Current through Register 2024 Notice Reg. No. 38, September 20, 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.
(c) The investment adviser or manager shall
reduce or rebate, or both, advisory and management fees otherwise payable by
the investment company for the fiscal year in the amount by which the
"aggregate annual expenses" of the investment company or the fiscal year exceed
the limitations stated in paragraph (a) of this Rule.
(d) The Commissioner, by rule or order, for
good cause shown, may approve the exclusion from "aggregate annual expenses" of
such items or amounts of ordinary or extraordinary expenses or costs as appear
necessary and appropriate in the interests of fairness, justice and
equity.
1.
Amendment filed 7-13-70; effective thirtieth day thereafter (Register 70, No.
29).
2. Amendment filed 7-12-74; effective thirtieth day thereafter
(Register 74, No. 28).
3. Amendment of subsections (b) and (d) filed
4-23-86; effective upon filing pursuant to Government Code Section
11346.2(d)
(Register 86, No. 17).
4. Amendment filed 9-21-89; operative 9-21-89
pursuant to Government Code Section
11346.2(d)
(Register 89, No. 39).
5. Change without regulatory effect repealing
subsection (d) and relettering former subsection (e) to subsection (d) filed
6-3-99 pursuant to section
100, title 1, California Code of
Regulations (Register 99, No. 23).
Note: Authority cited: Section
25610,
Corporations Code. Reference: Sections
25140
and
25146,
Corporations Code.
