share Class for Mutual Fund: In some mutual fund families, when an investor reaches some milestone of..."_- continued

If only certain shares are being converted within one account (say shares held longer than 5 years), the user may want to enter the Shares Removed and Shares Added transactions manually rather than through the Corporate Acquisition process. Using the Corporate Acquisition process would involve entering that transaction, then editing the newly added 'Shares Removed' transaction to reflect that only certain lots were removed, and deleting the 'Shares Added' transactions associated with more recent acquisitions.

It may be easier to manually enter a 'Shares Removed' transaction that properly identifies the lots being removed and one or more Shares Added transactions that indicate the Class B shares replacing the removed shares. In the Shares Added transaction be sure to specify correctly the original cost and acquisition date. These transactions will have an effect on certain performance metrics.

As you hold the new (Class

shares for a longer time, the impact on the performance metrics tend to lessen. The most reliable performance metric (in my opinion) is the Average Annual Return percentage. The user can customize a report to only include the older and newer (class A and class

holdings and get performance measures that are unaffected by the conversion transactions. Because of the definition of Amount Invested, ROI% is a poorly suited metric after these transactions.

unknown

Thanks for the great discussion. I suppose that if I sold the old shares and purchased the new shares that they would still not carry through the cost basis, etc. So the corporate acquisition is the way to preserve the continuity of the transactions.

Tod

"I suppose that if I sold the old shares and purchased the new shares that they would still not carry through the cost basis, etc."
That is right. Each time you Buy Shares, a new cost basis gets established for the shares you just bought based on the price you just paid and the date of the transaction. The Shares Added transaction that the Corporate Acquisition invokes allows the basis to be separately specified and the date of acquisition can be different than the date of the transaction.

unknown

I started looking into using the corporate acquisition procedure to fix my share class conversion transactions. When I tried one transaction, I realized that this would just be too difficult with the two different funds and multiple partial conversions, then made more complex by having some of these shares in other accounts. This action converts all shares, even those in hidden accounts, according to the corporate acquisition transaction procedure. If it could be limited to single accounts, it might be workable. If I had recognized this problem back in September 2005, when the first conversion transactions occurred, it might have been feasible, but not now. Any other suggestions?My version of Quicken is 2006. Would the new 2008 Quicken have any better way to make these transactions more easily?

Tod

"I started looking into using the corporate acquisition procedure to fix my share class conversion transactions. When I tried one transaction, I realized that this would just be too difficult with the two different funds and multiple partial conversions, then made more complex by having some of these shares in other accounts. This action converts all shares, even those in hidden accounts, according to the corporate acquisition transaction procedure. If it could be limited to single accounts, it might be workable. If I had recognized this problem back in September 2005, when the first conversion transactions occurred, it might have been feasible, but not now. Any other suggestions?"
In my opinion, when there are partial conversions, the user is often better off entering the transactions manually rather than through a single Corp Acq entry followed by multiple deletions and edits. The user must (or should) take note of the shares being removed (converted) so that the like information_(basis and acq. date) are entered for the Add shares half of the entry process. You are right about the Corp Acq. action applying across all accounts. I had not noted the risk before of this occurring in hidden accounts, but then I only hide accounts after their balances are taken to zero - dollars and shares. In those cases, there are no actions entered in the hidden accounts._ I'm not sure why one would hide an account with assets in it, but I am likewise sure someone out there has some reason to do so. To repeat(?), in accounts where the conversion effect is not applicable, simply delete the remove Shares / Add_Shares transactions_that were entered by the general Corp Acq entry.

unknown

I am using Quicken Mac 2007. Please explain in more detail how to [manually enter a 'Shares Removed' transaction that properly identifies the lots being removed and one or more ?Shares Added? transactions that indicate the Class A shares replacing the removed shares.] Do I use "Move Shares(MS)"transaction? Can you also explain how to enter the original cost and acquisition date in the ?Shares Added? transaction?

unknown

"I am using Quicken Mac 2007".
Ask no further...please post your question in the Quicken for Mac users forum.You have this posted in the Quicken for Windows users forum.

Tod

As gmalis1 implied, I know nothing about the Mac setup, but I'll try to expand in more generalities from the Windows side and perhaps you can extrapolate._ "manually enter a 'Shares Removed' transaction that properly identifies the lots being removed" -- The Windows version_has a Shares Removed transaction that does just that - the shares are removed from the particular account and no recipient account is associated with the transaction._ So it is not a move, it is a remove._ It is as if you gave them away._ As part of that transaction definition is the ability to specify which lots of the_particular security is being removed, just as when one might specifiy which lots are being sold in a Sell Shares transaction._ If only some shares are being converted, that is where you want to specify which one those are._ Each lot being removed at this point_ will have its own acquisition date and cost basis associated with that lot._ "and one or more ?Shares Added? transactions that indicate the Class A shares replacing the removed shares." -- Paralleling the Remove Shares transaction is an Add Shares transaction._ In that case, the source of the shares is not identified._ They are not being bought, they just 'appear' in your Quicken investment account._ It is as if you were just given these shares._ As part of the specification of that transaction, the user can identify the date of acquisition of those shares (which is a tax-related date and may be different than the date of the transaction._ In the case of this conversion, the acquisition date corresponds to the acquisition date for the lot that these converted shares came from - the date from the prior comments._ Likewise, the Add Shares transaction allows the user to define the cost basis for those shares._ This similarly should match the cost basis for the lot of shares just removed._ Thus you might end with transactions:--Remove 45 shares Class B (acquired 1/2/03 for $200)--Remove 90 shares Class B (acquired 3/4/05 for $250)--Add_36 Shares Class A (acquired 1/2/03 for $200)--Add 72 Shares Class A (acquired 3/4/05 for $250)Hope this helps

unknown

Thank you for the info. I can not find a 'Shares Removed' transaction on the Mac version, the windows version seems to have more features. I will post this on the Mac forum.

unknown

I have looked for "corporate acquisition" in the list of transactions everywhere I can think of, but cannot find it. Where is this transaction listed?

unknown

"I have looked for "corporate acquisition" in the list of transactions everywhere I can think of, but cannot find it."
If you are looking in a Quicken "Single Mutual Fund" account, you will not see that transaction: a Single Mutual Fund account can only hold one security.To learn about the Corporate Acquisition transaction: look in Quicken Help (for "corporate acquisition")..To learn about how to deal with multiple securities in a Single Mutual Fund account: look in Quicken Help (for "single mutual fund").

unknown

Thank you for your response. Removing/adding works just fine for the conversion of the original shares & I can easily tell which lot to specify_ however, in addition to the share class exchange of the original shares purchased, I also need to record an exchange for the dividends I have received for those original shares since over the time I've held them in my account. My mutual fund just lumps them all together into one transaction.How do I specify which lot (since there have been several over the years I've held the shares which were not only paid for the shares currently being converted as well as to other shares in my account that have not yet reached their exchange date)? Or am I thinking in the wrong direction?

Tod

"... I also need to record an exchange for the dividends I have received for those original shares since over the time I've held them in my account. My mutual fund just lumps them all together into one transaction."
Not a clear statement._ Are these reinvested dividends not included in your Quicken records? If not, why not? They should be if you are trying to keep complete records. If they are in your Quicken data, the conversion process is just the same (Remove shares and Add Shares), even if your fund family reports it as one lump sum action.
"How do I specify which lot?"
The Remove Shares window allows you to specify which lot of shares is being removed.

unknown

Hi, I have a vanguard account with two different funds. One fund is the total stock market index. Recently it was converted from "investor" shares to "admiral" shares. I followed the steps described above and used the "corporate acquisition" transaction to remove the old shares and add the new shares. Once I completed inputing the information (number of shares/share price, etc.) quicken listed a number of transaction and showed me having about 43,000,000 total shares. Which would be great if it is true, however, it should only be about 3,500 shares - the figure I inserted in the transaction box. I did this twice figuring I may have typed the numbers wrong but both times Quicken came up with the same result. Any help would be greatly appreciated. Thanks.

unknown

Was this a one for one exchange, i.e., one "admiral" share per "investor" share?If so, did you enter a 1 for the "New Shares Issued per old share" entry box of the Corporate Acquisition dialog window?

unknown

That was the problem. Thanks very much. I really appreciate it.

unknown

... I also need to record an exchange for the dividends I have received for those original shares over the time I've held them in my account. My mutual fund just lumps them all together into one transaction.Not a clear statement. Are these reinvested dividends not included in your Quicken records? If not, why not? They should be if you are trying to keep complete records. If they are in your Quicken data, the conversion process is just the same (Remove shares and Add Shares), even if your fund family reports it as one lump sum action.Yes, they are reinvested & yes, I the dividends, etc. have been recorded in my Quicken data. What I meant was that when my mutual fund pays dividends or declares capital gains, etc, the amount paid is for all shares held for a particular class regardless of purchase date.So, for example, I am holding x shares purchased on x date which are now being exchanged along with y & z shares purchased on y & z dates which have not yet reached their conversion period_ however, when dividends are paid it is as one total amount for all shares held (i.e., x y & z).How do I specify which lot (???)? The Remove Shares window allows you to specify which lot of shares is being removed.My question here is how do I know which lot to specify?

Tod

So, for example, I am holding x shares purchased on x date which are now being exchanged along with y &amp_ z shares purchased on y &amp_ z dates which have not yet reached their conversion period_ however, when dividends are paid it is as one total amount for all shares held (i.e., x y &amp_ z). My question here is how do I know which lot to specify?It is common in my experience that dividends from x, y, and z holdings are lumped together._ To do otherwise would be an exponentially increasing nightmare for the fund families and the consumers.You seem to be saying that your 'x' holdings are being converted and all the dividends associated with that holding are being converted - whether that dividend was received last month or 5 years ago._ In my experience, that would be an unusual program._ (Caveat:_ I have been 'around the block' a couple of times but there are a lot of fund families I have never dealt with._ Most anything is possible.)_ If what you say is true as I have understood it, I think you would need to talk with the fund family about getting more specific details._ Possibly, you can convert the oldest shares you have as those are the ones usually converted._ Good Luck

unknown

Quote:" FAQ: Convert Share Class for Mutual Fund: So, for example, I am holding x shares purchased on x date which..."Does anyone know whether the new 2009 version allows you to do this automatically? I have been dollar-cost-averaging in B-shares for many years in several accounts. So, every month I need to go through the add/remove function. The new version would be worth every penny if it automated this (while maintaining appropriate cost basis and ROI would be nice too).I tried emailing Quicken directly before it was released, but the tech reps didn't understand what B-shares vs. A-shares are.

unknown

Quote:" FAQ: Convert Share Class for Mutual Fund: Does anyone know whether the new 2009 version allows you to do this..."I too and planning to purchase Quicken 2009 and would like to know if this is addressed in the new version. Anyone have the new version?Thanks in advance

Howard Roark

Quote:" FAQ: Convert Share Class for Mutual Fund: I too and planning to purchase Quicken 2009 and would like to know if this is addressed in the new version".

No, it's not addressed: Q2009 handles this the same as previous versions.

unknown

I have this conversion problem, too. However I cannot go to where your answer is continued. How do I do this, or just give the brief answer.Thanks,Howiem

unknown

Quote:" FAQ: Convert Share Class for Mutual Fund: I have this conversion problem, too. However I cannot go to where your...">Click on the "Previous" button - lower right of this window.

unknown

Tod:You're a lifesaver!!! I have been struggling with this share class conversion thing for three months. Twice I've submitted questions to tech support and gotten useless answers back (from Bangalore or somewhere). Thanks for the answer.

unknown

Quote:" FAQ: Convert Share Class for Mutual Fund: _- continued If only certain shares are being converted within one account (say..."Thank you for the great info! I am just getting back into Quicken after several years, and was trying to figure out how to handle this transaction. I have not tried it yet, but hope my reinvested dividends don't get all clumped into one as others have mentioned. To limit the accounts this conversion affects, is it possible to temporarily mark accounts as closed? If this is even possible, I wonder if it would still try and exchange the funds in the "closed" accounts as well (or maybe a 0 balance/shares is necessary). My question is regarding the sale of the new exchanged/"add shares". I suspect the transaction would have today's date, Couldn't that have an effect on capital gains (depending how long you hold the exchanged shares)? If so, how should this be handled? On a separate note, I see the drop down now lists 2010. Is Quicken 2010 due out soon? I JUST bought 2009 and wondering if I should return it and wait on 2010. Thanks in advance for any info provided. Regards,Gavin

unknown

Quote:" FAQ: Convert Share Class for Mutual Fund: As gmalis1 implied, I know nothing about the Mac setup, but I'll try..."I just found this thread. I also need to convert share classes in only one of several accounts while keeping tax lots intact. I can see that the Remove Shares/Add Shares approach would work (although very cumbersome if there is a long history of transactions, such as when there are monthly dividends). However, wouldn't these transactions muddle up the Investment Performance reports for the years involved? i.e. those lots that resulted from Dividends or CG reinvestments would now appear to be just additional purchases, thus not counted as investment income. Is there a solution for that?Is Intuit ever to add a Convert Share Class transaction?Thanks for any comments,Tony

Tod

Quote:" FAQ: Convert Share Class for Mutual Fund: I just found this thread. I also need to convert share classes in..."

However, wouldn't these transactions muddle up the Investment Performance reports for the years involved? i.e. those lots that resulted from Dividends or CG reinvestments would now appear to be just additional purchases, thus not counted as investment income. Is there a solution for that?

As originally noted, some performance metrics can be affected.  The impact that I see along the line you are inquiring is that the amount invested for the original shares will be different than the amount invested for the converted shares since the original shares had reinvestments and the converted shares are created through  ALL 'add shares' transactions.  That difference in amount invested will lead to differences in ROI and perhaps other parameters.   I do not know of a clean direct alternative approach.  Properly constructed, a report on Average Annual Return should be consistent and correct.  You need to choose what is meaningful to you and relevant to your data.  I do not see where this approach muddles up data 'for the years involved'.  The conversion - Remove and Add shares - takes place in current time at one day in time, not back when the original transactions were entered.  Again careful construction of reports across the conversion time is necessary to get meaningful results.  Reports for times before the conversion or after the conversion should not be affected.

Is Intuit ever to add a Convert Share Class transaction?
Why do you ask other users what the corporate plans are?   Nobody posting here has any information relevant to your question.   Intuit does not share their future development plans.   I have seen Intuit employees post here that one of their development considerations is existence of a viable workaround.   It would not surprise me if Intuit rationalized that this approach represents a viable workaround for share class conversions, thus they would choose not to expend resources to develop a separate tool.   Note that any specific tool so developed has to address all the subtleties or carry all the flaws of the current workaround.   The more subtleties that are deemed necessary to address, the greater the development cost.

Raymond Turner

Quote:" FAQ: Convert Share Class for Mutual Fund: I just found this thread. I also need to convert share classes in..."

However, wouldn't these transactions muddle up the Investment Performance reports for the years involved? i.e. those lots that resulted from Dividends or CG reinvestments would now appear to be just additional purchases, thus not counted as investment income. Is there a solution for that?

As originally noted, some performance metrics can be affected.  The impact that I see along the line you are inquiring is that the amount invested for the original shares will be different than the amount invested for the converted shares since the original shares had reinvestments and the converted shares are created through  ALL 'add shares' transactions.  That difference in amount invested will lead to differences in ROI and perhaps other parameters.   I do not know of a clean direct alternative approach.  Properly constructed, a report on Average Annual Return should be consistent and correct.  You need to choose what is meaningful to you and relevant to your data.  I do not see where this approach muddles up data 'for the years involved'.  The conversion - Remove and Add shares - takes place in current time at one day in time, not back when the original transactions were entered.  Again careful construction of reports across the conversion time is necessary to get meaningful results.  Reports for times before the conversion or after the conversion should not be affected.

Is Intuit ever to add a Convert Share Class transaction?
Why do you ask other users what the corporate plans are?   Nobody posting here has any information relevant to your question.   Intuit does not share their future development plans.   I have seen Intuit employees post here that one of their development considerations is existence of a viable workaround.   It would not surprise me if Intuit rationalized that this approach represents a viable workaround for share class conversions, thus they would choose not to expend resources to develop a separate tool.   Note that any specific tool so developed has to address all the subtleties or carry all the flaws of the current workaround.   The more subtleties that are deemed necessary to address, the greater the development cost.

I am using Quicken 2008. Since I originally set up the account as a mutual fund, 'corporate acquisition' does not appear in the drop down menu of actions. It would seem this is not a viable workaround. Am I missing something?

q_lurker

Quote:" FAQ: Convert Share Class for Mutual Fund: I just found this thread. I also need to convert share classes in..."

However, wouldn't these transactions muddle up the Investment Performance reports for the years involved? i.e. those lots that resulted from Dividends or CG reinvestments would now appear to be just additional purchases, thus not counted as investment income. Is there a solution for that?

As originally noted, some performance metrics can be affected.  The impact that I see along the line you are inquiring is that the amount invested for the original shares will be different than the amount invested for the converted shares since the original shares had reinvestments and the converted shares are created through  ALL 'add shares' transactions.  That difference in amount invested will lead to differences in ROI and perhaps other parameters.   I do not know of a clean direct alternative approach.  Properly constructed, a report on Average Annual Return should be consistent and correct.  You need to choose what is meaningful to you and relevant to your data.  I do not see where this approach muddles up data 'for the years involved'.  The conversion - Remove and Add shares - takes place in current time at one day in time, not back when the original transactions were entered.  Again careful construction of reports across the conversion time is necessary to get meaningful results.  Reports for times before the conversion or after the conversion should not be affected.

Is Intuit ever to add a Convert Share Class transaction?
Why do you ask other users what the corporate plans are?   Nobody posting here has any information relevant to your question.   Intuit does not share their future development plans.   I have seen Intuit employees post here that one of their development considerations is existence of a viable workaround.   It would not surprise me if Intuit rationalized that this approach represents a viable workaround for share class conversions, thus they would choose not to expend resources to develop a separate tool.   Note that any specific tool so developed has to address all the subtleties or carry all the flaws of the current workaround.   The more subtleties that are deemed necessary to address, the greater the development cost.

prettygoodgolfer wrote:  "I am using Quicken 2008. Since I originally set up the account as a mutual fund, ...   Am I missing something?"

Your problem is that you set it up as a 'single' mutual fund account.  You should be able to change that setting (Overview tab for that account; account attributes area).  Then you can implement the Corporate Acquisition approach.

I suggest you backup the file first incase you do not like the results.  I also will not predict what other ramifications droppping the SMF setting will have on your personal setup and processing.  I do not use SMF accounts finding their drawbacks (such as this) outweigh any advantages nor do I recommend their use.  Ultimately, it will be your decision.

jr7107

Quote:" FAQ: Convert Share Class for Mutual Fund: I just found this thread. I also need to convert share classes in..."

However, wouldn't these transactions muddle up the Investment Performance reports for the years involved? i.e. those lots that resulted from Dividends or CG reinvestments would now appear to be just additional purchases, thus not counted as investment income. Is there a solution for that?

As originally noted, some performance metrics can be affected.  The impact that I see along the line you are inquiring is that the amount invested for the original shares will be different than the amount invested for the converted shares since the original shares had reinvestments and the converted shares are created through  ALL 'add shares' transactions.  That difference in amount invested will lead to differences in ROI and perhaps other parameters.   I do not know of a clean direct alternative approach.  Properly constructed, a report on Average Annual Return should be consistent and correct.  You need to choose what is meaningful to you and relevant to your data.  I do not see where this approach muddles up data 'for the years involved'.  The conversion - Remove and Add shares - takes place in current time at one day in time, not back when the original transactions were entered.  Again careful construction of reports across the conversion time is necessary to get meaningful results.  Reports for times before the conversion or after the conversion should not be affected.

Is Intuit ever to add a Convert Share Class transaction?
Why do you ask other users what the corporate plans are?   Nobody posting here has any information relevant to your question.   Intuit does not share their future development plans.   I have seen Intuit employees post here that one of their development considerations is existence of a viable workaround.   It would not surprise me if Intuit rationalized that this approach represents a viable workaround for share class conversions, thus they would choose not to expend resources to develop a separate tool.   Note that any specific tool so developed has to address all the subtleties or carry all the flaws of the current workaround.   The more subtleties that are deemed necessary to address, the greater the development cost.

Where is Tod?