master-feeder structure

This subtopic governs how investment companies present the statement of changes in net assets and financial highlights. The statement of changes in net assets must separately show operations (net investment income, realized gains/losses, change in unrealized appreciation), net equalization credits/debits, distributions to shareholders (with tax return of capital separate), and capital share transactions. Financial highlights—per-share data, expense and net investment income ratios, total return (or since-inception IRR for certain limited-life funds), and capital commitment data—must be presented as a separate schedule or in the notes for each class of common shares.

This subtopic governs how an investment company presents its financial position — either a statement of assets and liabilities or a statement of net assets — and the schedule (or condensed schedule) of investments that accompanies it. It sets bright-line disclosure thresholds (1 percent of net assets for registered/other investment companies; 5 percent for nonregistered investment partnerships), special presentation rules for multiple-class, master-feeder, and fund-of-funds structures, and requires contract-value reporting for fully benefit-responsive investment contracts held by qualified defined contribution plan trusts.

This subtopic governs the form and content of the statement of operations (income statement) for investment companies. The statement must show investment income less expenses to arrive at net investment income, then net realized gains/losses and the change in unrealized appreciation/depreciation on investments and foreign currency, summing to the net increase or decrease in net assets resulting from operations. Special presentation rules apply to multiple-class funds, master-feeder structures, and funds of funds.

This Subtopic sets the note disclosure requirements for investment companies with complex capital structures — multiple-class funds, master-feeder arrangements, and funds of funds. Multiple-class funds must describe each class, the income/expense and gain/loss allocation method, class-specific fee arrangements, capital share transactions by class, and sales charges paid to affiliates. Feeder funds must describe the master-feeder structure, their percentage ownership of the master, and the master's accounting policies affecting them, while funds of funds must describe the structure and the valuation policy based on investee-reported values.

ASC 946-10 sets the scope of the Financial Services—Investment Companies Topic by defining which entities qualify as investment companies and therefore apply the Topic's specialized (fair value) accounting and reporting. Any entity regulated under the Investment Company Act of 1940 is automatically an investment company (946-10-15-4); all others must possess the two fundamental characteristics in 946-10-15-6 and are assessed against five typical characteristics in 946-10-15-7, applying judgment when a typical characteristic is absent. Status is determined at formation and reassessed only upon a change in purpose and design (or loss of 1940 Act regulation), with prescribed prospective or cumulative-effect accounting and disclosure for a change in status.