How does FACTS calculate and distribute earnings?

FACTS allocates and distributes earnings and fees based on average daily balance.
The earnings for the cycle are allocated across the days of the cycle based on the relative value of the pool.
• The earnings allocated to each day are also allocated back to the funds based upon their relative value to each other and the total market for the day. The total market values for each fund are calculated for each day based on the beginning balances and the various transactions that have been included in the cycle.   The confirm dates are used to determine on which day the transaction should impact. For example, if a fund has a beginning market of \$1000 and a gift transaction of \$400 with a confirm date of the third day, the ending market balance on the third day would be \$1400.
• Once all the daily fund values are determined, the total market for each day for the pool is determined by adding all of the individual fund daily market values.   So, if fund 1 is \$1000 and fund 2 is \$2000, the total market is \$3000.
• After the total market for the day is determined for the pool, a total daily pool number is determined by adding all the daily pool numbers together.   For instance, if there are 4 days in the cycle and the pool markets totaled \$3000, \$3000, \$3400, and \$3400 for each of the 4 days, this total would be \$12800.
• The system then determines the percentage of the total for each day.   In our example, day one's total of \$3000 is 23.4375% of \$12800.   Each daily ratio or proportion is determined.   This ratio is applied to the total earnings for the month so that that portion of earnings associated with each day can be calculated.   For example, if the total earnings for the month are \$100, then 23.4375 would be given to day 1 and 2 and 26.5625 would be given to day 3 and 4.   (\$23.4375 + \$23.4375 + \$26.5625 + \$26.5625 = \$100).
• The system looks at the relative value of each fund to the whole for each day. For example:
• Fund 1 has a value of \$1000 on day one and two and has a \$400 gift on day three to give it a value of \$1400 on day three and day four.
• F und 2 has a flat \$2000 balance for the cycle with no transactions.
• For day one, fund 1 makes up 1/3 of the balance and fund 2 makes up 2/3.   Fund 1 will get 1/3 of the day one earnings or 1/3 x \$23.4375 = \$7.8125 and fund 2 will get 2/3 of the \$23.4375 or \$15.6250.

This is done for each fund for each day and then totaled to get the total cycle earnings for that fund.

FACTS.doc

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