Waterfall Waiver Daily with Recoupment Example
- Nancy Cohn (Deactivated)
The waterfall waiver process is mainly done at the share class level, with total fund processing only when needed. The waterfall waiver example that follows is of a fund set up for Special Waiver Processing of Waterfall Waiver Daily.
The special waiver fund hierarchy rule has two expenses in this example:
Advisory/Management Fees
Administration Fees
The special waiver class hierarchy rule has four expenses in this example:
Administration Fees
Call Center Fees
Transfer Agent Fees
Sub-TA/Networking Fees
Share Class A
The system uses the NAV Component for share class A to retrieve the Total Net Asset amount of $94,820,273.70 and uses the Expense Limit/Cap of 0.013 to calculate the expense cap (94,820,273.70 x .013 / 366 = $3,367.93). The gross expense amount of $3,937.35 is over the expense cap and a waiver of $569.42 is needed. The sum of class hierarchy expenses ($51.82 + $2.97 + $16.42 + $74.57 = $145.78) is then virtually waived to determine if a total fund waiver is needed. Class A needs $423.64 from the total fund, so the system calculates the basis point impact (423.64 / 94,820,273.70 x 366) to compare against the other share classes. The system uses the amount with the highest impact to back into a total fund waiver. After the system waives total fund expenses according to the fund hierarchy, they will be allocated down to the share classes ($558.36) and deducted from the needed waiver amount ($569.42) to obtain the remaining amount ($11.06) for class hierarchy waivers. Share Class A only needs $11.06 after the fund waiver and the first class hierarchy expense (Administration Fees) posted $51.82 for daily expenses, so the system posts an Administration Fee Waiver for the $11.06 to complete special waiver processing.
Share Class A is set up for special waiver recoupment, so the system multiplies the Total Fund Net Asset amount of $94,820,273.70 by the Contract Cap of 0.014 and divides it by the 366 days in the year to produce a recoupment cap of $3,627.01. The daily gross expense amount of $3,937.35 is over the recoupment cap, so the system saves the $310.34 amount over cap to the recoupment table for future use. Because the sum of eligible class hierarchy expenses is $71.21, the system saves it to the recoupment table under Share Class A and saves the excess of $239.13 under Total Fund.
Share Class B
The system uses the NAV Component for share class B to retrieve the Total Net Asset amount of $13,796,878.60 and uses the Expense Limit/Cap of 0.015 to calculate the expense cap (13,796,878.60 x .015 / 366 = $565.45). The gross expense amount of $784.65 is over the expense cap and a waiver of $219.20 is needed. The sum of class hierarchy expenses ($7.56 + $3.03 + $15.14 + $112.15 = $137.88) is then virtually waived to determine if a total fund waiver is needed. Class B needs $81.32 from the total fund, so the basis point impact is calculated (81.32 / 13,796,878.60 x 366) to compare against the other share classes. Share Class B has the highest impact of 0.002157, so the system uses $81.32 to back into a total fund waiver (81.32 / .12168866322 = $668.26). After total fund expenses are waived according to the fund hierarchy, they will be allocated down to the share classes ($81.32) and deducted from the needed waiver amount ($219.20) to obtain the remaining amount ($137.88) for class hierarchy waivers. Share Class B fully waives its class hierarchy expenses to complete special waiver processing.
Share Class B is set up for special waiver recoupment, so the system multiplies the Total Fund Net Asset amount of $13,796,878.60 by the Contract Cap of 0.016 and divides it by the 366 days in the year to produce a recoupment cap of $603.14. The daily gross expense amount of $784.65 is over the recoupment cap, so the system saves the $181.51 amount over cap to the recoupment table for future use. Because the sum of eligible class hierarchy expenses is $25.73, the system saves it to the recoupment table under Share Class B and saves the excess of $155.78 under Total Fund.
Share Class C
The system uses the NAV Component for share class C to retrieve the Total Net Asset amount of $4,851,492.54 and uses the Expense Limit/Cap of 0.0225 to calculate the expense cap (4,851,492.54 x .0225 / 366 = $298.25). The gross expense amount of $367.21 is over the expense cap and a waiver of $68.96 is needed. The sum of class hierarchy expenses ($2.65 + $1.48 + $7.65 + $28.79 = $40.57) is then virtually waived to determine if a total fund waiver is needed. Class C needs $28.39 from the total fund, so the system calculates the basis point impact (28.39 / 4,851,492.54 x 366) to compare against the other share classes. The system uses the amount with the highest impact to back into a total fund waiver. After total fund expenses are waived according to the fund hierarchy, they will be allocated down to the share classes ($28.58) and deducted from the needed waiver amount ($68.96) to obtain the remaining amount ($40.38) for class hierarchy waivers. Share Class C fully waives the $2.65 Administration Fees, $1.48 Call Center Fees, $7.65 Transfer Agent Fees, and partially waives Sub-TA/Networking Fees for the remaining $28.60 to complete special waiver processing.
Share Class C is not set up for special waiver recoupment, so the system saves nothing to the recoupment table.
Total Fund
All three share classes did not have enough class hierarchy expenses to satisfy the waivers needed, so a total fund waiver is needed. The system uses the amount needed by Share Class B with the highest basis point impact to back into a total fund waiver amount (81.32 / .12168866322 = $668.26). The first fund hierarchy expense Advisory/Management Fees posted $3,558.97 for daily expenses, so the system posts a waiver for the $668.26 needed to complete total fund waiver processing.
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