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In the NII Distribution Rule panels, you can create and maintain net investment income (NII) rules. The NII rule establishes which general ledger accounts are included in the calculation of net investment income.

A fund that invests primarily in assets that produce tax exempt income can pay tax exempt income distributions to its shareholders. However, not all of the income in these funds may be tax exempt. You can identify specific income and expense accounts as tax exempt or taxable. The net investment income process uses the fiscal year to date tax exempt income and expenses for both distribution postings and mil rate calculations.

After you create an NII distribution rule, you can assign it to one or more master funds as its Net Investment Income Rule. For more information, see Set Up Master Funds for NII Distributions. You can also use NII distribution rules when you calculate theoretical distribution yields.