Dividends

Omnibus Platform: Dividend Processing

Distribution elections are made at the position level, CASH or DRIP, and because each election maps to its own Omnibus Account at the Transfer Agent, entitlements are segregated cleanly at the omnibus layer. A position is defined by account, fund, share class, and distribution election, meaning that if an investor holds both a CASHposition and a DRIP position in the same fund and share class, each position will be allocated underneath a separate Omnibus Account.

In the custodian omnibus model, Monark does not touch cash at any point in the dividend process: funds wire cash to the Custodian directly. In the MMM Securities master omnibus, funds wire cash to MMM Securities LLC, Monark's broker-dealer subsidiary, which forwards each Custodian's pro-rata share based on record-date balances. In both models, Monark provides the per-investor breakdown of the dividend via the Dividend Event webhook. Upon receipt of the webhook and wire, the Custodian allocates cash downstream to investor accounts accordingly.

Reinvested dividends are treated similarly, except Monark will receive the updated Position at the Omnibus Account level, and allocate shares downstream accordingly. Similar to CASH dividends, when DRIP dividends are processed Monark will send a Distribution Event webhook with the per-investor breakdown of the allocation.

Dividend Eligibility

Dividend eligibility is based on the settlement date of each tax lot.

If the settlement date of a tax lot falls on or before the dividend's record date, the lot is eligible to receive the dividend. If the settlement date of a tax lot falls after the dividend's record date, the lot is ineligible to receive the dividend. Settlement date, not order submission date or match date, governs eligibility.

In Monark's Omnibus Platform, the Dividend Eligibility rule applies at the individual lot level. In the event of a Model Order, each Child fill is evaluated independently: Child fills that settle on or before the record date are eligible for the distribution, and Child fills that settle after are not. This holds true even if the placement(s) of the Model Order span across the record date of the dividend.

CASH Distributions

When a fund announces a distribution, the Transfer Agent notifies Monark in advance with the record date, payable date, and distribution rates. On payable date, the TA sends Monark the trade file describing the distribution and wires the cash directly to the Custodian (or, in the MMM Securities master omnibus, to MMM Securities, which forwards each Custodian's share). EFO reconciles the record-date positions on the TA's file against our internal sub-ledger, calculates the per-investor entitlement, and delivers the breakdown to the Custodian for downstream allocation. Custodians receive a wire from the TA (or from MMM Securities) and the per-lot breakdown from Monark EFO, and allocate cash downstream to investor accounts accordingly.

CASH distributions are issued and broken down as follows:

1. Declaration: The fund declares a distribution. The Transfer Agent notifies Monark in advance with the record date, payable date, and distribution rates via EFO's integration with the TA.
2. Payable date, or omnibus-level payment: The TA sends EFO the trade file describing the distribution (record-date omnibus positions, distribution rates, and total dollar amount), and wires the cash directly to the Custodian (or, in the MMM Securities master omnibus, to MMM Securities, which forwards each Custodian's pro-rata share based on record-date balances). The wire and the trade file move concurrently. Upon receiving the file, EFO generates the per-lot breakdown (see below).
3. Reconciliation: EFO reconciles the record-date positions on the TA's trade file against our internal sub-ledger, verifying that the omnibus-level dollar amount on the file matches the expected amount based on record-date sub-account positions and the distribution rate.
4. Sub-ledger breakdown: EFO calculates the per-investor entitlement. We take each eligible lot's record-date shares multiplied by the distribution rate and round the amount down to the penny. Then, we deliver the per-investor, per-lot breakdown to the Custodian via the Dividend Event webhook. Rounding residuals, if any, accrue to the correction account (see Rounding and the Correction Account below).
   1. Note that for CASH Distributions, the reinvestedLotId will not be included in the webhook payload.
5. Downstream allocation: The Custodian matches the wire it receives against Monark's breakdown and allocates cash downstream to investor accounts.

DRIP Distributions

DRIP distributions follow the same reconciliation process, with one difference: no cash moves. Instead, the Transfer Agent issues new shares at NAV into the DRIP omnibus account (the Custodian's, or MMM Securities' in the MMM Securities master omnibus). Then, EFO calculates the per-investor share entitlement, delivers the breakdown to the Custodian, and creates new tax lots for each account. Custodians update their ledger based on the dividend update from Monark and the new Positions gathered via Monark's APIs. The new Positions generated as a result of the DRIP dividend are then made available via the Positions endpoint.

DRIP distributions are issued and broken down as follows:

1. Declaration: The fund declares a distribution. The Transfer Agent notifies Monark in advance with the record date, payable date, and distribution rates via EFO's integration with the TA.
2. Payable date, or omnibus-level share issuance: The TA calculates the distribution at the omnibus level, and issues the new shares into the DRIP omnibus account (the Custodian's, or MMM Securities' in the MMM Securities master omnibus). Then, the TA sends EFO a trade file describing the issuance. No cash moves.
3. Reconciliation: EFO reconciles the TA's trade file against the internal sub-ledger, verifying that the share count received from the TA matches what we expect from the TA based on our ledger's record date position ownership at the tax lot level.
4. Sub-ledger breakdown: EFO calculates the per-investor share entitlement, rounded down to six decimal places. Residuals accrue to the share-denominated correction account. EFO then delivers the per-investor, per-lot breakdown to the Custodian via the Dividend Event webhook.
5. New tax lots: Monark's sub-ledger creates a new tax lot for each account that received shares as part of the DRIP issuance. Each new lot carries the payable date as the settlement date and the reinvestment NAV received from the TA as the cost basis.
6. Downstream allocation: The Custodian updates its ledger from the Dividend Event webhook breakdown and retrieves the new Positions and lots through the Positions endpoint.

Please Note: There is a window between the time when the TA issues DRIP shares at the omnibus level and EFO allocates those shares down to individual accounts. During this window, the omnibus balance will exceed the sum of the sub-accounts. This is an expected imbalance, and reconciliation flags are suppressed during this window.

Rounding and the Correction Account

Dividend allocations produce fractional-penny and fractional-share amounts across the sub-ledger that do not sum exactly to the omnibus-level amount received from the TA. EFO applies the following rounding rules on every distribution cycle:

• Dollar entitlements (CASH) are rounded down to two decimal places. Monark does not deal in fractional pennies, any investor whose entitlement is less than one cent receives nothing, with the full amount accruing to the correction account.
• Share entitlements (DRIP )are rounded down to six decimal places.
• All rounding residuals accrue to the correction account attached to the omnibus account: dollar-denominated for CASH omnibus accounts, share-denominated for DRIP omnibus accounts.

This guarantees that the sum of the individual sub-account allocations, plus the correction account, always ties exactly to the omnibus-level amount received from the TA.

Rounding Account Example:

For example, Fund 123 pays a $0.10 per share CASH Dividend. Custodian ABC's CASH omnibus account holds 100 shares across three investors, so in total EFO will need to allocate $10.00. Worked example below:

The TA wires $10.00 to the Custodian (100 shares × $0.10). EFO allocates $9.99 across the three investors and accrues the remaining $0.01 to the correction account. This way, the sub-accounts plus the correction account allocations tie exactly to the $10.00 received.

Distribution Discrepancies

Because the TA's wires and share issuances move concurrently with its trade files, discrepancies in the dividend process are resolved post-hoc through a manual, operations-led process. There are two discrepancy scenarios, and both follow the same core principle: nothing is allocated downstream to investor accounts until the break is resolved.

Scenario 1: The Custodian receives a different dollar amount than Monark reports on the Dividend webhook for CASH Dividends.

1. The Custodian identifies the mismatch between the wire it received and the breakdown delivered on the Dividend webhook, and flags it to Monark's operations team before allocating any cash downstream.
2. The Custodian holds the cash. No downstream allocation to investor accounts occurs while the break is open.
3. Monark ops researches the break, reconciling the TA's trade file, the wire amount, and the sub-ledger, and coordinates with the Custodian and the Transfer Agent reconciliation contact to identify the erroneous leg.
4. Once resolved, Monark posts a correction and reissues the final per-investor breakdown (if it changed). Corrections are append-only and preserved in the audit trail.
5. Monark confirms resolution to the Custodian, and the Custodian allocates cash downstream per the final breakdown.

Scenario 2: Monark receives a different allocation from the TA than expected.

1. EFO's payable-date reconciliation detects that the dollar amount (CASH )or share issuance (DRIP) on the TA's trade file does not match the expected amount based on our sub-ledger record-date positions and the distribution rate.
2. Because the cash has already been wired, or the shares have already been issued at the omnibus level, Monark notifies the Custodian to hold the downstream allocation. No cash is distributed and no new shares are allocated downstream to investor accounts while the break is open.
3. Monark ops escalates the break to the fund's Transfer Agent reconciliation contact for resolution.
   Once resolved, EFO delivers the final per-investor breakdown via the Dividend webhook, creates new tax lots for DRIP distributions, and confirms to the Custodian that downstream allocation can proceed.

For questions on an open distribution break, contact Monark's operations team at [email protected].

Tax Document (1099s) Preparation

In EFO, since TAs do not hold fully disclosed accounts on behalf of Investors, Custodians are responsible for preparing and distributing 1099s.

End of fiscal year cost basis adjustments are handled by Monark's Omnibus platform. The Transfer Agent delivers the ICI Primary Layout file, containing the final tax characterization of the year's distributions (qualified vs. ordinary income, return of capital, and other re-characterizations), directly to Monark, typically in mid-to-late January. EFO uses the file to adjust our ledger, applying the resulting cost basis adjustments at the individual tax lot level. Custodians then use the data in Monark's ledger, retrieved via API, to generate 1099s accurately, ensuring that investor reporting reflects the final, adjusted cost basis.

Custodians are required to issue 1099s by February 15, per IRS regulations. If further adjustments are required after 1099s have been issued, Monark will provide the requisite data via API, and Custodians will issue corrected 1099s accordingly.