BILL NUMBER: AB 1688	AMENDED
	BILL TEXT

	AMENDED IN SENATE   AUGUST 16, 1999

INTRODUCED BY   Committee on Banking and Finance (Papan (Chair), Cox
(Vice Chair), Alquist, Campbell, Florez, Frusetta, Gallegos, Machado,
Mazzoni, Pescetti, and Washington)

                        MARCH 18, 1999

   An act to amend Sections  2115 and 2200  
1300, 2115, 2200, and 25219  of the Corporations Code,  to
amend Section 45308.5 of the Government Code, to amend Section 1170.3
of the Harbors and Navigation Code, to amend Sections 1792.2 and
25112.5 of the Health and Safety Code, and to amend Sections 1192.8
and 11521.2 of the Insurance Code,  relating to foreign
corporations.



	LEGISLATIVE COUNSEL'S DIGEST


   AB 1688, as amended, Committee on Banking and Finance.    Foreign
corporations:  California law.
   (1) Existing law provides that a foreign corporation is subject to
specified requirements of California law regarding corporate
organization, liability, distributions, shareholder remedies, and
other matters, if more than 1/2 of the outstanding voting securities
are held of record by persons with addresses in this state, and the
average of the property factor, the payroll factor, and the sales
factor with respect to the corporation, as defined, is more than 50%
during the latest full income year.  Existing law also provides that
these provisions do not apply to any corporation with outstanding
securities that are listed on the New York or American Stock
Exchanges, designated as qualified for trading on the NASDAQ provided
that there are at least 800 shareholders thereof as specified, or
that are all owned directly or indirectly by a corporation or
corporations not subject to these provisions.  Existing law also
specifies the beginning and ending periods for which these
requirements are applicable, based upon a defined time period
following an income year in which the above tests are met or not met,
or alternatively upon a final order by a court of competent
jurisdiction declaring whether or not the corporation meets these
tests.
   This bill would provide that for the purpose of determining
whether a foreign corporation is subject to these requirements, the
address of a shareholder shall be determined as of the record date
for the latest meeting of shareholders held during the latest full
income year, or if no meeting was held that year, as of the date of
the last day of the latest full income year. This bill would also
eliminate the requirement that a corporation have at least 800
shareholders of record in order to be exempted from these provisions
on the basis that its securities are qualified for trading on the
NASDAQ.  
   This bill would also amend the list of specified requirements
applicable to a foreign corporation meeting these tests to expressly
exclude the personal liability of directors in connection with
illegal distributions or the making of any loan or guaranty without
the approval of a majority of shareholders, as specified.  This bill
would also exclude from these requirements a statutorily required
construction of incorporation articles resulting in additional
indemnification of directors and officers for breaches of corporate
duty.
   This bill would state that internal cross-references to other
provisions of the Corporations Code found in provisions listed in the
above requirements shall be deemed to refer to an equivalent
provision of law in the foreign corporation's state of incorporation,
or the applicable law of another state to which the corporation is
subject, that imposes the same or comparable requirements, unless the
provision in question concerns a number of specified subjects,
including limitations on the power of a corporation to eliminate or
indemnify directors or agents or to provide for the reorganization of
the board into staggered classes or for the use of cumulative
voting, provisions regulating shareholder notice of specified
categories of mergers and shareholder approval of specified asset
sales, and provisions imposing specified penalties to be paid to
shareholders by a corporation that neglects, fails, or refuses to
keep or maintain required shareholder records or to prepare and
submit financial statements and other specified information subject
to written request and inspection by shareholders. 
   (2) Existing law generally requires corporations to send to its
shareholders an annual report, and additionally requires a
corporation to comply with written shareholder requests for specified
financial information. Existing law provides that these provisions
may be enforced by a court of competent jurisdiction, and, under
certain circumstances, the shareholder may be reimbursed for
reasonable expenses, including attorney's fees, incurred in
connection with such an action.
   This bill would provide that a foreign corporation that is subject
to specified provisions of California law as discussed above, upon
written request, shall, within 30 days, advise any shareholder of
record, officer, director, employee, agent, or creditor of the
corporation whether or not the corporation is subject to those
provisions at the time the request is received.  The bill would
provide that any party who obtains a final determination by a court
of competent jurisdiction that the corporation failed to provide this
information or provided information that was incorrect, may be
awarded court costs and reasonable attorney's fees to the extent they
relate to obtaining that final determination.  The bill would also
provide that existing statutory damages provisions would apply in
this situation and would run from the date the written request for
information is received by the corporation, and that no additional
request for information need be made for this statutory penalty to
attach.  
   (3) The bill would additionally incorporate and make applicable to
securities listed on the National Market System of the NASDAQ Stock
Market various provisions of state law relating to the following:
the purchase of dissenting shares in connection with a corporate
reorganization; the suspension of over-the-counter trading by agents
and broker-dealers; a conflict of interest code for pilots involving
the ownership of tugboats; the composition of reserves required to be
maintained by entities executing or assuming continuing care
contracts; the submission of disclosure statements by hazardous waste
control applicants; authorized excess funds investments for domestic
life insurers; authorized investments for reserves of annuity
contracts; and authorized investments by certain governmental
retirement systems in common and preferred stock, as specified.

   Vote:  majority.  Appropriation:  no.  Fiscal committee:  no.
State-mandated local program:  no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.   Section 1300 of the Corporations Code is amended
to read: 
   1300.  (a) If the approval of the outstanding shares (Section 152)
of a corporation is required for a reorganization under subdivisions
(a) and (b) or subdivision (e) or (f) of Section 1201, each
shareholder of the corporation entitled to vote on the transaction
and each shareholder of a subsidiary corporation in a short-form
merger may, by complying with this chapter, require the corporation
in which the shareholder holds shares to purchase for cash at their
fair market value the shares owned by the shareholder which are
dissenting shares as defined in subdivision (b).  The fair market
value shall be determined as of the day before the first announcement
of the terms of the proposed reorganization or short-form merger,
excluding any appreciation or depreciation in consequence of the
proposed action, but adjusted for any stock split, reverse stock
split, or share dividend which becomes effective thereafter.
   (b) As used in this chapter, "dissenting shares" means shares
which come within all of the following descriptions:
   (1) Which were not immediately prior to the reorganization or
short-form merger either (A) listed on any national securities
exchange certified by the Commissioner of Corporations under
subdivision (o) of Section 25100 or (B) listed on the  list
of OTC margin stocks issued by the Board of Governors of the Federal
Reserve System   National Market System of the NASDAQ
Stock Market  , and the notice of meeting of shareholders to act
upon the reorganization summarizes this section and Sections 1301,
1302, 1303 and 1304; provided, however, that this provision does not
apply to any shares with respect to which there exists any
restriction on transfer imposed by the corporation or by any law or
regulation; and provided, further, that this provision does not apply
to any class of shares described in subparagraph (A) or (B) if
demands for payment are filed with respect to 5 percent or more of
the outstanding shares of that class.
   (2) Which were outstanding on the date for the determination of
shareholders entitled to vote on the reorganization and (A) were not
voted in favor of the reorganization or, (B) if described in
subparagraph (A) or (B) of paragraph (1) (without regard to the
provisos in that paragraph), were voted against the reorganization,
or which were held of record on the effective date of a short-form
merger; provided, however, that subparagraph (A) rather than
subparagraph (B) of this paragraph applies in any case where the
approval required by Section 1201 is sought by written consent rather
than at a meeting.
   (3) Which the dissenting shareholder has demanded that the
corporation purchase at their fair market value, in accordance with
Section 1301.
   (4) Which the dissenting shareholder has submitted for
endorsement, in accordance with Section 1302.
   (c) As used in this chapter, "dissenting shareholder" means the
recordholder of dissenting shares and includes a transferee of
record.   
  SEC. 2.   Section 2115 of the Corporations Code is amended to
read:
   2115.  (a) A foreign corporation (other than a foreign association
or foreign nonprofit corporation but including a foreign parent
corporation even though it does not itself transact intrastate
business) is subject to the requirements of subdivision (b),
commencing on the date specified in subdivision (d) and continuing
until the date specified in subdivision (e), if  , with respect
to a full income year  :
   (1) the average of the property factor, the payroll factor, and
the sales factor (as defined in Sections 25129, 25132, and 25134 of
the Revenue and Taxation Code) with respect to it is more than 50
percent during  its latest   the  full
income year  ; and 
   (2) more than one-half of its outstanding voting securities are
held of record by persons having addresses in this state appearing on
the books of the corporation on the record date for the latest
meeting of shareholders held during  its latest 
 the  full income year, or, if no meeting of shareholders
was held during that year, on the date specified in the articles of
incorporation or bylaws for the holding of the annual meeting of
shareholders during that year, or, if that date is not specified, on
the last day of  its latest   the  full
income year.
   The property factor, payroll factor, and sales factor shall be
those used in computing the portion of its income allocable to this
state in its franchise tax return or, with respect to corporations
the allocation of whose income is governed by special formulas or
that are not required to file separate or any tax returns, which
would have been so used if they were governed by this three-factor
formula.  The determination of these factors with respect to any
parent corporation shall be made on a consolidated basis, including
in a unitary computation (after elimination of intercompany
transactions) the property, payroll, and sales of the parent and all
of its subsidiaries in which it owns directly or indirectly more than
50 percent of the outstanding shares entitled to vote for the
election of directors, but deducting a percentage of the property,
payroll, and sales of any subsidiary equal to the percentage minority
ownership, if any, in the subsidiary.
   For the purpose of this subdivision, any securities held to the
knowledge of the issuer in the names of broker-dealers, nominees for
broker-dealers (including clearing corporations), or banks,
associations, or other entities holding securities in a nominee name
or otherwise on behalf of a beneficial owner (collectively "Nominee
Holders"), shall not be considered outstanding. However, if the
foreign corporation requests all Nominee Holders to certify, with
respect to all beneficial owners for whom securities are held, the
number of shares held for those beneficial owners having addresses
(as shown on the records of the Nominee Holder) in this state and
outside of this state, then all shares so certified shall be
considered outstanding and held of record by persons having addresses
either in this state or outside of this state as so certified,
provided that the certification so provided shall be retained with
the record of shareholders and made available for inspection and
copying in the same manner as is provided in Section 1600 with
respect to that record.  A current list of beneficial owners of a
foreign corporation's securities provided to the corporation by one
or more Nominee Holders or their agent pursuant to the requirements
of Rule 14b-1(b)(3) or 14b-2(b)(3) as adopted on January 6, 1992,
promulgated under the Securities Exchange Act of 1934, shall
constitute an acceptable certification with respect to beneficial
owners for the purposes of this subdivision.
   (b)  (1) Subject to the provisions of paragraphs (2) and
(3), and except   Except  as provided in
subdivision (c), the following chapters and sections of this division
shall apply to a foreign corporation as defined in subdivision (a)
(to the exclusion of the law of the jurisdiction in which it is
incorporated):
   Chapter 1 (general provisions and definitions), to the extent
applicable to the following provisions;
   Section 301 (annual election of directors);
   Section 303 (removal of directors without cause);
   Section 304 (removal of directors by court proceedings);
   Section 305, subdivision (c) (filling of director vacancies where
less than a majority in office elected by shareholders);
   Section 309 (directors' standard of care);
   Section 316 (excluding paragraph (3) of subdivision  (a),
paragraph (3) of subdivision (c), the references to illegal loan or
guaranty in subdivision (d), and paragraph   (a) and
paragraph  (3) of subdivision (f)) (liability of directors for
unlawful distributions);
   Section 317  (excluding the third sentence of subdivision
(g))  (indemnification of directors, officers, and others);
   Sections 500 to 505, inclusive (limitations on corporate
distributions in cash or property);
   Section 506 (liability of shareholder who receives unlawful
distribution);
   Section 600, subdivisions (b) and (c) (requirement for annual
shareholders' meeting and remedy if same not timely held);
   Section 708, subdivisions (a), (b), and (c) (shareholder's right
to cumulate votes at any election of directors);
   Section 710 (supermajority vote requirement);
   Section 1001, subdivision (d) (limitations on sale of assets);
   Section 1101 (provisions following subdivision (e)) (limitations
on mergers);
   Chapter 12 (commencing with Section 1200) (reorganizations);
   Chapter 13 (commencing with Section 1300) (dissenters' rights);
   Sections 1500 and 1501 (records and reports);
   Section 1508 (action by Attorney General);
   Chapter 16 (commencing with Section 1600) (rights of inspection).

   (2) Except as provided in subparagraphs (A) to (H), inclusive, the
references in the sections of this code specified in paragraph (1)
to other sections of this code (collective referred to herein as the
"cross-referenced sections") or portions thereof not specified in
that paragraph (collectively referred to herein as the "secondary
cross-referenced sections") shall not subject a foreign corporation
to the requirements of the cross-referenced sections or secondary
cross-referenced sections, but instead shall be deemed to refer to
the provisions of law of the state of incorporation of the foreign
corporation (or the applicable law of any other state to which the
foreign corporation is subject) dealing with the same or comparable
subject matter or imposing the same or comparable requirements as
those referred to by the cross-referenced sections or secondary
cross-referenced sections.
   (A) The limitation on the power of a corporation to eliminate or
limit the personal liability of a director for monetary damages set
forth in paragraph (10) of subdivision (a) of Section 204 shall
apply, for purposes of Section 309, to foreign corporations subject
to paragraph (1), provided that the limitation on this power shall
apply even though the foreign corporation does not have language in
its articles of incorporation as specified in paragraph (10) of
subdivision (a) of Section 204.
   (B) The limitation on the power of a corporation to provide
indemnification of any agent set forth in paragraph (11) of
subdivision (a) of Section 204 shall apply, for purposes of Section
317, to foreign corporations subject to paragraph (1), provided that
the limitation on this power shall apply even though the foreign
corporation does not have language in its articles of incorporation
as specified in paragraph (11) of subdivision (a) of Section 204.
   (C) Section 301.5 shall apply, for the limited purposes of
Sections 301, 303, and 708, to foreign corporations subject to
paragraph (1) that are also "listed corporations" as defined in
Section 301.5.
   (D) Section 605 shall apply, for purposes of Sections 710, 1203,
and 1501, to foreign corporations subject to paragraph (1).
   (E) The reference in subdivision (d) of Section 1001 to a sale of
assets pursuant to subdivision (a) of Section 1001 or subdivision (g)
of Section 2001 shall apply to any such sale by a foreign
corporation subject to paragraph (1) that has the control
relationship specified in subdivision (d) of Section 1001.
   (F) Section 407 shall apply, for the purposes of Section 1101, to
foreign corporations subject to paragraph (1) to the extent that
Section 407 does not permit disregarding or rounding of fractional
shares or payment of cash for fractional shares.
   (G) Subdivision (i) of Section 1110 shall apply, for the purposes
of the last sentence of subdivision (b) of Section 1301 and
subdivision (c) of Section 1309, to foreign corporations subject to
paragraph (1) if the laws of the state of incorporation of the
foreign corporation (or the applicable laws of any other state to
which the foreign corporation is subject) do not require the giving
of notice at least 20 days prior to the effective date of a merger
described in subdivision (i) of Section 1110.
   (H) Section 2200 shall apply, for the purposes of subdivision (e)
of Section 1501, to foreign corporations subject to paragraph (1).
   (3) No reference to Section 301.5 in any of the sections of this
code specified in paragraph (1) shall affect the exclusion from the
provisions of this section provided by subdivision (c). 
   (c) This section does not apply to any corporation (1) with
outstanding securities listed on the New York Stock Exchange or the
American Stock Exchange, or (2) with outstanding securities
designated as qualified for trading on the NASDAQ National Market (or
any successor thereto), of the NASDAQ Stock Market operated by the
NASDAQ Stock Market Inc., or (3) if all of its voting shares (other
than directors' qualifying shares) are owned directly or indirectly
by a corporation or corporations not subject to this section.
   (d) For purposes of subdivision (a), the requirements of
subdivision (b) shall become applicable to a foreign corporation only
upon the first day of the first income year of the corporation (i)
commencing on or after the 135th day of the income year immediately
following  the latest   a full  income year
with respect to which the tests referred to in subdivision (a) have
been met or (ii) commencing on or after the entry of a final order by
a court of competent jurisdiction declaring that those tests have
been met.
   (e) For purposes of subdivision (a), the requirements of
subdivision (b) shall cease to be applicable to a foreign corporation
(i) at the end of the first income year of the corporation
immediately following  the latest   a full 
income year with respect to which at least one of the tests referred
to in subdivision (a) is not met or (ii) at the end of the income
year of the corporation during which a final order has been entered
by a court of competent jurisdiction declaring that one of those
tests is not met, provided that a contrary order has not been entered
before the end of the income year.
   (f) Any foreign corporation that is subject to the requirements of
paragraph (1) of subdivision (b) shall advise any shareholder of
record, any officer, director, employee, or other agent (within the
meaning of Section 317) and any creditor of the corporation, in
writing, within 30 days after receipt of a written request for that
information, whether or not it is subject to paragraph (1) of
subdivision (b) at the time the request is received.  If any party
obtains a final determination in a court of competent jurisdiction
that the corporation failed to provide to that party information
required to be provided under this subdivision, or provided
information that was incorrect, then the court, in its discretion,
may include in its judgment recovery by that party from the
corporation of all court costs and reasonable attorney's fees
incurred in that legal proceeding to the extent they relate to
obtaining that final determination.   
  SEC. 2.  
  SEC. 3.   Section 2200 of the Corporations Code is amended to
read:
   2200.  Every corporation which neglects, fails or refuses:  (a) to
keep or cause to be kept or maintained the record of shareholders or
books of account required by this division to be kept or maintained,
(b) to prepare or cause to be prepared or submitted the financial
statements required by this division to be prepared or submitted, or
(c) to give any shareholder of record the advice required by
subdivision (f) of Section 2115, is subject to penalty as provided in
this section.
   The penalty shall be twenty-five dollars ($25) for each day that
such failure or refusal continues, up to a maximum of one thousand
five hundred dollars ($1,500), beginning 30 days after receipt of
written request that the duty be performed from one entitled to make
the request, except that, in the case of a failure to give advice
required by subdivision (f) of Section 2115, the 30-day period shall
run from the date of receipt of the request made pursuant to that
subdivision and no additional request shall be required by this
section.
   The penalty shall be paid to the shareholder or shareholders
jointly making the request for performance of the duty and damaged by
the neglect, failure or refusal, if suit therefor is commenced
within 90 days after the written request is made, including any
request made pursuant to subdivision (f) of Section 2115; but the
maximum daily penalty because of failure to comply with any number of
separate requests made on any one day or for the same act shall be
two hundred fifty dollars ($250).   
  SEC. 4.  Section 25219 of the Corporations Code is amended to read:

   25219.  Notwithstanding any other provision of this division, if
in his  or her  opinion the public interest and the
protection of investors so require, the commissioner is authorized
summarily to suspend all over-the-counter trading in this state by
broker-dealers and agents in any security or summarily to suspend all
trading on a national securities exchange located in this state in
any security (provided, in the case of trading on such exchange, that
the security is not listed on  the National Market System of the
NASDAQ Stock Market  any national securities exchange located
outside this state on which trading has not been suspended) for a
period not exceeding 90 days, and for successive periods of 90 days.
No broker-dealer or agent shall effect any transaction (other than
an unsolicited brokerage transaction effected on  the National
Market System of the NASDAQ Stock Market or on  a national
securities exchange located outside this state) in, or induce or
attempt to induce the purchase or sale of, any security in this state
in which trading is in any manner suspended under this section,
except in performance of a contract previously entered into.   
  SEC. 5.  Section 45308.5 of the Government Code is amended to read:

   45308.5.  Notwithstanding Section 45308.1, in addition to 
such   any  other investments as are authorized by
this article, city retirement systems may in their discretion under
the advice of proper counsel invest the assets of the retirement fund
in an amount, determined on the basis of cost, not to exceed 10
percent of the assets in the first two years after the effective date
of this section, not to exceed 15 percent during the third year
after the effective date of this section, and not to exceed 25
percent thereafter, in common stock or shares, and not to exceed 2
percent of the assets in the first year after the effective date of
this section, not to exceed 3 percent during the second year after
the effective date of this section, and not to exceed 5 percent
thereafter, in preferred stock or shares, of corporations created or
existing under the laws of the United States, or any state, district,
or territory thereof; provided that
   (a)  Such   The  stock is registered on
a national securities exchange, as provided in the "Securities
Exchange Act of 1934" as amended  as listed on the National
Market System of the NASDAQ Stock Market  .   Such
  The  registration shall not be required with
respect to the following stocks:
   (1) The common stock of a bank which is a member of the Federal
Deposit Insurance Corporation and has capital funds, represented by
capital, surplus, and undivided profits, of at least fifty million
dollars ($50,000,000);
   (2) The common stock of an insurance company which has capital
funds, represented by capital, special surplus funds, and unassigned
surplus, of at least fifty million dollars ($50,000,000);
   (3) Any preferred stock.
   (b)  Such   The  corporation has total
assets of at least one hundred million dollars ($100,000,000);
   (c) Bonds of  such a   that 
corporation, if any are outstanding, qualify for investment of the
retirement fund, and that there are no arrears of dividend payments
on its preferred stock;
   (d)  Such   The  corporation has paid a
cash dividend on its common stock in at least 8 of the 10 years next
preceding the date of investment, and the aggregate net earnings
available for dividends on the common stock of  such
  the  corporation for the whole of  such
  that  period have been equal to the amount of
 such   the  dividends paid, and 
such   the  corporation has paid an earned cash
dividend in each of the last three years;
   (e)  Such   The investment in any one
company may not exceed 5 percent of the common shares outstanding;
and
   (f) No single common stock investment, based on cost, may exceed 2
percent of the assets of the fund.   
  SEC. 6.  Section 1170.3 of the Harbors and Navigation Code is
amended to read: 
   1170.3.  (a) The board shall adopt, by regulation, a pilot's
conflict-of-interest code which shall include, but not be limited to,
a provision specifying that a pilot shall not have any interest in,
or derive any income from, any tugboat in operation on the Bays of
San Francisco, San Pablo, and Suisun.  This requirement of
divestiture does not apply to the ownership of barges and vessels
similar to barges.
   (b) The conflict-of-interest code shall not prohibit the ownership
of stock in any corporation registered on a national securities
exchange  or on the National Market System of the NASDAQ Stock
Market  , pursuant to Section 78f of Title 15 of the United
States Code, which may own tugboats in operation on the Bays of San
Francisco, San Pablo, and Suisun.   
  SEC. 7.  Section 1792.2 of the Health and Safety Code is amended to
read: 
   1792.2.  (a) Any entity that has executed or assumed continuing
care contracts shall maintain reserves covering obligations
thereunder.
   (b) The following assumptions shall be used when calculating the
reserves:
   (1) The following life expectancy table shall be used in
connection with all continuing care contracts:


    Age     Females     Males           Age     Females     Males
     55      26.323    23.635            83      7.952      6.269
     56      25.526    22.863            84      7.438      5.854
     57      24.740    22.101            85      6.956      5.475
     58      23.964    21.350            86      6.494      5.124
     59      23.199    20.609            87      6.054      4.806
     60      22.446    19.880            88      5.613      4.513
     61      21.703    19.163            89      5.200      4.236
     62      20.972    18.457            90      4.838      3.957
     63      20.253    17.764            91      4.501      3.670
     64      19.545    17.083            92      4.175      3.388
     65      18.849    16.414            93      3.862      3.129
     66      18.165    15.759            94      3.579      2.903
     67      17.493    15.116            95      3.329      2.705
     68      16.832    14.486            96      3.109      2.533
     69      16.182    13.869            97      2.914      2.384
     70      15.553    13.268            98      2.741      2.254
     71      14.965    12.676            99      2.584      2.137
     72      14.367    12.073           100      2.433      2.026
     73      13.761    11.445           101      2.289      1.919
     74      13.189    10.830           102      2.152      1.818
     75      12.607    10.243           103      2.022      1.723
     76      12.011     9.673           104      1.899      1.637
     77      11.394     9.139           105      1.784      1.563
     78      10.779     8.641           106      1.679      1.510
     79      10.184     8.159           107      1.588      1.500
     80       9.620     7.672           108      1.522      1.500
     81       9.060     7.188           109      1.500      1.500
     82       8.501     6.719           110      1.500      1.500

   The life expectancy table set forth in this paragraph shall be
used until this section is amended.
   (2) For residents over 110 years of age use 1.500 for computing
the statutory reserve requirements.
   (3) If a continuing care retirement community has contracted with
a resident under 55 years of age, provide the department with the
methodology used to determine that resident's life expectancy.
   (4) A zero interest assumption shall be used to adjust resident
life expectancies in conjunction with the computation of the
statutory reserve requirement.
   (c) The reserves shall be calculated by progressing through each
of the following steps:
   (1) Compute net cash per capita costs:
   (A) Cash operating expenses:  Deduct: depreciation and other
noncash expenses; processing fees; community services; expenses that
will not be incurred in future years; reimbursements for services to
nonresidents; donated services, if included as an operating expense
on the income statement; investment income; contributions received;
and other items that the continuing care retirement community
reasonably believes should be deducted with accompanying explanation.

   For a continuing care retirement community in its first year of
operation or following a major addition to an existing continuing
care retirement community, cash operating expenses for calculating
reserve requirements may be classified as fixed or variable and
totaled separately.
   (B) Mean number of residents by level of care:  List the number of
residents for each level of care separately at the beginning of the
fiscal year.  Add the number of residents for each level of care
separately at the end of the fiscal year.  Divide the total for each
level of care by two.
   (C) Total mean number of residents:  Add the total number of
residents at the beginning of the fiscal year to the total number of
residents at the end of the fiscal year and divide by two.  For
continuing care retirement communities wherein resident population
fluctuates significantly from month to month and for continuing care
retirement communities in their first year of operation, the mean
number of residents by level of care or the total mean number may be
computed by adding                                              the
number of residents at the end of each month in the fiscal year and
dividing by the total number of months included.  The daily
attendance for the fiscal year may also be used to determine the mean
number of residents.
   (D) Net cash per capita cost:  Cash operating expenses divided by
the mean number of residents.  It is acceptable, but not required, to
compute net cash per capita for various levels of care, based on
allocated expenses and contributions from consolidated financial
statements.  Allocation methods shall be subject to the approval of
the department, and schedules shall be prepared for all levels of
care, including any levels not covered by continuing care contracts.
For a continuing care retirement community in its first year of
operation or following a major addition to an existing continuing
care retirement community, net cash per capita cost for calculating
reserve requirements may be the sum of the figures determined by
dividing fixed cash operating expenses by the number of residents at
the end of the fiscal year, and dividing variable cash operating
expenses by the mean number of residents.
   (2) Compute projected life cost:
   (A) Compute aggregate life expectancies:  For each resident,
compare age against the life expectancy table and total all life
expectancies.
   (B) Multiply net cash per capita costs by aggregate life
expectancies.
   (3) Compute five-year plan residents:  Determine the maximum
annual total of SSI/SSP payments for the year of entry for each
resident.  If that amount is greater than the amount of the entrance
fee paid by a resident, the resident is designated a "Five-year Plan
Resident" and the entrance fee is amortized over five years.  No
reserves are required for these residents after the fifth year.
   (4) Compute projected life revenue:
   (A) Annual fee:  Multiply by 12 each monthly fee paid by
residents, including payments to be made by third-party payers on
behalf of the resident, including SSI/SSP and Medi-Cal, and
contributions, donations, or endowments, that the provider actually
used for operating expenditures for continuing care contracts during
the fiscal year.
   (B) Continuing care residents requiring full reserves:  Enter the
number of continuing care residents for each annual fee, excluding
five-year plan residents.
   (C) Aggregate life expectancies:  For each resident, compare age
against the life expectancy table and total all life expectancies for
each annual fee.
   (D) Total projected life revenue:  Multiply each annual fee by
aggregate life expectancies.  Total the products obtained.
   (5) Compute statutory reserve:
   (A) Reserves not including five-year plan residents:  Deduct the
projected life revenue from the projected life cost.  If the
remainder is less than zero, use zero.
   (B) Total statutory reserves:  Add the total unamortized balance
for five-year plan residents to the remainder in paragraph (A) above.

   (6) Compute liquid asset portion of statutory reserve:  For
providers that have executed monthly fee contracts with at least
one-half of the residents, compute 5 percent of the total statutory
reserves.  For providers that have executed prepaid contracts with at
least one-half of the residents, compute 25 percent of the total
statutory reserves.
   (d) At least 25 percent of the statutory reserve shall consist of
liquid assets, as defined in paragraph (8) of subdivision (e), except
that a 5 percent requirement shall apply to the continuing care
retirement communities that have executed monthly fee contracts with
at least 50 percent of the residents.
   (e) The assets available for reserves shall consist of the
following:
   (1) Deposits in commercial and savings accounts with California
banks that are members of the Federal Deposit Insurance Corporation.

   (2) Notes receivable by the continuing care retirement community,
that are secured by first deeds of trust and first mortgages on
property not owned by the provider or its affiliates.
   (3) Stocks, bonds, and securities, at current market value unless
otherwise specified, shall meet the following criteria to be approved
as assets available for statutory reserves:
   (A) Highly liquid money securities, including, but not limited to,
United States Treasury Bills, prime banker's acceptances, negotiable
time certificates of deposit, and short-term tax-exempt notes.
   (B) Common stocks rated "above average" or higher by any national
rating agency.  For example, a rating of A+, A, or A- by Standard and
Poor's Corporation is required for common stock.
   (C) Bonds issued by the United States government or federal
agencies.
   (D) Nonfederal bonds that have a current rating of at least "A" by
Moody's Investors Service, Standard and Poor's Corporation, or Fitch
Investors Service, and are listed on a national securities exchange
 or on the National Market System of the NASDAQ Stock Market
 .
   (E) Bonds that are not listed on a national securities exchange
 or on the National Market System of the NASDAQ Stock Market
 , but are traded over-the-counter and have a current rating of
at least "Aa" by Moody's Investors Service or at least "AA" by
Standard and Poor's Corporation or Fitch's Investors Service.
   (F) The security interest in the cash surrender value of life
insurance policies assigned by residents to the continuing care
retirement community.
   (4) Stocks, bonds, and securities that do not meet the approval
criteria may be retained as part of the reserves with the specific
approval of the department.  If necessary to meet reserve
requirements, stocks, bonds, and securities that are not approved by
the department may be disposed of in a gradual manner, to avoid loss
to certificate holders.
   (5) Real estate used to provide care and housing for holders of
continuing care contracts, or real estate, or equities therein, owned
by the entity as an investment, the rents from which are used to
discharge obligations to holders of continuing care contracts or to
reinvest as a part of the reserves.  These investments may be located
outside the State of California.
   (A) The value of this real estate shall be based on 70 percent of
the net equity thereof, which shall be the book value, assessed
value, or current appraised value within 12 months prior to the end
of the fiscal year, less all encumbrances, depreciation, and the
amount required for reserves for refundable contracts under Section
1793, all according to audited financial statements acceptable to the
department.
   (B) All appraisals shall be prepared by either a member of the
American Institute of Appraisers or a member of the Society of Real
Estate Appraisers, or the county assessor.  The department may
require technical reports to be verified or certified, or both.  The
expense of any technical reports or any verifications thereof shall
be borne by the provider.
   (6) Seventy percent of the net equity in furniture and equipment
situated on property used to provide care and housing for holders of
continuing care contracts.
   (7) Investment certificates or shares in open end investment
trusts, that meet all of the following requirements:
   (A) The trust management shall have experience either managing
another mutual fund registered under the Investment Company Act of
1940 (15 U.S.C.  Sec. 80a-1 et seq.), or have been registered as an
investment adviser under the Investment Advisors Act of 1940 (15
U.S.C. Sec. 80b-1 et seq.), and in either case shall currently have
at least one hundred million dollars ($100,000,000) under its
supervision.
   (B) Qualified for sale in California.
   (C) Has at least 40 percent of its directors or trustees not
affiliated with the fund's management company or principal
underwriter or any of their affiliates.
   (D) Is registered under the Investment Company Act of 1940.
   (E) Is a fund listed as qualifying under rules maintained by the
Commissioner of Corporations in cooperation with the Department of
Insurance.
   (8) Liquid assets, if any, shall consist of the following:
   (A) Listed bonds, stocks, and commercial and savings accounts.
   (B) A sinking fund comprised of liquid assets, if it is a
replacement fund subject to disbursement for items, including, but
not limited to, payment of principal and interest on the mortgage or
for operations during the succeeding year.  Replacement funds, that
may only be used for capital improvements or repairs, shall not be
included in liquid reserves.
   (9) Deposits made prior to signing a continuing care contract
represent liabilities and shall be offset against liquid assets, if
any, otherwise against any other assets.
   (10) Deposits that represent funds turned over to the continuing
care retirement community by residents for safekeeping without
relinquishing control thereof shall be offset against liquid assets,
if any, otherwise against other assets.   
  SEC. 8.  Section 25112.5 of the Health and Safety Code is amended
to read: 
   25112.5.  "Disclosure statement" means either of the following:
   (a) A statement submitted to the department by an applicant,
signed by the applicant under penalty of perjury, which includes all
of the following information:
   (1) The full name, business address, social security number, and
driver's license number of all of the following:
   (A) The applicant.
   (B) Any officers, directors, or partners, if the applicant is a
business concern.
   (C) All persons or any officers, partners, or any directors if
there are no officers, of business concerns holding more than 5
percent of the equity in, or debt liability of the applicant, except
that if the debt liability is held by a lending institution, the
applicant shall only supply the name and address of the lending
institution.
   (2) The following persons listed on the disclosure statement shall
submit properly completed fingerprint cards:
   (A) The sole proprietor.
   (B) The partners.
   (C) Other persons listed in subparagraph (C) of paragraph (1) and
any officers or directors of the applicant company as required by the
department.
   (3) Fingerprint cards submitted for any person required by
paragraph (2) shall only be submitted once.  Fingerprint cards shall
be completed and submitted for any additional person only if there is
a change in the person serving in a position for which fingerprint
cards are required to be submitted pursuant to paragraph (2).  The
department shall use the information required by paragraph (2) to
positively identify the applicant.
   (4) The full name and business address of any company which
generates, transports, treats, stores, recycles, disposes of, or
handles hazardous waste and hazardous materials in which the
applicant holds at least a 5 percent debt liability or equity
interest.
   (5) A description of any local, state, or federal licenses,
permits, or registrations for the generation, transportation,
treatment, storage, recycling, disposal, or handling of hazardous
waste or hazardous materials applied for, or possessed by the
applicant, or by the applicant under any previous name or names, in
the three years preceding the filing of the statement, or, if the
applicant is a business concern, by the officers, directors, or
partners of the business concern, including the name and address of
the issuing agency.
   (6) A listing and explanation of any final administrative orders
or license revocations or suspensions issued or initiated by any
local, state, or federal authority, in the three years immediately
preceding the filing of the statement, or any civil or criminal
prosecutions filed in the three years immediately preceding, or
pending at the time of, the filing of the statement, with any
remedial actions or resolutions if applicable, relating to the
generation, transportation, treatment, storage, recycling, disposal,
or handling of hazardous waste or hazardous materials by the
applicant, or by the applicant under any previous name or names, or,
if the applicant is a business concern, by any officer, director, or
partner of the business concern.
   (7) A listing of any agencies outside of the state which regulate,
or had regulated, the applicant's, or the applicant's under any
previous name or names, generation, transportation, treatment,
storage, recycling, disposal, or handling of hazardous waste or
hazardous materials in the three years preceding the filing of the
disclosure statement.
   (8) A listing and explanation of any federal or state conviction,
judgment, or settlement, in the three years immediately preceding the
filing of the statement, with any remedial actions or resolutions if
applicable, relating to the generation, transportation, treatment,
storage, recycling, disposal, or handling of hazardous waste or
hazardous materials by the applicant, or by the applicant under any
previous name or names, or if the applicant is a business concern, by
any officer, director, or partner of the business concern.
   (9) A listing of all owners, officers, directors, trustees, and
partners of the applicant who have owned, or been an officer,
director, trustee, or partner of, any company which generated,
transported, treated, stored, recycled, disposed of, or handled
hazardous wastes or hazardous materials and which was the subject of
any of the actions described in paragraphs (6) and (8) for the three
years preceding the filing of the statement.
   (b) In lieu of the statement specified in subdivision (a), a
corporation, the stock of which is listed on a national securities
exchange  or on the National Market System of the NASDAQ Stock
Market  and registered under the Securities Exchange Act of 1934
(15 U.S.C. Sec. 78a et seq.), or a subsidiary of  such a
  that  corporation, may submit to the department
copies of all periodic reports, including, but not limited to, those
reports required by Section 78m of Title 15 of the United States Code
and Part 229 (commencing with Section 229.10) of Chapter II of Title
17 of the Code of Federal Regulations which the corporation or
subsidiary has filed with the Securities and Exchange Commission in
the three years immediately preceding the submittal, if the
corporation or subsidiary thereof has held a hazardous waste facility
permit or operated a hazardous waste facility under interim status
pursuant to Section 25200 or 25200.5 since January 1, 1984.   
  SEC. 9.  Section 1192.8 of the Insurance Code is amended to read:

   1192.8.  (a) A domestic life insurer having admitted assets
aggregating in value not less than one hundred million dollars
($100,000,000) may make excess fund investments pursuant to this
section in interest-bearing notes, bonds, or obligations issued by
(1) any operating business trust or limited partnership organized
under the laws of any state of the United States, the District of
Columbia, the Dominion of Canada, any province of the Dominion of
Canada or (2) an authority established pursuant to the California
Industrial Development Financing Act, Title 10 (commencing with
Section 91500) of the Government Code.  The issuer of the notes,
bonds, or obligations through itself or its paying agent shall be
obligated thereunder to make payments, with respect to the notes,
bonds, or other obligations, directly to the insurer or the insurer's
nominee.
   (b) Except upon the prior written approval of the commissioner, an
investment may not be made under the authority of this section
unless the note, bond, or obligation is exchange traded.
"Exchange-traded," as used in this subdivision, means listed and
traded on  the National Market System of the NASDAQ Stock Market
or on  a securities exchange subject to regulation, supervision,
or control under a statute of the United States and acceptable to
the commissioner.
   (c) Without the prior written consent of the commissioner
investment made pursuant to this section shall not exceed in the
aggregate 10 percent of the life insurer's policyholder surplus.
   (d) A request to the commissioner for (1) approval pursuant to
subdivision (b) to invest in notes, bonds, or obligations that are
not exchange-traded or  traded on the National Market System of
the NASDAQ Stock Market or  (2) for consent to exceed the 10
percent limitation set forth in subdivision (c), shall be in writing
and shall be accompanied by any supporting data and documentation
that the commissioner may require.  The commissioner shall require
the payment of a five thousand dollar ($5,000) fee in advance for the
determination of whether to approve or disapprove each request.
Each request shall be in writing and shall be deemed approved unless
the commissioner disapproves it within 60 days with respect to
requests under subdivision (c) or 20 days with respect to requests
under subdivision (b), after the request has been filed in the
commissioner's office.
   (e) This section shall not be construed to increase or reduce the
authority to invest in any operating business trust or limited
partnership specifically permitted in other sections of this code.

  SEC. 10.  Section 11521.2 of the Insurance Code is amended to read:

   11521.2.  (a) The reserve required by the table of commensurate
values for each annuity contract issued must be invested in
investments specified in Sections 1170 through 1182 except that a
certificate holder may invest in securities listed and traded on the
New York Stock Exchange, the American Stock Exchange  or
  ,  regional stock exchanges  , or the
National Market System of the NASDAQ Stock Market  or successors
to  such   those  exchanges  or that
market  having the same qualifications, to the extent of the
lesser of net worth (assets over liabilities and reserves) of the
certificate holder or 10 percent of such general investments.  This
section does not permit investment in options or commodity exchanges.

   (b) The certificate holder may invest in  such 
 any  other investments as permitted by and subject to the
written consent of the commissioner.