[Code of Federal Regulations]
[Title 17, Volume 2]
[Revised as of April 1, 2001]
From the U.S. Government Printing Office via GPO Access
[CITE: 17CFR210.6-07]

[Page 274-275]
 
              TITLE 17--COMMODITY AND SECURITIES EXCHANGES
 
             CHAPTER II--SECURITIES AND EXCHANGE COMMISSION
 
PART 210--FORM AND CONTENT OF AND REQUIREMENTS FOR FINANCIAL STATEMENTS,
 
Sec. 210.6-07  Statements of operations.

    Statements of operations filed by registered investment companies, 
other than issuers of face-amount certificates subject to the special 
provisions of Sec. 210.6-08 of this part, shall comply with the 
following provisions:

                        Statements of Operations

    1. Investment income. State separately income from: (a) dividends; 
(b) interest on securities; and (c) other income. If income from 
investments in or indebtedness of affiliates is included hereunder, such 
income shall be segregated under an appropriate caption subdivided to 
show separately income from: (1) Controlled companies; and (2) other 
affiliates. If non-cash dividends are included in income, the bases of 
recognition and measurement used in respect to such amounts shall be 
disclosed. Any other category of income which exceeds five percent of 
the total shown under this caption shall be stated separately.
    2. Expenses. (a) State separately the total amount of investment 
advisory, management and service fees, and expenses in connection with 
research, selection, supervision, and custody of investments. Amounts of 
expenses incurred from transactions with affiliated persons shall be 
disclosed together with the identity of and related amount applicable to 
each such person accounting for five percent or more of the total 
expenses shown under this caption together with a description of the 
nature of the affiliation. Expenses incurred within the person's own 
organization in connection with research, selection and supervision of 
investments shall be stated separately. Reductions or reimbursements of 
management or service fees shall be shown as a negative amount or as a 
reduction of total expenses shown under this caption.
    (b) State separately any other expense item the amount of which 
exeeds five percent of the total expenses shown under this caption.
    (c) A note to the financial statements shall include information 
concerning management and service fees, the rate of fee, and the base 
and method of computation. State separately the amount and a description 
of any fee reductions or reimbursements representing: (1) Expense 
limitation agreements or commitments; and (2) offsets received from 
broker-dealers showing separately for each amount received or due from 
(i) unaffiliated persons; and (ii) affiliated persons. If no management 
or service fees were incurred for a period, state the reason therefor.
    (d) If any expenses were paid otherwise than in cash, state the 
details in a note.
    (e) State in a note to the financial statements the amount of 
brokerage commissions (including dealer markups) paid to affiliated 
broker-dealers in connection with purchase and sale of investment 
securities. Open-end management companies shall state in a note the net 
amounts of sales charges deducted from the proceeds of sale of capital 
shares which were retained by any affiliated principal underwriter or 
other affiliated broker-dealer.
    (f) State separately all amounts paid in accordance with a plan 
adopted under rule 12b-1 of the Investment Company Act of 1940 [17 CFR 
270.12b-1]. Reimbursement to the fund of expenses incurred under such 
plan (12b-1 expense reimbursement) shall be shown as a negative amount 
and deducted from current 12b-1 expenses. If 12b-1 expense 
reimbursements exceed current 12b-1 costs, such excess shall be shown as 
a negative amount used in the calculation of total expenses under this 
caption.
    (g)(1) Brokerage/Service Arrangements. If a broker-dealer or an 
affiliate of the broker-dealer has, in connection with directing the 
person's brokerage transactions to the broker-dealer, provided, agreed 
to provide, paid for, or agreed to pay for, in whole or in part, 
services provided to the person (other than brokerage and research 
services as those terms are used in section 28(e) of the Securities 
Exchange Act of 1934 [15 U.S.C. 78bb(e)]), include in the expense items 
set forth under this caption the amount that would have been incurred by 
the person for the services had it paid for the services directly in an 
arms-length transaction.
    (2) Expense Offset Arrangements. If the person has entered into an 
agreement with any other person pursuant to which such other person 
reduces, or pays a third party which reduces, by a specified or 
reasonably ascertainable amount, its fees for services provided to the 
person in exchange for use of the person's assets, include in the 
expense items set forth under this caption the amount of fees that would 
have been incurred by the person if the person had not entered into the 
agreement.

[[Page 275]]

    (3) Financial Statement Presentation. Show the total amount by which 
expenses are increased pursuant to paragraphs (1) and (2) of this 
paragraph 2.(g) as a corresponding reduction in total expenses under 
this caption. In a note to the financial statements, state separately 
the total amounts by which expenses are increased pursuant to paragraphs 
(1) and (2) of this paragraph 2.(g), and list each category of expense 
that is increased by an amount equal to at least 5 percent of total 
expenses. If applicable, the note should state that the person could 
have employed the assets used by another person to produce income if it 
had not entered into an arrangement described in paragraph 2.(g)(2) of 
this section.
    3. Interest and amortization of debt discount and expense. Provide 
in the body of the statements or in the footnotes, the average dollar 
amount of borrowings and the average interest rate.
    4. Investment income before income tax expense.
    5. Income tax expense. Include under this caption only taxes based 
on income.
    6. Investment income-net.
    7. Realized and unrealized gain (loss) on investments-net. (a) State 
separately the net realized gain or loss on transactions in: (1) 
Investment securities of unaffiliated issuers, (2) investment securities 
of affiliated issuers, and (3) investments other than securities.
    (b) Distributions of realized gains by other investment companies 
shall be shown separately under this caption.
    (c) State separately: (1) The gain or loss from expiration or 
closing of option contracts written, (2) the gain or loss on closed 
short positions in securities, and (3) other realized gain or loss. 
Disclose in a note to the financial statements the number and associated 
dollar amounts as to option contracts written: (i) At the beginning of 
the period; (ii) during the period; (iii) expired during the period; 
(iv) closed during the period; (v) exercised during the period; (vi) 
balance at end of the period.
    (d) State separately the amount of the net increase or decrease 
during the period in the unrealized appreciation or depreciation in the 
value of investment securities and other investments held at the end of 
the period.
    (e) State separately any: (1) Federal income taxes and (2) other 
income taxes applicable to realized and unrealized gain (loss) on 
investments, distinguishing taxes payable currently from deferred income 
taxes.
    8. Net gain (loss) on investments.
    9. Net increase (decrease) in net assets resulting from operations.

[47 FR 56838, Dec. 21, 1982, as amended at 52 FR 23172, June 18, 1987; 
59 FR 65636, Dec. 20, 1994; 60 FR 38923, July 28, 1995]