MERGER: A.G. Edwards Inc. (AGE) and Wachovia Corporation (WB)

Issue:

On 9/28/2007 A.G. Edwards, Inc. (AGE) and Wachovia Corporation (WB) completed a merger.

Cause:

This merger is a cash plus stock reorganization, a type of transaction which has become more and more frequent in recent years.

Resolution:

All the information below is from the information available at the WB web site: http://www.wachovia.com/file/Wach_AG_Edwards_as_printed_Special_Proxy_082807.pdf.

For each share of (AGE), you received 0.9844 shares of WB common stock plus $35.8 in cash.

The instructions below work if you have purchased (AGE) in one block and have not had any reinvested dividends or additional purchases of the stock. If you have reinvested dividends or purchased additional blocks of stock, you'll need to calculate this for each and every block. To make this easier, please refer to Jim Thomas' excellent spreadsheet at
http://home.comcast.net/~jimt075/BI/StockCashMerger.xls

First, if you have made any entries for this transaction in the Club Accounting software, you should delete them.

The total merger consideration is $86.309564 per (AGE) share. Subtract your (AGE) basis from that total consideration to calculate your gain. That is your total gain on the transaction, not your reportable gain. The reportable gain is the lesser of the cash received or the total gain. The type of gain is based on how long you held it - over one year is Long-Term, one year or less is Short-Term. You report it by going to Transactions, Dividend or Distribution, and then selecting either long term or short term capital gain as the type. Date that transaction 10/1/2007.

If your total gain is more than the cash received, you should skip the rest of this paragraph.
Now, we must account for the balance of cash received in excess of that reportable gain. You will enter that excess as a return of capital against the (AGE) stock. Enter it by going to Transactions, Dividend or Distribution: type = Return of Capital. Date that transaction 10/1/2007 also.

Now, we are ready to record the merger. Date this transaction one day later than the previous two, or 10/2/2007. Go to Transactions, Merger. The total number of WB shares received will be 0.9844 times the number of (AGE) shares held. Show that you are receiving the full number of shares of WB, including the fractional portion.Enter the Cash In Lieu received in the Cash Received section.

Finally, if the broker charged a reorganization fee, enter that on 10/3/2007 as a negative return of capital against WB for the reorganization fee. Goto Transactions,Dividend or Distribution: Type Return of Capital. Be sure to enter it as a negative figure - that is with a minus sign.

For a step-by-step of this procedure, I recommend printing out this sheet and filling out the blanks.

Step 1) If you entered any part of this merger transaction, delete those transactions from the software.

Step 2) Determine your total merger consideration.

The total merger consideration is $86.309564 per (AGE) share.
Your total consideration is: your shares in (AGE) ________ * $86.309564 = ________________________

Step 3) Determine your gain.
Your total consideration (above) MINUS your (AGE) basis $________________ =
The total gain (not the reportable gain) _____________________

Step 4) Determine your reportable gain. Do not include cash in lieu of fractional shares in the CASH RECEIVED blank below.
Your reportable gain is either the cash received $_____________, or the total gain $______________, whichever is less.
Your reportable gain is $________________

Step 5) Determine the type of gain.
* If the stock has been held over 1 year, it is a Long-Term Capital Gain (LTCG)
* If the stock has been held one year or less, it is a Short-Term Capital Gain (STCG)

Step 6) In the software, enter the Reportable Gain
a) Go to TRANSACTIONS > DIVIDEND OR DISTRIBUTION
b) Set Transaction Date to 10/1/2007
c) Set Transaction Type to Dividend or Distribution
d) Select your Cash Account.
e) In the Amount field, enter the Reportable Gain (Step 4, above)
f) Set the Type to Short-Term or Long-Term Capital Gain.
g) Set the Security to (AGE)
h) Click OK

Step 7) If the reportable gain is more than or equal to the cash received, skip this step and step 8.
Determine the amount of cash received in excess of the reportable gain.
Your cash received $__________________ MINUS your reportable gain (from Step 4) $________________________ = $_______________________________. This amount will be entered as a Return of Capital in Step 8, below.

Step 8) Enter the cash received in excess of the reportable gain as a Return of Capital.
a) Go to TRANSACTIONS > DIVIDEND OR DISTRIBUTION
b) Set Transaction Date to 10/1/2007
c) Set Transaction Type to Dividend or Distribution
d) Select your Cash Account.
e) In the Amount field, enter the balance of cash received in excess of the reportable gain (Step 7, above)
f) Set the Type to Return of Capital
g) Set the Security to (AGE)
h) Click OK

Step 9) Record the Merger

a) Compute the number of WB shares received.
The number of (AGE) shares ____________ times 0.9844 = ____________, total number of WB shares received, including fractional shares.
b) At the top of the page, select TRANSACTIONS > MERGER
c) Set Transaction Date to 10/2/2007.
d) Transaction Type will already be set as MERGER.
e) Select the appropriate Cash Account - ie Broker, checking, etc.
f) Select A.G. Edwards, Inc. under Select Old Security.
g) Set Old Security Price per share to zero (0).
h) Under CASH RECEIVED, enter the cash received IN LIEU OF FRACTIONAL SHARES, if any. Do not enter the ENTIRE amount of cash received.

Note: The cash received from the sale of a fractional share should be separate on your broker statement from the cash received. This "cash in lieu" comes from the fact that no fractional shares were issued in this transaction, and, thus, cash was paid instead. The program will sell the fractional portion of the total WB shares for this amount.

i) Enter Wachovia Corporation for New Security. [If Wachovia Corporation is not available select NEW SECURITY and enter the data.]
j) In SHARES RECEIVED, enter ____________ from step 9a, in the line with WB.
k) Enter $51.31 for the price per share.
l) Click OK to complete the merger transaction.

Step 10 - Optional) If there is a reorganization fee, that gets entered as a negative Return of Capital against Wachovia Corporation

a) Go to TRANSACTIONS > DIVIDEND OR DISTRIBUTION
b) Set Transaction Date to 10/3/2007
c) Set Transaction Type to Dividend or Distribution
d) Select your Cash Account.
e) In the Amount field, enter the Reorganization Fee as a negative number, using the minus sign.
f) Set the Type to Return of Capital
g) Set the Security to Wachovia Corporation
h) Click OK

Your transaction is complete!