California Code of Regulations › Title 10 - Investment › Chapter 3 - Commissioner of Financial Protection and Innovation › Subchapter 2 - Corporate Securities › Article 4 - Standards for the Exercise of the Commissioner's Authority › Subarticle 8 - Investment Companies › Section 260.140.84 - Investment Company Expense Limitation

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) "Aggregate annual expenses" shall not
					 normally exceed two and one-half percent (2-1/2%) of the first $30 million of
					 the average net assets, two percent (2%) of the next $70 million of the average
					 net assets, and one and one-half percent (1-1/2%) of the remaining average net
					 assets of the investment company for any fiscal year, determined monthly or at
					 more frequent intervals on a consistent basis.
(b) "Aggregate annual expenses" means the sum
					 of all expenses of the investment company (including advisory and management
					 fees) and all charges paid or payable by the shareholders of the investment
					 company related to the activities of the investment company, the maintenance of
					 shareholder accounts, and other similar services, subject to the following:
(1) Expenses of the investment company shall
					 be determined in accordance with generally accepted accounting principles
					 applicable to investment companies.
(2) Interest, taxes and capital items of the
					 investment company such as, but not limited to, the cost of brokerage incurred
					 in connection with execution of securities transactions are not included in
					 aggregate annual expenses.
(3)
					 Sales and redemption charges paid by the shareholders of the investment company
					 shall not be included in aggregate annual expenses to the extent that they are
					 not directly charged against and/or do not have the effect of reducing the
					 expenses of the investment company.
(4) There shall be excluded from aggregate
					 annual expenses costs incurred or charges paid by any person, entity or plan
					 other than the investment company in connection with:
(A) any registered unit investment trust
					 contractual plan through which an interest in shares of the investment company
					 may be accumulated, or
(B) any
					 retirement plan, employee trust, pension, profit sharing or other benefit plan,
					 or payroll deduction or other group investment plan, participation in which is
					 available to persons whose eligibility depends on factors other than their
					 being the owners of shares of the investment company.
(5) If an investment company obtains
					 custodian, transfer agency or other fees at a rate lower than would otherwise
					 have been charged by maintaining uninvested cash balances at its custodian bank
					 in excess of the amount reasonably necessary to clear its transactions, there
					 shall be included in "aggregate annual expenses," in addition to the amount of
					 fees paid by the investment company, an amount equal to interest on such excess
					 cash balances at a rate equal to the prevailing interest rate then paid by the
					 custodian bank on its 90 day certificates of deposit during the period such
					 excess balance was maintained.
(6)
					 Aggregate annual expenses shall exclude expenses incurred by the investment
					 company:
(A) as a result of litigation in
					 connection with a suit involving a claim for recovery by the investment
					 company;
(B) as a result of
					 litigation involving a defense against a liability asserted against the
					 investment company, provided that, if the adviser made the decision or took the
					 action which resulted in such claim the adviser acted in good faith without
					 gross negligence or misconduct; and
(C) any indemnification paid by the
					 investment company to its officers, directors and advisers in accordance with
					 applicable state and federal laws as a result of such
					 litigation.
(7) Annual
					 distribution plan expenses incurred in the sale of its shares may be excluded
					 under the following circumstances:
(A) If
					 sales charges are not collected at the time of the sale of shares, then the
					 investment company may exclude all annual distribution plan expenses up to one
					 percent (1%) of its average net assets during its fiscal year.
(B) If sales charges are collected at the
					 time of the sale of shares, then the investment company shall first subtract
					 the maximum sales charge rate (under the schedule of sales charge rates
					 expressed in terms of a percentage of sales proceeds in the prospectus) from 9
					 percent (9%) and second, divide the result by 9. The quotient resulting from
					 the second step of this calculation is the portion of the one percent (1%) of
					 average net assets which may be excluded.
(8) There shall be excluded from aggregate
					 annual expenses the excess custodian costs attributable to investments in
					 foreign securities compared to the custodian costs which would have been
					 incurred had the investments been in domestic securities.