The Commission is adopting new rule 18f-4, as well as amendments to
rule 6c-11, and Forms N-PORT, N-LIQUID (re-titled N-RN), and N-CEN.
This final rule, and final rule amendments, are designed to address the
investor protection purposes and concerns underlying section 18 of the
Investment Company Act and to provide an updated and more comprehensive
approach to the regulation of funds' use of derivatives and the other
transactions covered by rule 18f-4.\1050\
---------------------------------------------------------------------------

    \1050\ See supra section I.B (discussing the requirements of
section 18, and as well as Congress' concerns underlying the limits
of section 18). Other transactions specified in the rule include
reverse repurchase agreements and similar financing transactions,
unfunded commitments, and when-issued, forward-settling, and non-
standard settlement cycle securities.
---------------------------------------------------------------------------

    Rule 18f-4 is designed to provide an updated, comprehensive
approach to the regulation of funds' use of derivatives and certain
other transactions, generally through the implementation of a
derivatives risk management program, limits on fund leverage risk,
board oversight and reporting, and related recordkeeping
requirements.\1051\ The amendments to Forms N-PORT, N-LIQUID (re-titled
N-RN), and N-CEN will enhance the Commission's ability to effectively
oversee funds' use of the rule and provide the Commission and the
public with additional information regarding funds' use of
derivatives.\1052\ All of these requirements are discussed in detail in
section II of this release. The costs and burdens of these requirements
on small funds are discussed below, as well as above in our Economic
Analysis and Paperwork Reduction Act Analysis, which discuss the
applicable costs and burdens on funds.\1053\
---------------------------------------------------------------------------

    \1051\ See supra section II.A.
    \1052\ See supra section II.G.
    \1053\ See supra sections III and IV.
---------------------------------------------------------------------------

B. Significant Issues Raised by Public Comments

    In the Proposing Release, we requested comment on every aspect of
the IRFA, including the number of small entities that would be affected
by the proposed rule and form amendments, the existence or nature of
the potential impact of the proposals on small entities discussed in
the analysis, and how to quantify the impact of the proposed
amendments. We also requested comment on the proposed compliance
burdens and the effect these burdens would have on smaller entities.
    Although we did not receive comments specifically addressing the
IRFA, some commenters noted the impact of certain aspects of proposed
rule 18f-4 on smaller funds.\1054\ Commenters in particular expressed
concern that the proposed requirements concerning the appointment of a
derivatives risk manager could adversely affect smaller funds. One
commenter that urged the Commission to permit the fund's adviser to
serve as the derivatives risk manager, instead of requiring the board
to consider and select an individual to serve in this role, cited
unspecified cost burdens, particularly for smaller funds, associated
with the proposed approach.\1055\ Another commenter generally supported
the proposed requirement for an individual to serve as the derivatives
risk manager, but expressed concern ``that the specificity of the
requirements could hamstring smaller and mid-sized investment managers
in particular whose key personnel often carry out multiple
responsibilities.'' \1056\ Similarly, one commenter stated that smaller
firms may have significant difficulty complying with the proposed
requirement that a fund's derivatives risk management functions be
reasonably segregated from the fund's portfolio management functions
because ``the portfolio managers may be the principal employees
possessing the essential derivatives experience and hiring a person to
be a separate [derivatives risk manager] may not be economical (and may
not represent full time employment).'' \1057\
---------------------------------------------------------------------------

    \1054\ See, e.g., IDC Comment Letter; SIFMA AMG Comment Letter;
ABA Comment Letter; NYC Bar Comment Letter; Dechert Comment Letter
I. We did not receive any comments discussing the impact of
amendments to rules 6c-11, 22e-4 or 30b1-10 on smaller funds.
    \1055\ IDC Comment Letter; see also supra section II.B.1.
    \1056\ SIFMA AMG Comment Letter.
    \1057\ ABA Comment Letter.
---------------------------------------------------------------------------

    In addition to discussing the derivatives risk manager requirement
in particular, commenters observed that the proposed rule's
requirements as a whole could adversely affect smaller funds. One
commenter described the impact of the rule's requirements generally on
smaller funds, stating that like larger fund complexes, ``smaller fund
complexes may need to significantly increase the financial and human
capital resources to meet the detailed requirements under the Proposed
Rule,'' and ``[f]und complexes of all sizes may need to draft licensing
agreements and engage in due diligence regarding the capabilities of
potential vendors.'' \1058\ Another commenter urged us to broadly
exempt from the rule funds sold exclusively to accredited investors,
qualified purchasers, or qualified clients, stating that ``a small
advisory organization that offers a closed-end fund or BDC to
Qualifying Investors, as an extension of its sponsorship of private
funds, may not have the resources to hire and maintain separate risk
personnel, including a [derivatives risk manager], or develop and
maintain a [derivatives risk management program].'' \1059\ Several
commenters that recommended extending the transition period for all
funds beyond the one-year period we proposed noted a longer timeframe
could be particularly beneficial to smaller funds. One commenter stated
that ``certain smaller and midsize investment advisers that serve as
subadvisers to registered funds would benefit from more time to meet
these implementation challenges.'' \1060\ Similarly, another commenter
suggested that a longer transition period would be useful for smaller
funds with limited resources that may need to hire additional personnel
or redirect current resources in order to comply with the new
requirements.\1061\
---------------------------------------------------------------------------

    \1058\ Dechert Comment Letter I.
    \1059\ NYC Bar Comment Letter.
    \1060\ ICI Comment Letter.
    \1061\ Dechert Comment Letter I.
---------------------------------------------------------------------------

    After considering the comments we received, we are adopting the
proposed rule and form amendments, with certain modifications intended
to reduce many of the operational challenges commenters identified. For
example, we are adopting certain changes to the proposal that will be
cost-reducing to all funds, including small funds, such as requiring
weekly backtesting, instead of daily, as proposed.\1062\ This release
also clarifies that the final rule provides flexibility for the fund's
derivatives risk manager to rely on others, such as employees of the
fund's adviser, in carrying out activities associated with

the fund's derivatives risk management.\1063\ We believe that this
flexibility will benefit all funds, including smaller funds. We also
believe there will be certain compliance efficiencies associated with
raising the relative and absolute VaR limits to 200% and 20%,
respectively, which match the VaR limits in the UCITS framework, and
could benefit small funds with an adviser that also manages UCITS
funds.\1064\ While the proposal would have required all funds to report
their derivatives exposure, the final amendments we are adopting will
require only a fund that relies on the limited derivatives exception in
rule 18f-4 to report its derivatives exposure on Form N-PORT, which
will reduce reporting burdens on any smaller funds that do not rely on
the exception.\1065\ In addition, we are adopting an eighteen-month
transition period, instead of the proposed one-year transition period,
which provides more time for all funds, including smaller funds, to
comply with the new requirements.\1066\
---------------------------------------------------------------------------

    \1062\ See supra section II.B.2.d.
    \1063\ See supra section II.B.1.
    \1064\ See supra footnote 376.
    \1065\ See supra section II.G.1.b.
    \1066\ See supra section II.L.
---------------------------------------------------------------------------

C. Small Entities Subject to the Final Rule

    An investment company is a small entity if, together with other
investment companies in the same group of related investment companies,
it has net assets of $50 million or less as of the end of its most
recent fiscal year.\1067\ Commission staff estimates that, as of June
2020, approximately 40 registered mutual funds, 8 registered ETFs, 26
registered closed-end funds, and 12 BDCs (collectively, 86 funds) were
small entities.\1068\
---------------------------------------------------------------------------

    \1067\ Rule 0-10(a) under the Investment Company Act [17 CFR
270.0-10(a)]. Recognizing the growth in assets under management in
investment companies since rule 0-10(a) was adopted, the Commission
plans to revisit the definition of a small entity in rule 0-10(a).
    \1068\ This estimate is derived from an analysis of data
obtained from Morningstar Direct as well as data reported to the
Commission for the period ending June 2020. This estimate of small
entities include one money market fund, which has net assets of less
than $100,000.
---------------------------------------------------------------------------

D. Projected Reporting, Recordkeeping, and Other Compliance
Requirements

    The new rule and form amendments will impact current reporting,
recordkeeping and other compliance requirements for funds, including
those considered to be small entities.
1. Rule 18f-4
a. Derivatives Risk Management Program, and Board Oversight and
Reporting
    Rule 18f-4 will generally require a fund relying on the rule when
engaging in derivatives transactions--including small entities, but not
funds that are limited derivatives users--to adopt and implement a
derivatives risk management program.\1069\ This derivatives risk
management program will include policies and procedures reasonably
designed to assess and manage the risks of the fund's derivatives
transactions. The program requirement is designed to permit a fund to
tailor the program's elements to the particular types of derivatives
that the fund uses and related risks, as well as how those derivatives
impact the fund's investment portfolio and strategy. The final rule
will require a fund's program to include the following elements: (1)
Risk identification and assessment; (2) risk guidelines; (3) stress
testing; (4) backtesting; (5) internal reporting and escalation; and
(6) periodic review of the program. The final rule also will require:
(1) A fund's board of directors to approve the designation of the
fund's derivatives risk manager and (2) the derivatives risk manager to
provide written reports to the board regarding the program's
implementation and effectiveness.\1070\
---------------------------------------------------------------------------

    \1069\ See supra section II.B; see also rule 18f-4(c)(1).
    \1070\ See supra sections II.C and III.C.1.
---------------------------------------------------------------------------

    As discussed above, we estimate that the one-time operational costs
necessary to establish and implement a derivatives risk management
program will range from $150,000 to $500,000 per fund, depending on the
particular facts and circumstances and current derivatives risk
management practices of the fund.\1071\ We also estimate that each fund
will incur ongoing program-related costs that range from 65% to 75% of
the one-time costs necessary to establish and implement a derivatives
risk management program, or approximately $97,500 to $375,000.\1072\ We
estimate that approximately 21% of funds will be required to implement
a derivatives risk management program, including board oversight.\1073\
We therefore similarly estimate that approximately 21% of small funds,
or approximately 18 small funds, will establish a derivatives risk
management program.\1074\
---------------------------------------------------------------------------

    \1071\ See supra section III.C.1. This section, along with
sections IV.B.1 and IV.B.2, also discusses the professional skills
that we believe compliance with this aspect of the final rule will
entail.
    \1072\ See supra footnote 847.
    \1073\ See supra footnote 849 and accompanying text (estimating
that 21% of funds, or 2,766 funds total, will be required to
implement a derivatives risk management program). These are funds
that hold some derivatives and will not qualify as a limited
derivatives user under the final rule.
    \1074\ We estimate that there are 86 small funds that meet the
small entity definition. See supra footnote 1068 and accompanying
text. 86 small funds x 21% = approximately 18 funds that are small
entities that will be required to implement a derivatives risk
management program.
---------------------------------------------------------------------------

    There are different factors that will affect whether a smaller fund
incurs program-related costs that are on the higher or lower end of the
estimated range. For example, we would expect that smaller funds that
are not part of a fund complex--or their advisers--may not have
existing personnel capable of fulfilling the responsibilities of the
derivatives risk manager. Some smaller funds may have more limited
employee resources, making it more difficult to segregate the portfolio
management and derivatives risk management function. In addition, some
smaller entities may choose to hire a derivatives risk manager rather
than assigning that responsibility to a current officer or officers of
the fund's investment adviser who is not a portfolio manager and has
the requisite experience. Also, while we would expect larger funds or
funds that are part of a large fund complex to incur higher program-
related costs in absolute terms relative to a smaller fund or a fund
that is part of a smaller fund complex, a smaller fund may find it more
costly, per dollar managed, to comply with the derivatives risk
management program requirement because it will not be able to benefit
from a larger fund complex's economies of scale.\1075\
---------------------------------------------------------------------------

    \1075\ See supra section III.C.1.
---------------------------------------------------------------------------

b. Limit on Fund Leverage Risk
    Rule 18f-4 will generally require a fund relying on the rule to
engage in derivatives transactions to comply with an outer limit on
fund leverage risk based on VaR.\1076\ This requirement is applicable
to small entities, except for those that are limited derivatives users
or that are leveraged/inverse funds that cannot comply with the VaR
limit and meet other conditions, as the rule describes. This outer
limit is based on a relative VaR test that compares the fund's VaR to
the VaR of a designated reference portfolio. If the fund's derivatives
risk manager reasonably determines that a designated reference
portfolio would not provide an appropriate reference portfolio for
purposes of the relative VaR test, the fund will be required to comply
with an absolute VaR test. In either case, a fund must apply the test
at least once each

business day. This requirement is designed to limit fund leverage risk
consistent with the investor protection purposes underlying section 18.
---------------------------------------------------------------------------

    \1076\ See supra sections II.D, II.E, and II.F.
---------------------------------------------------------------------------

    As discussed above, we estimate that the one-time operational costs
necessary to establish and implement a VaR calculation model consistent
with the limit on fund leverage risk will range from $5,000 to $100,000
per fund, depending on the particular facts and circumstances and
current derivatives risk management practices of the fund.\1077\ We
estimate that approximately 21% of funds will be required to comply
with the limit on fund leverage risk.\1078\ We therefore similarly
estimate that approximately 21% of small funds, or approximately 18
small funds, will be required to comply with the limit on fund leverage
risk.\1079\
---------------------------------------------------------------------------

    \1077\ See supra section III.C.2. This section also discusses
the professional skills that we believe compliance with this aspect
of the final rule will entail.
    \1078\ See supra text following footnote 857 (estimating that
21% of funds, or 2,696 funds total, will be required to implement
VaR tests). This estimate excludes both: (1) Limited derivatives
users, and (2) funds that are leveraged/inverse funds that cannot
comply with the VaR limit and meet other conditions, as the rule
describes.
    \1079\ We estimate that there are 86 small funds that meet the
small entity definition. See supra footnote 1068 and accompanying
text. 86 small funds x 21% = approximately 18 funds that are small
entities that will be subject to a VaR test.
---------------------------------------------------------------------------

    There are multiple factors that could affect whether the costs that
smaller funds will incur in complying with the limit on fund leverage
risk will be on the lower versus higher end of this estimated range. To
the extent that funds (including smaller funds) have already
established and implemented portfolio VaR testing practices and
procedures, these funds will incur fewer costs relative to those funds
that have not already established and implemented VaR-based analysis in
their risk management. As a result of fewer resources, a smaller fund,
and more specifically a smaller fund not part of a fund complex, may be
particularly likely to hire a third-party vendor to comply with the
VaR-based limit on fund leverage risk, which could increase costs of
complying with the limit for those funds. Finally, costs will vary
based on factors such as whether the fund uses multiple types of
derivatives or uses derivatives more extensively, whether the fund
implements the absolute VaR test versus the relative VaR test, and
whether (for a fund that uses the relative VaR test) the fund uses a
designated reference portfolio for which the index provider charges a
licensing fee.\1080\
---------------------------------------------------------------------------

    \1080\ See supra footnote 880 and accompanying paragraph.
---------------------------------------------------------------------------

c. Requirements for Limited Derivatives Users
    Rule 18f-4 includes an exception from the rule's derivatives risk
management program requirement and limit on fund leverage risk for
``limited derivatives users.'' \1081\ The exception is available to a
fund that limits its derivatives exposure to 10% of its net assets,
excluding derivatives transactions used to hedge certain currency and/
or interest rate risks. A fund that relies on the exception--small
funds as well as large funds--will also be required to adopt policies
and procedures that are reasonably designed to manage its derivatives
risks. In a change from the proposal, the final rule provides two
alternative paths for remediation for limited derivatives users that
are out of compliance with the 10% derivatives exposure threshold
requirement.\1082\ We believe that the risks and potential impact of
these funds' derivatives use may not be as significant, compared to
those of funds that do not qualify for the exception, and that a
principles-based policies and procedures requirement will appropriately
address these risks. These ``reasonably designed'' policies and
procedures will have a scope that that reflects the extent and nature
of a fund's use of derivatives within the parameters that the exception
provides.
---------------------------------------------------------------------------

    \1081\ See supra section II.E; rule 18f-4(c)(4).
    \1082\ See supra section II.E.4.
---------------------------------------------------------------------------

    As discussed above, we estimate that the one-time costs to
establish and implement policies and procedures reasonably designed to
manage a fund's derivatives risks will range from $15,000 to $100,000
per fund, depending on the particular facts and circumstances and
current derivatives risk management practices of the fund.\1083\ We
also estimate that the ongoing annual costs that a fund that is a
limited derivatives user will incur range from 65% to 75% of the one-
time costs to establish and implement the policies and procedures.
Thus, we estimate that a fund will incur ongoing annual costs
associated with the limited derivatives user exception that will range
from $9,750 to $75,000.\1084\ We anticipate that larger funds that are
limited derivatives users--or limited derivatives user funds that are
part of a large fund complex--will likely experience economies of scale
in complying with the requirements for limited derivatives users that
smaller funds will not necessarily experience.\1085\ Thus, smaller
funds that are limited derivatives users could incur costs on the
higher end of the estimated range. However, a smaller fund whose
derivatives use is limited could benefit from the limited derivatives
user exception because it will not be required to adopt a derivatives
risk management program (including all of the program elements).\1086\
---------------------------------------------------------------------------

    \1083\ See supra section III.C.3 (discussing the one-time range
of costs for implementing the limited derivatives user requirements
under rule 18f-4 and the variables impacting a fund incurring costs
at the lower or higher end of the estimated cost range). This
section, along with section IV.B.6, also discusses the professional
skills that we believe compliance with this aspect of the rule will
entail.
    \1084\ See supra footnote 892.
    \1085\ See supra footnote 1075 and accompanying text.
    \1086\ See supra section II.E.
---------------------------------------------------------------------------

    We estimate that approximately 19% of funds will qualify for the
limited derivatives user exception.\1087\ We would expect some small
funds to fall within the limited derivatives user exception.\1088\
However, not all small funds that use derivatives will necessarily
qualify as limited derivatives users. We estimate--applying to small
funds the same estimated percentage of funds overall that will qualify
as limited derivatives users--that approximately 19% of small funds
(approximately 16 small funds) will qualify for the limited derivatives
user exception under the final rule.\1089\
---------------------------------------------------------------------------

    \1087\ See supra paragraph following footnote 892 (estimating
that 19% of funds, or 2,437 funds total, will qualify as limited
derivatives users). This estimate excludes funds that will comply
with the derivatives risk management program. See also supra
sections II.F, III.C.1, III.C.3, III.C.5, IV.B.3, and V.D.1.a.
    \1088\ Id.
    \1089\ Id. We estimate that there are 86 small funds that meet
the small entity definition. See supra footnote 1068 and
accompanying text. 86 small funds x 19% = approximately 16 funds
that are small entities that will qualify for the limited
derivatives user exception.
---------------------------------------------------------------------------

d. Reverse Repurchase Agreements
    Rule 18f-4 will permit a fund to engage in reverse repurchase
agreements and other similar financing transactions so long as they
either are subject to the relevant asset coverage requirements of
section 18 for senior securities representing indebtedness, or treated
as derivative transactions for all purposes under the rule.\1090\ A
fund's election will apply to all of its reverse repurchase agreements
and similar financing transactions, and therefore all of a fund's such
transactions will be subject to consistent treatment under the final
rule.\1091\
---------------------------------------------------------------------------

    \1090\ See supra section II.H.
    \1091\ Rule 18f-4(d)(1)(i) and (ii).

---------------------------------------------------------------------------

    Today, funds rely on the asset segregation approach that Release
10666 describes with respect to reverse repurchase agreements, which
funds may view as separate from the limitations established on bank
borrowings (and other senior securities that are evidence of
indebtedness) by the asset coverage requirements of section 18. To the
extent that funds elect to rely on the asset coverage requirements of
section 18 with respect to their reverse repurchase agreements and
similar financing transactions, these funds will have to take these
transactions into account in monitoring their compliance with the asset
coverage requirements of section 18. Alternatively, to the extent that
a fund chooses to treat its reverse repurchase and other similar
financing transaction activity as derivatives for all purposes of the
final rule, the fund must adopt and implement policies and procedures
reasonably designed to manage the fund's derivatives risks in order to
qualify as a limited derivatives user (assuming that the fund's use of
reverse repurchase agreements and similar financing transactions, in
addition to its derivatives exposure, was limited to 10% of its net
assets). If such a fund's use of reverse repurchase agreements and
similar financing transactions, in addition to derivatives exposure
associated with the fund's other derivatives transactions, exceeds 10%
of its net assets, the fund must adopt a derivatives risk management
program and comply with the VaR-based limit on fund leverage risk.
    We estimate that about 0.27% of all funds, excluding BDCs, will
enter into these transactions in amounts that exceed the asset coverage
requirements.\1092\ If these funds choose not to adjust their use of
reverse repurchase agreements, similar financing transactions, or
borrowings in order to comply with the asset coverage requirements,
these funds will have to qualify as a limited derivatives user under
the final rule (and adopt the policies and procedures that the limited
derivatives user exception requires) or else be subject to the final
rule's VaR and program requirements. We similarly estimate--applying to
small funds the same estimated percentage of funds that will engage in
reverse repurchase agreements or similar financing activities--that no
small funds will engage in these transactions in combined amounts that
exceed the asset coverage requirement.\1093\ We therefore do not
estimate a cost burden to small funds associated with the provisions
regarding reverse repurchase agreements in rule 18f-4.
---------------------------------------------------------------------------

    \1092\ See supra footnote 1033.
    \1093\ We estimate that there are 86 small funds that meet the
small entity definition. See supra footnote 1068 and accompanying
text. 86 small funds x 0.27% = 0 (rounded for convenience).
---------------------------------------------------------------------------

e. Unfunded Commitment Agreements
    The rule also addresses funds' participation in unfunded commitment
agreements. The approach in the final rule recognizes that while
entering into unfunded commitment agreements may raise the risk that a
fund may be unable to meet its obligations under these transactions,
unfunded commitments do not generally involve the leverage and other
risks associated with derivatives transactions.\1094\ Rule 18f-4 will
permit a fund to enter into unfunded commitment agreements if it
reasonably believes, at the time it enters into such agreement, that it
will have sufficient cash and cash equivalents to meet its obligations
with respect to each of its unfunded commitment agreements, in each
case as they come due. The rule prescribes factors that a fund must
consider in forming such a reasonable belief. If a fund enters into
unfunded commitment agreements in compliance with this requirement, the
rule specifies that unfunded commitment agreements will not be
considered for purposes of computing asset coverage, as defined in
section 18(h) of the Investment Company Act. This approach for unfunded
commitment agreements reflects current industry practice, as discussed
above.\1095\ We therefore do not expect that this provision in rule
18f-4 will result in significant costs to small (or large) funds.
---------------------------------------------------------------------------

    \1094\ See supra section II.I.
    \1095\ See id.
---------------------------------------------------------------------------

f. When-Issued, Forward-Settling, and Non-Standard Settlement Cycle
Securities Transactions
    In a change from the proposal, the final rule also includes a new
provision that will permit funds, as well as money market funds, to
invest in securities on a when-issued or forward-settling basis, or
with a non-standard settlement cycle, and the transactions will be
deemed not to involve a senior security subject to certain
conditions.\1096\ This provision will permit funds and money market
funds, including smaller entities, to invest in securities on a when-
issued basis under rule 18f-4 notwithstanding that these investments
trade on a forward basis involving a temporary delay between the
transaction's trade date and settlement date. We do not believe that
this approach will result in a significant change in the extent to
which funds and money market funds engage in these transactions. We
therefore do not expect these amendments to result in significant costs
to small (or large) funds.
---------------------------------------------------------------------------

    \1096\ See supra section II.A.
---------------------------------------------------------------------------

g. Recordkeeping
    Rule 18f-4 includes certain recordkeeping provisions that are
designed to provide the Commission, and the fund's board of directors
and compliance personnel, the ability to evaluate the fund's compliance
with the final rule's requirements.\1097\
---------------------------------------------------------------------------

    \1097\ See supra section II.J.
---------------------------------------------------------------------------

    First, the rule will require a fund to maintain certain records
documenting its derivatives risk management program, including a
written record of: (1) Its policies and procedures designed to manage
the fund's derivatives risks, (2) the results of any stress testing of
its portfolio, (3) the results of any VaR test backtesting it conducts,
(4) records documenting any internal reporting or escalation of
material risks under the program, and (5) records documenting any
periodic reviews of the program.\1098\
---------------------------------------------------------------------------

    \1098\ Rule 18f-4(c)(6)(i)(A).
---------------------------------------------------------------------------

    Second, the rule will also require a fund to maintain a written
record of any materials provided to the fund's board of directors in
connection with approving the designation of the derivatives risk
manager. The rule also requires a fund to keep records of any written
reports provided to the board of directors relating to the program, and
any written reports provided to the board that the rule requires
regarding the fund's non-compliance with the applicable VaR test.\1099\
---------------------------------------------------------------------------

    \1099\ Rule 18f-4(c)(6)(i)(B).
---------------------------------------------------------------------------

    Third, a fund that is required to comply with the VaR test also has
to maintain written records documenting the determination of: Its
portfolio VaR; the VaR of its designated reference portfolio, as
applicable; its VaR ratio (the value of the VaR of the fund's portfolio
divided by the VaR of the designated reference portfolio), as
applicable; and any updates to the VaR calculation models used by the
fund, as well as the basis for any material changes made to those
models.\1100\
---------------------------------------------------------------------------

    \1100\ Rule 18f-4(c)(6)(i)(C).
---------------------------------------------------------------------------

    Fourth, the rule requires a fund that is a limited derivatives user
to maintain a written record of its policies and procedures that are
reasonably designed to manage its derivatives risks.\1101\
---------------------------------------------------------------------------

    \1101\ Rule 18f-4(c)(6)(i)(D).
---------------------------------------------------------------------------

    Fifth, a fund that enters into unfunded commitment agreements will
be required to maintain a record documenting the basis for the fund's

belief regarding the sufficiency of its cash and cash equivalents to
meet its obligations with respect to its unfunded commitment
agreements.\1102\ A record must be made each time a fund enters into
such an agreement.
---------------------------------------------------------------------------

    \1102\ Rule 18f-4(e)(2).
---------------------------------------------------------------------------

    Sixth, the rule requires a fund that enters into reverse repurchase
agreements or similar financing transactions to maintain a record
documenting whether it is complying with the asset coverage
requirements of section 18 with respect to these transactions, or
alternatively whether it is treating these transactions as derivatives
transactions for all purposes under the rule.\1103\
---------------------------------------------------------------------------

    \1103\ Rule 18f-4(d)(2).
---------------------------------------------------------------------------

    Finally, funds must maintain the required records for a period of
five years.\1104\
---------------------------------------------------------------------------

    \1104\ Rule 18f-4(c)(6)(ii); rule 18f-4(d)(2); rule 18f-4(e)(2).
---------------------------------------------------------------------------

    As reflected above, we estimate that the average annual
recordkeeping costs for funds that will not qualify as limited
derivatives users (that is, recordkeeping costs associated with the
program and VaR requirements) will be $10,613 per fund, depending on
the particular facts and circumstances and current derivatives risk
management practices of the fund.\1105\ We separately estimate that the
average annual recordkeeping costs for a limited derivatives user will
be $1,917.50.\1106\
---------------------------------------------------------------------------

    \1105\ See supra section IV.B.7. The components of this estimate
include average annual estimates of $10,013 internal cost and $600
average annual external cost per fund ($10,013 + $600 = $10,613).
This section also discusses the professional skills that we believe
compliance with this aspect of the rule will entail.
    \1106\ Id. The components of this estimate include average
annual estimates of $1,317.50 internal cost and $600 average annual
external cost per fund ($1,317.50 + $600 = $1,917.50).
---------------------------------------------------------------------------

    To the extent that we estimate that small funds will be subject to
the various provisions of the rule that will necessitate recordkeeping
requirements, as discussed above, these small funds also will be
subject to the associated recordkeeping requirements. Therefore, we
estimate that: 21% of small funds (approximately 18 small funds) will
have to comply with the program-related recordkeeping requirements and
requirements regarding materials provided to the fund's board; 21% of
small funds (approximately 18 small funds) will have to comply with
requirements to maintain records of compliance with the VaR test; and
19% of small funds (approximately 16 funds) will have to comply with
the recordkeeping requirements for limited derivatives users.\1107\
---------------------------------------------------------------------------

    \1107\ See supra sections III.C.1, III.C.2, III.C.3, V.D.1.a,
V.D.1.b, and V.D.1.c.
---------------------------------------------------------------------------

    In addition, we estimate that 1% of small funds (approximately 1
small fund) will use reverse repurchase agreements or similar financing
agreements and be required to comply with the recordkeeping
requirements associated with this aspect of the rule.\1108\ We further
estimate that the average annual recordkeeping cost for each fund--
large or small--that chooses to enter into reverse repurchase
agreements or similar financing transactions is $790.50 to document how
the fund elects treat these transactions for all purposes under the
rule (i.e., either subject to section 18's asset coverage requirements,
or treated as derivatives transactions).\1109\
---------------------------------------------------------------------------

    \1108\ We estimate that 1% of all funds subject to the final
rule (excluding BDCs), will enter into such transactions. See supra
footnote 1033. Applying the same percentage, we estimate that 1
small fund will use reverse repurchase agreements or similar
financing transactions ((86 small funds-12 small BDCs) = 74 small
funds x 1% = 1 (rounded for convenience).
    \1109\ See supra section IV.B.7.
---------------------------------------------------------------------------

    Finally, we estimate that 10% of small funds, or 9 small funds,
will enter into at least one unfunded commitment agreement annually,
thus triggering the requisite recordkeeping requirements.\1110\ We also
estimate an average annual cost of $1,317.50 for a fund to create and
maintain a record documenting its ``reasonable belief'' regarding its
ability to meet its obligations with respect to each unfunded
commitment agreement, each time it enters such an agreement.\1111\
---------------------------------------------------------------------------

    \1110\ We believe the final rule's approach to unfunded
commitments is generally consistent with the current practices of
funds that enter into unfunded commitments. See supra section II.I.
Based on our staff's review of fund filings, we estimate that 1,339
funds (approximately 10% of all funds subject to the rule) entered
into an unfunded commitment agreement as of December 2019, see supra
footnote 1033, and 9 small funds (10% of 86 small funds) did
likewise.
    \1111\ See supra section IV.B.7.
---------------------------------------------------------------------------

    A fund's recordkeeping-related costs will vary, depending on the
provisions of rule 18f-4 that the fund relies on. For example, funds
that are required to adopt derivatives risk management programs, versus
funds that are limited derivatives users under the rule, will be
subject to different recordkeeping requirements. However, while small
funds' recordkeeping burdens will vary based on the provisions of the
rule that a fund relies on, their recordkeeping burdens will not vary
solely because they are small funds. We do not anticipate that larger
funds, or funds that are part of a large fund complex, will experience
any significant economies of scale related to the final rule's
additional recordkeeping requirements.
2. Amendments to Forms N-PORT, N-RN, and N-CEN
a. Amendments to Form N-PORT
    The amendments to Form N-PORT will require limited derivatives
users to report information about their derivatives exposure, and
also--as applicable for funds that are subject to the rule 18f-4 VaR-
based limit on fund leverage risk--to report certain VaR-related
information.\1112\ These amendments will help the Commission assess
compliance with rule 18f-4.
---------------------------------------------------------------------------

    \1112\ See supra section II.G.1; see also Items B.9 and B.10 of
Form N-PORT.
---------------------------------------------------------------------------

    Under the final rule, limited derivatives users that file Form N-
PORT will have to provide information regarding their derivatives
exposure on this form, specifically: (1) The fund's aggregate
derivatives exposure; and (2) the fund's derivatives exposure
attributable to currency or interest rate derivatives entered into and
maintained by the fund for hedging purposes. In addition, if a limited
derivatives user has derivatives exposure exceeding 10% of the fund's
net assets, and this exceedance persists beyond the five-business-day
period that the final rule provides for remediation, the fund will have
to report the number of business days beyond the five-business-day
remediation period that its derivatives exposure exceeded 10% of net
assets. We estimate that 19% of small funds that file Form N-PORT
(approximately 14 small funds) are limited derivatives users that will
report information in response to this new exposure-related disclosure
requirement.\1113\ In addition, funds that are subject to the limit on
fund leverage risk will have to report certain VaR-related information
for the reporting period. We estimate that 21% of small funds
(approximately 16 small funds) will be subject to these VaR-related
disclosure requirements.\1114\
---------------------------------------------------------------------------

    \1113\ See supra sections V.C, V.D.1.a, and V.D.1.c. Because
BDCs do not file reports on Form N-PORT, we deducted BDCs from our
estimate of small Form N-PORT filers (86 small funds-12 small BDCs =
74 small funds that file reports on Form N-PORT). See supra footnote
1068 and accompanying text.
    We estimate that approximately 19% of funds will qualify for the
limited derivatives user exception. See supra footnote 1087 and
accompanying text. Although this estimated percentage includes BDCs,
because the total number of BDCs relative to the number of
registered open- and closed-end funds is small, so we did not adjust
our estimated percentage to reflect the fact that BDCs do not file
Forms N-PORT. See supra section III.B.1. Therefore, we estimate the
total number of small funds subject to this Form N-PORT requirement
as follows: 74 small funds that file reports on Form N-PORT x 19% =
approximately 14 small funds.
    \1114\ We estimate that 74 small funds file reports on Form N-
PORT. See supra footnote 1113. We estimate that approximately 21% of
funds will be subject to the proposed limit on fund leverage risk.
See supra section III.C.2. Although this estimated percentage
includes BDCs, we note that the total number of BDCs relative to the
number of registered open- and closed-end funds is small, and
therefore our estimate does not adjust this percentage to reflect
the fact that BDCs do not file Form N-PORT. See supra section
III.B.1. Therefore, we estimate the total number of small funds that
will make VaR-related disclosures on Form N-PORT as follows: 74
small funds that file reports on Form N-PORT x 21% = approximately
16 small funds.
    Under the final rule, funds that choose not to adjust their use
of reverse repurchase agreements, similar financing transactions, or
borrowings to comply with section 18's asset coverage requirements
must treat such transactions as derivatives and either qualify as a
limited derivatives user or be subject to the VaR tests and program
requirements. We do not estimate any small funds will use these
transactions in combined amounts that exceed the asset coverage
requirement, and accordingly do not expect this requirement to
substantively affect our estimate regarding the number of smaller
funds that are likely to report VaR-related information on Form N-
PORT.

---------------------------------------------------------------------------

    We estimate that each fund that reports information in response to
the VaR-related disclosure requirements on Form N-PORT will incur an
average cost of $3,951 per year.\1115\ We also estimate that limited
derivatives users reporting information in response to the requirement
to report derivatives exposure, including the number of business days
its derivatives exposure exceeds 10% of net assets, will incur a cost
of $3,958 per year.\1116\ Notwithstanding the economies of scale
experienced by large versus small funds, we would not expect the costs
of compliance associated with the new Form N-PORT requirements to be
meaningfully different for small versus large funds. The costs of
compliance will vary only based on fund characteristics tied to their
derivatives use. For example, a limited derivatives user that uses
derivatives more extensively (while still under the 10% threshold) will
incur more costs to calculate its derivatives exposure than a limited
derivatives user that uses derivatives to a more limited degree. And a
fund that is a limited derivatives user, or that otherwise is not
subject to the VaR test, will not incur any costs to comply with the
new VaR-related N-PORT items. Similarly, a fund that is a limited
derivatives user will report derivatives exposure, but if it does not
exceed the 10% threshold, will not incur costs to report exceedances.
---------------------------------------------------------------------------

    \1115\ See supra section IV.D. The components of this $3,951
estimate include average annual estimates of $3,039 internal cost
and $912 average annual external cost per fund ($3,039 + $912 =
$3,951).
    \1116\ See supra section IV.D. The components of this $3,958
estimate include average annual estimates of $3,039 internal cost
(to report exposure information), $7.02 internal cost (to report
exceedance-related information), and $912 average annual external
cost per fund ($3,039 + $7.02 + $912 = approximately $3,958).
---------------------------------------------------------------------------

b. Amendments to Current Reporting Requirements
    We are re-titling Form N-LIQUID as Form N-RN, and amending this
form to include new reporting events for funds that are subject to rule
18f-4's limit on fund leverage risk.\1117\ We are adopting these
amendments in light of final rule 18f-4's requirement for funds to file
current reports on Form N-RN about VaR test breaches under certain
circumstances, as well as conforming amendments to rule 30b1-10.\1118\
These current reporting requirements are designed to aid the Commission
in assessing funds' compliance with the VaR tests. We are requiring
funds to provide this information in a current report because we
believe that the Commission should be notified promptly when a fund is
out of compliance with the VaR-based limit on fund leverage risk (and
also when it has come back into compliance with its applicable VaR
test). We believe this information could indicate that a fund is
experiencing heightened risks as a result of a fund's use of
derivatives transactions, as well as provide the Commission insight
about the duration and severity of those risks, and whether those
heightened risks are fund-specific or industry-wide.
---------------------------------------------------------------------------

    \1117\ See supra section II.G.3.
    \1118\ See rule 18f-4(c)(7); see also rule 30b1-10.
---------------------------------------------------------------------------

    We estimate that each report that a fund will file in response to
the new VaR-related reporting requirements of Form N-RN will entail
costs of approximately $1,438.\1119\ Furthermore, because each report
that a fund files initially reporting a VaR test breach must be
accompanied by a second report when the fund comes back into compliance
with the VaR test, each VaR test breach that requires a report will
entail costs of two times the estimated cost for filing a single report
($1,438 x 2 = $2,876). We estimate that approximately 18 small funds
will be required to comply with the limit on fund leverage risk and may
report VaR test related information on Form N-RN.\1120\ However, we
also estimate that only 1% of funds that must comply with the leverage
limit will file Form N-RN each year because they breached the relative
or absolute VaR test, and applying the same percentage, estimate that
that no small fund will file the form.\1121\ Regardless, because the
amendments to Form N-RN will require both large and small funds to
report VaR test breaches, the burden to report is not associated with
fund size, and consequently, we would not expect the costs of
compliance with the new Form N-RN requirements to be meaningfully
different for small versus large funds.
---------------------------------------------------------------------------

    \1119\ See supra section IV.E. The components of this $1,438
estimate include 3 hours of compliance attorney time ($368) and 1
hour of senior programmer time ($334) ((3 x $368 = $1,104) + (1 x
$334 = $334) = $1,438).
    \1120\ See supra footnote 1079 and accompanying text (estimating
that 21% of small funds, or 18 small funds, will be subject to a
VaR-based limit on fund leverage risk). We therefore similarly
estimate that the same percentage and number of small funds may be
required to report VaR-related information on Form N-RN.
    \1121\ See supra section IV.E. Calculated as follows: 18 small
funds subject to the VaR-based limit x 1% = 0 (rounded for
convenience).
---------------------------------------------------------------------------

c. Amendments to Form N-CEN
    The amendments to Form N-CEN will require a fund to identify
whether it relied on rule 18f-4 during the reporting period.\1122\ The
amendments also require a fund to identify whether it relied on any of
the exemptions from various requirements under the rule, specifically
whether it: (1) Is a limited derivatives user; (2) is a leveraged/
inverse fund as defined in the rule that is excepted from the
requirement to comply with the VaR-based limit on fund leverage risk;
(3) has entered into reverse repurchase agreements or similar financing
transactions in reliance either on the rule provision that requires
compliance with section 18's asset coverage requirements, or the
provision that treats such transactions as derivative transactions
under the final rule; (4) has entered into unfunded commitment
agreements; or (5) has invested in a security on a when-issued or
forward-settling basis, or with a non-standard settlement cycle.\1123\
The amendments to Form N-CEN are designed to assist the Commission with
its oversight functions by allowing it to identify which funds were
excepted from, or relied on, certain of the rule's provisions.
---------------------------------------------------------------------------

    \1122\ See supra section II.G.3; see also Item C.7.n of Form N-
CEN.
    \1123\ See Item C.7.n.i-vi of Form N-CEN; see also rule 18f-
4(c)(4); (c)(5); (d)(i); (d)(ii); (e); and (f).
---------------------------------------------------------------------------

    We estimate that each fund subject to the new Form N-CEN reporting
requirements will incur additional paperwork-related burdens associated
with responding to the new form items that average $140.40 per year on
a per-fund basis.\1124\ We estimate that approximately 31 registered
open- and closed-end funds are small entities that will be subject to
the new Form N-CEN reporting requirements.\1125\

Notwithstanding any economies of scale experienced by large versus
small funds, we do not expect the costs of compliance with the new Form
N-CEN requirements to be meaningfully different for small versus large
funds.
---------------------------------------------------------------------------

    \1124\ See supra section IV.F.
    \1125\ Because BDCs do not file reports on Form N-CEN, we deduct
the number of BDCs from the total number of small funds that we
estimate (86 small funds-12 BDCs that are small entities = 74 small
funds that file reports on Form N-CEN). See supra footnote 1068 and
accompanying text.
    The estimate of 31 funds is based on the percentage of funds we
believe will be subject to the derivatives risk management program
requirement (21% of funds, see supra footnote 849 and accompanying
text, which encompasses the percentage of funds that we estimate
will be subject to the VaR test requirements) plus the percentage of
funds we believe will qualify as limited derivatives users (19% of
funds, see supra footnote 1087 and accompanying text). We assume
generally that funds that will enter into reverse repurchase
agreements or similar financing transactions, and unfunded
commitments either would have to comply with the derivatives risk
management program or would qualify as a limited derivatives user.
See supra footnote 1033. In addition, we include money market funds
in this estimate, as they may report their reliance on rule 18f-4's
provisions for when-issued and forward-settling transactions on Form
N-CEN.
    We therefore estimate that approximately 30 small funds that
file reports on Form N-CEN ((86 total small funds less 12 small BDCs
= 74 small funds) x 40% (21% + 19%) = approximately 30 small funds)
+ 1 small money market fund = 31 small funds subject to the new Form
N-CEN reporting requirements.
---------------------------------------------------------------------------

3. Amendments to Rule 6c-11
    We are amending the provision in rule 6c-11 excluding leveraged/
inverse ETFs from the scope of that rule so that a leveraged/inverse
ETF may rely on that rule if the fund complies with the applicable
requirements of rule 18f-4.\1126\ Rule 6c-11 permits ETFs that satisfy
certain conditions to operate without obtaining an exemptive order from
the Commission.\1127\ The rule is designed to create a consistent,
transparent, and efficient regulatory framework for such ETFs and
facilitate greater competition and innovation among ETFs. As a
consequence of our amendment to rule 6c-11, and our rescission of the
exemptive orders we previously issued to leveraged/inverse ETFs, the
amendment to rule 6c-11 will newly permit leveraged/inverse ETFs to
come within scope of the rule's exemptive relief. As a result, fund
sponsors will be allowed to operate a leveraged/inverse ETF subject to
the conditions in rules 6c-11 and 18f-4 without obtaining an exemptive
order.
---------------------------------------------------------------------------

    \1126\ See supra section II.F.6.
    \1127\ Id.
---------------------------------------------------------------------------

    Currently, there are 172 leveraged/inverse ETFs.\1128\ As a result
of the amendments, we expect the number of funds relying on rule 6c-11
to increase, and all 172 leveraged/inverse ETFs will rely on rule 6c-
11. However, Commission staff estimates that none of these leveraged/
inverse ETFs is a small entity.\1129\ In addition, we do not estimate
our amendments to rule 6c-11 will change the estimated per-fund cost
burden associated with rule 6c-11. The costs associated with complying
with rule 6c-11 are discussed in the ETFs Adopting Release.\1130\
---------------------------------------------------------------------------

    \1128\ See supra footnote 820 and accompanying paragraph.
    \1129\ Id.
    \1130\ See ETFs Adopting Release, supra footnote 76, at sections
IV-VI.
---------------------------------------------------------------------------

E. Agency Action To Minimize Effect on Small Entities

    The RFA directs the Commission to consider significant alternatives
that would accomplish our stated objectives, while minimizing any
significant economic impact on small entities. We considered the
following alternatives for small entities in relation to the adopted
regulations: (1) Exempting funds that are small entities from the
reporting, recordkeeping, and other compliance requirements, to account
for resources available to small entities; (2) establishing different
reporting, recordkeeping, and other compliance requirements or
frequency, to account for resources available to small entities; (3)
consolidating or simplifying the compliance requirements under the
proposal for small entities; and (4) using performance rather than
design standards.
1. Alternative Approaches to Rule 18f-4
    We do not believe that exempting small funds from the provisions in
rule 18f-4 would permit us to achieve our stated objectives. Because
rule 18f-4 is an exemptive rule, it will require funds to comply with
new requirements only if they wish to enter into derivatives or certain
other transactions.\1131\ Therefore, if a small entity does not enter
into derivatives or such other transactions as part of its investment
strategy, then the small entity will not be subject to the provisions
of rule 18f-4. In addition, a small fund whose derivatives use is
limited could benefit from the limited derivatives user exception
because it will not be required to adopt a derivatives risk management
program (including all of the program elements). Although smaller funds
that are limited derivatives users will still have to adopt policies
and procedures that are reasonably designed to manage their derivatives
risks, the estimated costs associated with this requirement are
expected to be significantly lower than the cost of adopting a full
derivatives risk management program.\1132\ Thus, we estimate that small
funds that rely on the exception will not have to incur a signification
portion of the costs associated with new rule 18f-4.
---------------------------------------------------------------------------

    \1131\ See supra sections II.A and III.E.
    \1132\ See supra sections III.C.1 and IV.B.1 (Derivatives Risk
Management Program) and III.C.3 and IV.B.6 (Requirements for Limited
Derivatives Users) for a discussion of estimated costs associated
with these elements of the rule.
---------------------------------------------------------------------------

    We estimate that 60% of all funds do not have any exposure to
derivatives or such other transactions.\1133\ This estimate indicates
that many funds, including many small funds, will be unaffected by the
final rule. However, for small funds that are affected by our rule,
providing an exemption for them could subject investors in small funds
that engage in derivatives transactions (or other transactions that the
rule covers) to a higher degree of risk than investors to large funds
that will be required to comply with the elements of the rule.
---------------------------------------------------------------------------

    \1133\ See supra footnote 807 and accompanying paragraph.
---------------------------------------------------------------------------

    The undue speculation concern expressed in section 1(b)(7) of the
Investment Company Act, and the asset sufficiency concern reflected in
section 1(b)(8) of the Act--both of which the rule is designed to
address--apply to both small as well as large funds. As discussed
throughout this release, we believe that the rule will result in
investor protection benefits, and these benefits should apply to
investors in smaller funds as well as investors in larger funds. We
therefore do not believe it would be appropriate to exempt small funds
from the rule's program requirement or VaR-based limit on fund leverage
risk, or to establish different requirements applicable to funds of
different sizes under these provisions to account for resources
available to small entities. We believe that all of the elements of
rule 18f-4 should work together to produce the anticipated investor
protection benefits, and therefore do not believe it is appropriate to
except smaller funds because we believe this would limit the benefits
to investors in such funds.
    We also do not believe that it would be appropriate to subject
small funds to different reporting, recordkeeping, and other compliance
requirements or frequency. Similar to the concerns discussed above, if
the rule included different requirements for small funds, it could
raise investor protection concerns for investors in small funds,
including subjecting small fund investors to a higher degree of risk.
We also believe that all fund investors will benefit from enhanced
Commission monitoring and oversight of the fund

industry, which we anticipate will result from the disclosure and
reporting requirements.
    We do not believe that consolidating or simplifying the compliance
requirements under the rule for small funds would permit us to achieve
our stated objectives. Again, this approach would raise investor
protection concerns for investors in small funds using derivatives and
the other transactions that the final rule addresses.\1134\ However, as
discussed above, the rule contains an exception for limited derivatives
users that we anticipate will subject funds that qualify for this
exception to fewer compliance burdens. We recognize that the risks and
potential impact of derivatives transactions on a fund's portfolio
generally increase as the fund's level of derivatives usage increases
and when funds use derivatives for speculative purposes. Therefore the
rule will entail a less significant compliance burden for funds--
including small funds--that choose to limit their derivatives usage in
the manner that the exception specifies. The final rule, therefore,
includes provisions designed to consider the requirement burdens based
on the fund's use of derivatives (rather than the size of the fund).
---------------------------------------------------------------------------

    \1134\ See, e.g., rules 18f-4(d) (reverse repurchase agreements
and similar financing transactions); (e) (unfunded commitments); and
(f) (when-issued, forward-settling, and non-standard settlement
cycle securities).
---------------------------------------------------------------------------

    The costs associated with rule 18f-4 will vary depending on the
fund's particular circumstances, and thus the rule could result in
different burdens on funds' resources. In particular, we expect that a
fund that pursues an investment strategy that involves greater
derivatives risk may have greater costs associated with its derivatives
risk management program. For example, a fund that qualifies as a
limited derivatives user under the rule will be exempt from the
requirements to adopt and implement a derivatives risk management
program, to adhere to the rule's VaR-based limit on fund leverage risk,
and to comply with related board oversight and reporting provisions.
The costs of compliance with the rule will vary even for limited
derivatives users, as these funds will be required to adopt policies
and procedures that are ``reasonably designed'' to manage their
derivatives risks. Thus, to the extent a fund that is a small entity
faces relatively little derivatives risk, we believe it will incur
relatively low costs to comply with the rule. However, we believe that
it is appropriate to correlate the costs associated with the rule with
the level of derivatives risk facing a fund, and not necessarily with
the fund's size in light of our investor protection objectives.
    Finally, with respect to the use of performance rather than design
standards, the rule generally uses performance standards for all funds
relying on the rule, regardless of size. We believe that providing
funds with the flexibility with respect to investment strategies and
use of derivatives transactions is appropriate, as well as the
derivatives risk management program design. However, the rule also uses
design standards with respect to certain requirements such as complying
with the VaR-based limit on fund leverage risk and the specified
program elements in the derivatives risk management program. For the
reasons discussed above, we believe that this use of design standards
is appropriate to address investor protection concerns, particularly
the concerns expressed in sections 1(b)(7), 1(b)(8), and 18 of the
Investment Company Act.
2. Alternative Approaches to Amendments to Forms N-PORT, N-LIQUID (N-
RN), and N-CEN
    We do not believe that the interests of investors would be served
by exempting funds that are small entities from the reporting
requirements. We believe that the form amendments are necessary to help
identify and provide the Commission timely information about funds that
comply with rule 18f-4.\1135\ Exempting small funds from coverage under
all or any part of the form amendments could compromise the
effectiveness of the reporting requirements, which the Commission
believes would not be consistent with its goals of industry oversight
and investor protection. We believe that fund investors will benefit
from enhanced Commission monitoring and oversight of the fund industry,
which we anticipate will result from the new reporting requirements.
---------------------------------------------------------------------------

    \1135\ See supra section III.C.9.
---------------------------------------------------------------------------

    For similar reasons, although we considered establishing different
reporting requirements for small funds, we believe this would subject
investors in small funds that enter into derivatives transactions to a
higher degree of risk and information asymmetry than investors to large
funds that will be required to comply with the new reporting
requirements for which the reported information will be publicly
available. We also note that registered open- and closed-end management
investment companies, including those that are small entities, have
already updated their systems and have established internal processes
to prepare, validate, and file reports on Forms N-PORT and N-CEN.\1136\
For funds that will be required to file reports on Form N-RN pursuant
to rules 18f-4 and 30b1-10, the vast majority of them are open-end
funds, which already are required to submit the form upon specified
events. With respect to the additional registered closed-end funds and
BDCs newly required to file reports on Form N-RN, we do not believe
they will need more time than other types of funds to comply with the
new reporting requirements, given the limited set of reporting
requirements they will be subject to and the relatively low burden we
estimate of filing reports on Form N-RN.
---------------------------------------------------------------------------

    \1136\ See supra footnote 625 (noting that the funds that will
rely on rule 18f-4, other than BDCs, generally are subject to
reporting requirements of Forms N-PORT and N-CEN); see also
Reporting Modernization Adopting Release, Release No. 32936 (Dec. 8,
2017) [82 FR 58731 (Dec. 14, 2017)] (requiring larger registered
fund groups to submit reports on Form N-PORT by April 30, 2019, and
smaller fund groups to submit reports on Form N-PORT by April 30,
2020).
---------------------------------------------------------------------------

    We also do not believe that the interests of investors would be
served by consolidating or simplifying the reporting requirements under
the final rule for small funds. Small funds are as vulnerable to the
same potential risks associated with their derivatives use as larger
funds are, and therefore we believe that simplifying or consolidating
the reporting requirements for small funds would not allow us to meet
our stated objectives. Moreover, we believe many of the reporting
requirements involve minimal burden. For example, the Form N-CEN
``checking a box'' reporting requirement is completed on an annual
basis.
    Finally, we did not prescribe performance standards rather than
design standards for small funds because we believe this too could
diminish the ability of the new rules to achieve their intended
regulatory purpose by creating inconsistent reporting requirements
between small and large funds, and weakening the benefits of the
reporting requirement for investors in small funds.
3. Alternative Approaches to Rule 6c-11
    Rule 6c-11 is designed to modernize the regulatory framework for
ETFs and to create a consistent, transparent, and efficient regulatory
framework.\1137\ The Commission's full Regulatory Flexibility Act
Analysis regarding rule 6c-11, including analysis of significant
alternatives, appears in the 2019 ETFs

Adopting Release.\1138\ This analysis of alternatives for small
leveraged/inverse ETFs here is consistent with the Commission's
analysis of alternatives for small ETFs in that release.
---------------------------------------------------------------------------

    \1137\ See ETFs Adopting Release, supra footnote 76, at section
I.
    \1138\ See id. at section VI.
---------------------------------------------------------------------------

    We do not believe that permitting or requiring different treatment
for any subset of leveraged/inverse ETFs, including small leveraged/
inverse ETFs, under the amendments to rule 6c-11, and the rule's
related recordkeeping, disclosure and reporting requirements, will
permit us to achieve our stated objectives. Similarly, we do not
believe that we can establish simplified or consolidated compliance
requirements for small leveraged/inverse ETFs under the amendments to
rule 6c-11 without compromising our objectives. The Commission
discussed the bases for this determination (with respect to ETFs other
than leveraged/inverse ETFs) in more detail in the ETFs Adopting
Release, and we are extending that analysis to leveraged/inverse ETFs
in this FRFA.

VI. Statutory Authority

    The Commission is adopting new rule 18f-4 under the authority set
forth in sections 6(c), 12(a), 18, 31(a), 38(a), and 61 of the
Investment Company Act of 1940 [15 U.S.C. 80a-6(c), 80a-12(a), 80a-18,
80a-30(a), 80a-37(a), and 80a-60]. The Commission is adopting
amendments to rule 6c-11 under the authority set forth in sections
6(c), 22(c), and 38(a) of the Investment Company Act [15 U.S.C. 80a-
6(c), 22(c), and 80a-37(a)]. The Commission is adopting amendments to
rule 22e-4 under the authority set forth in 22(c), 22(e), 34(b) and
38(a) of the Investment Company Act [15 U.S.C. 80a-22(c), 80a-22(e),
80a-35(b), and 80a-37(a)], the Investment Advisers Act, particularly,
section 206(4) thereof [15 U.S.C. 80b-6(4)], the Exchange Act,
particularly section 10(b) thereof [15 U.S.C. 78a et seq.], the
Securities Act, particularly section 17(a) thereof [15 U.S.C. 77a et
seq.]. The Commission is adopting amendments to rule 30b1-10 under the
authority set forth in sections 22(c), 22(e), 34(b) and 38(a) of the
Investment Company Act [15 U.S.C. 80a-22(c), 80a-22(e), 80a-35(b), and
80a-37(a)], the Investment Advisers Act, particularly, section 206(4)
thereof [15 U.S.C. 80b-6(4)], the Exchange Act, particularly section
10(b) thereof [15 U.S.C. 78a et seq.], the Securities Act, particularly
section 17(a) thereof [15 U.S.C. 77a et seq.]. The Commission is
adopting amendments to Form N-PORT, Form N-LIQUID (re-titled ``Form N-
RN''), Form N-CEN, and Form N-2 under the authority set forth in
sections 6(c), 8, 18, 30, and 38 of the Investment Company Act of 1940
[15 U.S.C. 80a-8, 80a-18, 80a-29, 80a-37, 80a-63], sections 6, 7(a), 10
and 19(a) of the Securities Act of 1933 [15 U.S.C. 77f, 77g(a), 77j,
77s(a)], and sections 10, 13, 15, 23, and 35A of the Exchange Act [15
U.S.C. 78j, 78m, 78o, 78w, and 78ll].

List of Subjects

17 CFR Part 239

    Reporting and recordkeeping requirements, Securities.

17 CFR Part 249

    Brokers, Fraud, Reporting and recordkeeping requirements,
Securities.

17 CFR Parts 270 and 274

    Investment companies, Reporting and recordkeeping requirements,
Securities.

Text of Rules and Form Amendments

    For the reasons set out in the preamble the Commission amends title
17, chapter II of the Code of Federal Regulations as follows:

PART 239--FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1933

0
1. The authority citation for part 239 continues to read, in part, as
follows:

    Authority: 15 U.S.C. 77c, 77f, 77g, 77h, 77j, 77s, 77z-2, 77z-3,
77sss, 78c, 78 l, 78m,78n, 78o(d), 78o-7 note, 78u-5, 78w(a), 78ll,
78mm, 80a-2(a), 80a-3, 80a-8, 80a-9, 80a-10, 80a-13, 80a-24, 80a-26,
80a-29, 80a-30, and 80a-37; and sec. 107, Pub. L. 112-106, 126 Stat.
312, unless otherwise noted.
* * * * *

PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934

0
2. The authority citation for part 249 continues to read, in part, as
follows:

    Authority:  15 U.S.C. 78a et seq. and 7201 et seq.; 12 U.S.C.
5461 et seq.; 18 U.S.C. 1350; Sec. 953(b), Pub. L. 111-203, 124
Stat. 1904; Sec. 102(a)(3), Pub. L. 112-106, 126 Stat. 309 (2012);
Sec. 107, Pub. L. 112-106, 126 Stat. 313 (2012), and Sec. 72001,
Pub. L. 114-94, 129 Stat. 1312 (2015), unless otherwise noted.
* * * * *

PART 270--RULES AND REGULATIONS, INVESTMENT COMPANY ACT OF 1940

0
3. The authority citation for part 270 continues to read, in part, as
follows:

    Authority: 15 U.S.C. 80a-1 et seq., 80a-34(d), 80a-37, 80a-39,
and Pub. L. 111-203, sec. 939A, 124 Stat. 1376 (2010), unless
otherwise noted.
* * * * *
    Section 270.6c-11 is also issued under 15 U.S.C. 80a-6(c) and
80a-37(a).
* * * * *

0
4. Amend Sec.  270.6c-11 by revising paragraph (c)(4) to read as
follows:

Sec.  270.6c-11  Exchange traded-funds.

* * * * *
    (c) * * *
    (4) An exchange-traded fund that seeks, directly or indirectly, to
provide investment returns that correspond to the performance of a
market index by a specified multiple, or to provide investment returns
that have an inverse relationship to the performance of a market index,
over a predetermined period of time, must comply with all applicable
provisions of Sec.  270.18f-4.
* * * * *

0
5. Section 270.18f-4 is added to read as follows:

Sec.  270.18f-4  Exemption from the requirements of section 18 and
section 61 for certain senior securities transactions.

    (a) Definitions. For purposes of this section:
    Absolute VaR test means that the VaR of the fund's portfolio does
not exceed 20% of the value of the fund's net assets, or in the case of
a closed-end company that has issued to investors and has then
outstanding shares of a class of senior security that is a stock, that
the VaR of the fund's portfolio does not exceed 25% of the value of the
fund's net assets.
    Derivatives exposure means the sum of the gross notional amounts of
the fund's derivatives transactions described in paragraph (1) of the
definition of the term ``derivatives transaction'' of this section, and
in the case of short sale borrowings, the value of the assets sold
short. If a fund's derivatives transactions include reverse repurchase
agreements or similar financing transactions under paragraph (d)(1)(ii)
of this section, the fund's derivatives exposure also includes, for
each transaction, the proceeds received but not yet repaid or returned,
or for which the associated liability has not been extinguished, in
connection with the transaction. In determining derivatives exposure a
fund may convert the notional amount of interest rate derivatives to
10-year bond equivalents and delta adjust the notional amounts of
options contracts and exclude any closed-out positions, if those
positions were closed out with the same counterparty and result in no
credit or market exposure to the fund.
    Derivatives risk manager means an officer or officers of the fund's
investment adviser responsible for administering the program and
policies

and procedures required by paragraph (c)(1) of this section, provided
that the derivatives risk manager:
    (1) May not be a portfolio manager of the fund, or if multiple
officers serve as derivatives risk manager, may not have a majority
composed of portfolio managers of the fund; and
    (2) Must have relevant experience regarding the management of
derivatives risk.
    Derivatives risks means the risks associated with a fund's
derivatives transactions or its use of derivatives transactions,
including leverage, market, counterparty, liquidity, operational, and
legal risks and any other risks the derivatives risk manager (or, in
the case of a fund that is a limited derivatives user as described in
paragraph (c)(4) of this section, the fund's investment adviser) deems
material.
    Derivatives transaction means:
    (1) Any swap, security-based swap, futures contract, forward
contract, option, any combination of the foregoing, or any similar
instrument (``derivatives instrument''), under which a fund is or may
be required to make any payment or delivery of cash or other assets
during the life of the instrument or at maturity or early termination,
whether as margin or settlement payment or otherwise;
    (2) Any short sale borrowing; and
    (3) If a fund relies on paragraph (d)(1)(ii) of this section, any
reverse repurchase agreement or similar financing transaction.
    Designated index means an unleveraged index that is approved by the
derivatives risk manager for purposes of the relative VaR test and that
reflects the markets or asset classes in which the fund invests and is
not administered by an organization that is an affiliated person of the
fund, its investment adviser, or principal underwriter, or created at
the request of the fund or its investment adviser, unless the index is
widely recognized and used. In the case of a blended index, none of the
indexes that compose the blended index may be administered by an
organization that is an affiliated person of the fund, its investment
adviser, or principal underwriter, or created at the request of the
fund or its investment adviser, unless the index is widely recognized
and used.
    Designated reference portfolio means a designated index or the
fund's securities portfolio. Notwithstanding paragraph (2) of the
definition of designated index of this section, if the fund's
investment objective is to track the performance (including a leverage
multiple or inverse multiple) of an unleveraged index, the fund must
use that index as its designated reference portfolio.
    Fund means a registered open-end or closed-end company or a
business development company, including any separate series thereof,
but does not include a registered open-end company that is regulated as
a money market fund under Sec.  270.2a-7.
    Leveraged/inverse fund means a fund that seeks, directly or
indirectly, to provide investment returns that correspond to the
performance of a market index by a specified multiple (``leverage
multiple''), or to provide investment returns that have an inverse
relationship to the performance of a market index (``inverse
multiple''), over a predetermined period of time.
    Relative VaR test means that the VaR of the fund's portfolio does
not exceed 200% of the VaR of the designated reference portfolio, or in
the case of a closed-end company that has issued to investors and has
then outstanding shares of a class of senior security that is a stock,
that the VaR of the fund's portfolio does not exceed 250% of the VaR of
the designated reference portfolio.
    Securities portfolio means the fund's portfolio of securities and
other investments, excluding any derivatives transactions, that is
approved by the derivatives risk manager for purposes of the relative
VaR test, provided that the fund's securities portfolio reflects the
markets or asset classes in which the fund invests (i.e., the markets
or asset classes in which the fund invests directly through securities
and other investments and indirectly through derivatives transactions).
    Unfunded commitment agreement means a contract that is not a
derivatives transaction, under which a fund commits, conditionally or
unconditionally, to make a loan to a company or to invest equity in a
company in the future, including by making a capital commitment to a
private fund that can be drawn at the discretion of the fund's general
partner.
    Value-at-risk or VaR means an estimate of potential losses on an
instrument or portfolio, expressed as a percentage of the value of the
portfolio's assets (or net assets when computing a fund's VaR), over a
specified time horizon and at a given confidence level, provided that
any VaR model used by a fund for purposes of determining the fund's
compliance with the relative VaR test or the absolute VaR test must:
    (1) Take into account and incorporate all significant, identifiable
market risk factors associated with a fund's investments, including, as
applicable:
    (i) Equity price risk, interest rate risk, credit spread risk,
foreign currency risk and commodity price risk;
    (ii) Material risks arising from the nonlinear price
characteristics of a fund's investments, including options and
positions with embedded optionality; and
    (iii) The sensitivity of the market value of the fund's investments
to changes in volatility;
    (2) Use a 99% confidence level and a time horizon of 20 trading
days; and
    (3) Be based on at least three years of historical market data.
    (b) Derivatives transactions. If a fund satisfies the conditions of
paragraph (c) of this section, the fund may enter into derivatives
transactions, notwithstanding the requirements of sections 18(a)(1),
18(c), 18(f)(1), and 61 of the Investment Company Act (15 U.S.C. 80a-
18(a)(1), 80a-18(c), 80a-18(f)(1), and 80a-60), and derivatives
transactions entered into by the fund in compliance with this section
will not be considered for purposes of computing asset coverage, as
defined in section 18(h) of the Investment Company Act (15 U.S.C. 80a-
18(h)).
    (c) Conditions--(1) Derivatives risk management program. The fund
adopts and implements a written derivatives risk management program
(``program''), which must include policies and procedures that are
reasonably designed to manage the fund's derivatives risks and to
reasonably segregate the functions associated with the program from the
portfolio management of the fund. The program must include the
following elements:
    (i) Risk identification and assessment. The program must provide
for the identification and assessment of the fund's derivatives risks.
This assessment must take into account the fund's derivatives
transactions and other investments.
    (ii) Risk guidelines. The program must provide for the
establishment, maintenance, and enforcement of investment, risk
management, or related guidelines that provide for quantitative or
otherwise measurable criteria, metrics, or thresholds of the fund's
derivatives risks. These guidelines must specify levels of the given
criterion, metric, or threshold that the fund does not normally expect
to exceed, and measures to be taken if they are exceeded.
    (iii) Stress testing. The program must provide for stress testing
to evaluate potential losses to the fund's portfolio in response to
extreme but plausible market changes or changes in market risk factors
that would have a significant adverse effect on the fund's portfolio,

taking into account correlations of market risk factors and resulting
payments to derivatives counterparties. The frequency with which the
stress testing under this paragraph is conducted must take into account
the fund's strategy and investments and current market conditions,
provided that these stress tests must be conducted no less frequently
than weekly.
    (iv) Backtesting. The program must provide for backtesting to be
conducted no less frequently than weekly, of the results of the VaR
calculation model used by the fund in connection with the relative VaR
test or the absolute VaR test by comparing the fund's gain or loss that
occurred on each business day during the backtesting period with the
corresponding VaR calculation for that day, estimated over a one-
trading day time horizon, and identifying as an exception any instance
in which the fund experiences a loss exceeding the corresponding VaR
calculation's estimated loss.
    (v) Internal reporting and escalation--(A) Internal reporting. The
program must identify the circumstances under which persons responsible
for portfolio management will be informed regarding the operation of
the program, including exceedances of the guidelines specified in
paragraph (c)(1)(ii) of this section and the results of the stress
tests specified in paragraph (c)(1)(iii) of this section.
    (B) Escalation of material risks. The derivatives risk manager must
inform in a timely manner persons responsible for portfolio management
of the fund, and also directly inform the fund's board of directors as
appropriate, of material risks arising from the fund's derivatives
transactions, including risks identified by the fund's exceedance of a
criterion, metric, or threshold provided for in the fund's risk
guidelines established under paragraph (c)(1)(ii) of this section or by
the stress testing described in paragraph (c)(1)(iii) of this section.
    (vi) Periodic review of the program. The derivatives risk manager
must review the program at least annually to evaluate the program's
effectiveness and to reflect changes in risk over time. The periodic
review must include a review of the VaR calculation model used by the
fund under paragraph (c)(2) of this section (including the backtesting
required by paragraph (c)(1)(iv) of this section) and any designated
reference portfolio to evaluate whether it remains appropriate.
    (2) Limit on fund leverage risk. (i) The fund must comply with the
relative VaR test unless the derivatives risk manager reasonably
determines that a designated reference portfolio would not provide an
appropriate reference portfolio for purposes of the relative VaR test,
taking into account the fund's investments, investment objectives, and
strategy. A fund that does not apply the relative VaR test must comply
with the absolute VaR test.
    (ii) The fund must determine its compliance with the applicable VaR
test at least once each business day. If the fund determines that it is
not in compliance with the applicable VaR test, the fund must come back
into compliance promptly after such determination, in a manner that is
in the best interests of the fund and its shareholders.
    (iii) If the fund is not in compliance with the applicable VaR test
within five business days:
    (A) The derivatives risk manager must provide a written report to
the fund's board of directors and explain how and by when (i.e., number
of business days) the derivatives risk manager reasonably expects that
the fund will come back into compliance;
    (B) The derivatives risk manager must analyze the circumstances
that caused the fund to be out of compliance for more than five
business days and update any program elements as appropriate to address
those circumstances; and
    (C) The derivatives risk manager must provide a written report
within thirty calendar days of the exceedance to the fund's board of
directors explaining how the fund came back into compliance and the
results of the analysis and updates required under paragraph
(c)(2)(iii)(B) of this section. If the fund remains out of compliance
with the applicable VaR test at that time, the derivatives risk
manager's written report must update the report previously provided
under paragraph (c)(2)(iii)(A) of this section and the derivatives risk
manager must update the board of directors on the fund's progress in
coming back into compliance at regularly scheduled intervals at a
frequency determined by the board.
    (3) Board oversight and reporting--(i) Approval of the derivatives
risk manager. A fund's board of directors, including a majority of
directors who are not interested persons of the fund, must approve the
designation of the derivatives risk manager.
    (ii) Reporting on program implementation and effectiveness. On or
before the implementation of the program, and at least annually
thereafter, the derivatives risk manager must provide to the board of
directors a written report providing a representation that the program
is reasonably designed to manage the fund's derivatives risks and to
incorporate the elements provided in paragraphs (c)(1)(i) through (vi)
of this section. The representation may be based on the derivatives
risk manager's reasonable belief after due inquiry. The written report
must include the basis for the representation along with such
information as may be reasonably necessary to evaluate the adequacy of
the fund's program and, for reports following the program's initial
implementation, the effectiveness of its implementation. The written
report also must include, as applicable, the derivatives risk manager's
basis for the approval of any designated reference portfolio or any
change in the designated reference portfolio during the period covered
by the report; or an explanation of the basis for the derivatives risk
manager's determination that a designated reference portfolio would not
provide an appropriate reference portfolio for purposes of the relative
VaR test.
    (iii) Regular board reporting. The derivatives risk manager must
provide to the board of directors, at a frequency determined by the
board, a written report regarding the derivatives risk manager's
analysis of exceedances described in paragraph (c)(1)(ii) of this
section, the results of the stress testing conducted under paragraph
(c)(1)(iii) of this section, and the results of the backtesting
conducted under paragraph (c)(1)(iv) of this section since the last
report to the board. Each report under this paragraph must include such
information as may be reasonably necessary for the board of directors
to evaluate the fund's response to exceedances and the results of the
fund's stress testing.
    (4) Limited derivatives users. (i) A fund is not required to adopt
a program as prescribed in paragraph (c)(1) of this section, comply
with the limit on fund leverage risk in paragraph (c)(2) of this
section, or comply with the board oversight and reporting requirements
as prescribed in paragraph (c)(3) of this section, if:
    (A) The fund adopts and implements written policies and procedures
reasonably designed to manage the fund's derivatives risk; and
    (B) The fund's derivatives exposure does not exceed 10 percent of
the fund's net assets, excluding, for this purpose, currency or
interest rate derivatives that hedge currency or interest rate risks
associated with one or more specific equity or fixed-income investments
held by the fund (which must be foreign-currency-denominated in the
case of currency derivatives), or the fund's borrowings, provided that
the currency

or interest rate derivatives are entered into and maintained by the
fund for hedging purposes and that the notional amounts of such
derivatives do not exceed the value of the hedged investments (or the
par value thereof, in the case of fixed-income investments, or the
principal amount, in the case of borrowing) by more than 10 percent.
    (ii) If a fund's derivatives exposure exceeds 10 percent of its net
assets, as calculated in accordance with paragraph (c)(4)(i)(B) of this
section, and the fund is not in compliance with that paragraph within
five business days, the fund's investment adviser must provide a
written report to the fund's board of directors informing them whether
the investment adviser intends either:
    (A) To reduce the fund's derivatives exposure to less than 10
percent of the fund's net assets promptly, but within no more than
thirty calendar days of the exceedance, in a manner that is in the best
interests of the fund and its shareholders; or
    (B) For the fund to establish a program as prescribed in paragraph
(c)(1) of this section, comply with the limit on fund leverage risk in
paragraph (c)(2) of this section, and comply with the board oversight
and reporting requirements as prescribed in paragraph (c)(3) of this
section, as soon as reasonably practicable.
    (5) Leveraged/inverse funds. A leveraged/inverse fund that cannot
comply with the limit on fund leverage risk in paragraph (c) of this
section is not required to comply with the limit on fund leverage risk
if, in addition to complying with all other applicable requirements of
this section:
    (i) As of October 28, 2020, the fund is in operation; has
outstanding shares issued in one or more public offerings to investors;
and discloses in its prospectus a leverage multiple or inverse multiple
that exceeds 200% of the performance or the inverse of the performance
of the underlying index;
    (ii) The fund does not change the underlying market index or
increase the level of leveraged or inverse market exposure the fund
seeks, directly or indirectly, to provide; and
    (iii) The fund discloses in its prospectus that it is not subject
to the limit on fund leverage risk in paragraph (c)(2) of this section.
    (6) Recordkeeping--(i) Records to be maintained. A fund must
maintain a written record documenting, as applicable:
    (A) The fund's written policies and procedures required by
paragraph (c)(1) of this section, along with:
    (1) The results of the fund's stress tests under paragraph
(c)(1)(iii) of this section;
    (2) The results of the backtesting conducted under paragraph
(c)(1)(iv) of this section;
    (3) Records documenting any internal reporting or escalation of
material risks under paragraph (c)(1)(v)(B) of this section; and
    (4) Records documenting the reviews conducted under paragraph
(c)(1)(vi) of this section.
    (B) Copies of any materials provided to the board of directors in
connection with its approval of the designation of the derivatives risk
manager, any written reports provided to the board of directors
relating to the program, and any written reports provided to the board
of directors under paragraphs (c)(2)(iii)(A) and (C) of this section.
    (C) Any determination and/or action the fund made under paragraphs
(c)(2)(i) and (ii) of this section, including a fund's determination
of: The VaR of its portfolio; the VaR of the fund's designated
reference portfolio, as applicable; the fund's VaR ratio (the value of
the VaR of the fund's portfolio divided by the VaR of the designated
reference portfolio), as applicable; and any updates to any VaR
calculation models used by the fund and the basis for any material
changes thereto.
    (D) If applicable, the fund's written policies and procedures
required by paragraph (c)(4) of this section, along with copies of any
written reports provided to the board of directors under paragraph
(c)(4)(ii) of this section.
    (ii) Retention periods. (A) A fund must maintain a copy of the
written policies and procedures that the fund adopted under paragraph
(c)(1) or (4) of this section that are in effect, or at any time within
the past five years were in effect, in an easily accessible place.
    (B) A fund must maintain all records and materials that paragraphs
(c)(6)(i)(A)(1) through (4) and (c)(6)(i)(B) through (D) of this
section describe for a period of not less than five years (the first
two years in an easily accessible place) following each determination,
action, or review that these paragraphs describe.
    (7) Current reports. A fund that experiences an event specified in
the parts of Form N-RN [referenced in 17 CFR 274.223] titled ``Relative
VaR Test Breaches,'' ``Absolute VaR Test Breaches,'' or ``Compliance
with VaR Test'' must file with the Commission a report on Form N-RN
within the period and according to the instructions specified in that
form.
    (d) Reverse repurchase agreements. (1) A fund may enter into
reverse repurchase agreements or similar financing transactions,
notwithstanding the requirements of sections 18(c) and 18(f)(1) of the
Investment Company Act, if the fund:
    (i) Complies with the asset coverage requirements of section 18,
and combines the aggregate amount of indebtedness associated with all
reverse repurchase agreements or similar financing transactions with
the aggregate amount of any other senior securities representing
indebtedness when calculating the asset coverage ratio; or
    (ii) Treats all reverse repurchase agreements or similar financing
transactions as derivatives transactions for all purposes under this
section.
    (2) A fund relying on paragraph (d) of this section must maintain a
written record documenting whether the fund is relying on paragraph
(d)(1)(i) or (ii) of this section for a period of not less than five
years (the first two years in an easily accessible place) following the
determination.
    (e) Unfunded commitment agreements. (1) A fund may enter into an
unfunded commitment agreement, notwithstanding the requirements of
sections 18(a), 18(c), 18(f)(1), and 61 of the Investment Company Act,
if the fund reasonably believes, at the time it enters into such
agreement, that it will have sufficient cash and cash equivalents to
meet its obligations with respect to all of its unfunded commitment
agreements, in each case as they come due. In forming a reasonable
belief, the fund must take into account its reasonable expectations
with respect to other obligations (including any obligation with
respect to senior securities or redemptions), and may not take into
account cash that may become available from the sale or disposition of
any investment at a price that deviates significantly from the market
value of those investments, or from issuing additional equity. Unfunded
commitment agreements entered into by the fund in compliance with this
section will not be considered for purposes of computing asset
coverage, as defined in section 18(h) of the Investment Company Act (15
U.S.C. 80a-18(h)).
    (2) For each unfunded commitment agreement that a fund enters into
under paragraph (e)(1) of this section, a fund must document the basis
for its reasonable belief regarding the sufficiency of its cash and
cash equivalents to meet its unfunded commitment agreement obligations,
and maintain a record of this documentation for a period of not less
than five years (the first two years in an easily

accessible place) following the date that the fund entered into the
agreement.
    (f) When issued, forward-settling, and non-standard settlement
cycle securities transactions. Notwithstanding the requirements of
sections 18(a)(1), 18(c), 18(f)(1), and 61 of the Investment Company
Act (15 U.S.C. 80a-18(a)(1), 80a018(c), 80a-18(f)(1), and 80a-60), a
fund or registered open-end company that is regulated as a money market
fund under Sec.  270.2a-7 may invest in a security on a when-issued or
forward-settling basis, or with a non-standard settlement cycle, and
the transaction will be deemed not to involve a senior security,
provided that: The fund intends to physically settle the transaction;
and the transaction will settle within 35 days of its trade date.

0
6. Amend Sec.  270.22e-4 by revising paragraph (b)(1)(ii)(C), note to
paragraph (b)(1)(ii)(C) and paragraph (b)(1)(iii)(B) to read as
follows:

Sec.  270.22e-4   Liquidity risk management programs.

* * * * *
    (b) * * *
    (1) * * *
    (ii) * * *
    (C) For derivatives transactions that the fund has classified as
moderately liquid investments, less liquid investments, and illiquid
investments, identify the percentage of the fund's highly liquid
investments that it has pledged as margin or collateral in connection
with derivatives transactions in each of these classification
categories.

    Note to paragraph (b)(1)(ii)(C):  For purposes of calculating
these percentages, a fund that has pledged highly liquid investments
and non-highly liquid investments as margin or collateral in
connection with derivatives transactions classified as moderately
liquid, less liquid, or illiquid investments first should apply
pledged assets that are highly liquid investments in connection with
these transactions, unless it has specifically identified non-highly
liquid investments as margin or collateral in connection with such
derivatives transactions.

* * * * *
    (iii) * * *
    (B) For purposes of determining whether a fund primarily holds
assets that are highly liquid investments, a fund must exclude from its
calculations the percentage of the fund's assets that are highly liquid
investments that it has pledged as margin or collateral in connection
with derivatives transactions that the fund has classified as
moderately liquid investments, less liquid investments, and illiquid
investments, as determined pursuant to paragraph (b)(1)(ii)(C) of this
section.
* * * * *

0
7. Revise Sec.  270.30b1-10 to read as follows:

Sec.  270.30b1-10  Current report for open-end and closed-end
management investment companies.

    Every registered open-end management investment company, or series
thereof, and every registered closed-end management investment company,
but not a fund that is regulated as a money market fund under Sec.
270.2a-7, that experiences an event specified on Form N-RN, must file
with the Commission a current report on Form N-RN within the period and
according to the instructions specified in that form.

PART 274--FORMS PRESCRIBED UNDER THE INVESTMENT COMPANY ACT OF 1940

0
8. The authority for part 274 continues to read in part as follows:

    Authority:  15 U.S.C. 77f, 77g, 77h, 77j, 77s, 78c(b), 78l, 78m,
78n, 78o(d), 80a-8, 80a-24, 80a-26, 80a-29, and Pub. L. 111-203,
sec. 939A, 124 Stat. 1376 (2010), unless otherwise noted.
* * * * *

0
9. Amend Form N-2 (referenced in Sec. Sec.  239.14 and 274.11a-1) by
revising instruction 2. to sub-item ``3. Senior Securities'' of ``Item
4. Financial Highlights'' to read as follows:

    Note: The text of Form N-2 does not, and this amendment will
not, appear in the Code of Federal Regulations.

Form N-2

* * * * *

Item 4. Financial Highlights

* * * * *

3. Senior Securities

* * * * *

Instructions

* * * * *
    2. Use the method described in section 18(h) of the 1940 Act [15
U.S.C. 80a-18(h)] to calculate the asset coverage to be set forth in
column (3). However, in lieu of expressing asset coverage in terms of a
ratio, as described in section 18(h), express it for each class of
senior securities in terms of dollar amounts per share (in the case of
preferred stock) or per $1,000 of indebtedness (in the case of senior
indebtedness). A fund should not consider any derivatives transactions,
or any unfunded commitment agreements, that it enters into in
compliance with rule 18f-4 under the Investment Company Act [17 CFR
270.18f-4] for purposes of computing asset coverage.
* * * * *

0
10. Amend Form N-CEN (referenced in Sec. Sec.  249.330 and 274.101) by
adding new Item C.7.n. to read as follows:

    Note: The text of Form N-CEN does not, and this amendment will
not, appear in the Code of Federal Regulations.

FORM N-CEN

ANNUAL REPORT FOR REGISTERED INVESTMENT COMPANIES

* * * * *
Item C.7. * * *

n. Rule 18f-4 (17 CFR 270.18f-4):___
    i. Is the Fund excepted from the rule 18f-4 (17 CFR 270.18f-4)
program requirement and limit on fund leverage risk under rule 18f-
4(c)(4) (17 CFR 270.18f-4(c)(4))? ___
    ii. Is the Fund a leveraged/inverse fund that, under rule 18f-
4(c)(5) (17 CFR 270.18f-4(c)(5)), is excepted from the requirement to
comply with the limit on fund leverage risk described in rule 18f-
4(c)(2) (17 CFR 270.18f-4(c)(2))? ___
    iii. Did the Fund enter into any reverse repurchase agreements or
similar financing transactions under rule 18f-4(d)(i) (17 CFR 270.18f-
4(d)(i))? ___
    iv. Did the Fund enter into any reverse repurchase agreements or
similar financing transactions under rule 18f-4(d)(ii) (17 CFR 270.18f-
4(d)(ii))? ___
    v. Did the Fund enter into any unfunded commitment agreements under
rule 18f-4(e) (17 CFR 270.18f-4(e))? ___
    vi. Did the Fund invest in a security on a when-issued or forward-
settling basis, or with a non-standard settlement cycle, in reliance on
rule 18f-4(f) (17 CFR 270.18f-4(f))? ___
* * * * *

0
11. Amend Form N-PORT (referenced in Sec.  274.150) by:
0
a. Adding to General Instruction E. ``Definitions'' the parenthetical
``(including rule 18f-4 solely for Items B.9 and 10 of the Form)'' in
the introductory paragraph, and adding in alphabetical order, the
following definitions:
0
i. ``Absolute VaR Test'';
0
ii. ``Derivatives Exposure'';
0
iii. ``Designated Index'';
0
iv. ``Designated Reference Portfolio'';
0
v. ``Relative VaR Test'';
0
vi. ``Securities Portfolio'';
0
vii. ``Value-at-Risk''; and
0
viii. ``VaR Ratio''.

0
b. Revising General Instruction F ``Public Availability'' to add the
text ``Derivatives Exposure for limited derivatives users (Item B.9),
median daily VaR (Item B.10.a), median VaR Ratio (Item B.10.b.iii),''
and ``VaR backtesting results (Item B.10.c),''.
0
c. Revising Item B.8 to replace the text ``segregated to cover or
pledged to satisfy margin requirements'' with ``pledged as margin or
collateral,'' and to add after the enumerated liquidity categories the
text ``For purposes of Item B.8, when computing the required
percentage, the denominator should only include assets (and exclude
liabilities) that are categorized by the Fund as Highly Liquid
Investments.''
0
d. Adding Items B.9 and B.10.
    The additions and revisions read as follows:

    Note: The text of Form N-PORT does not, and this amendment will
not, appear in the Code of Federal Regulations.

FORM N-PORT

MONTHLY PORTFOLIO INVESTMENTS REPORT

* * * * *

GENERAL INSTRUCTIONS

* * * * *

E. Definitions

    References to sections and rules in this Form N-PORT are to the
Act, unless otherwise indicated. Terms used in this Form N-PORT have
the same meanings as in the Act or related rules (including rule 18f-4
solely for Items B.9 and 10 of the Form), unless otherwise indicated.
* * * * *
    ``Absolute VaR Test'' has the meaning defined in rule 18f-4(a) [17
CFR 270.18f-4(a)].
* * * * *
    ``Derivatives Exposure'' has the meaning defined in rule 18f-4(a)
[17 CFR 270.18f-4(a)].
* * * * *
    ``Designated Index'' has the meaning defined in rule 18f-4(a) [17
CFR 270.18f-4(a)].
* * * * *
    ``Designated Reference Portfolio'' has the meaning defined in rule
18f-4(a) [17 CFR 270.18f-4(a)].
* * * * *
    ``Relative VaR Test'' has the meaning defined in rule 18f-4(a) [17
CFR 270.18f-4(a)].
* * * * *
    ``Securities Portfolio'' has the meaning defined in rule 18f-4(a)
[17 CFR 270.18f-4(a)].
* * * * *
    ``Value-at-Risk'' or VaR has the meaning defined in rule 18f-4(a)
[17 CFR 270.18f-4(a)].
* * * * *
    ``VaR Ratio'' means the value of the Fund's portfolio VaR divided
by the VaR of the Designated Reference Portfolio.
* * * * *

F. Public Availability

    Information reported on Form N-PORT for the third month of each
Fund's fiscal quarter will be made publicly available 60 days after the
end of the Fund's fiscal quarter.
    The SEC does not intend to make public the information reported on
Form N-PORT for the first and second months of each Fund's fiscal
quarter that is identifiable to any particular fund or adviser, or any
information reported with respect to a Fund's Highly Liquid Investment
Minimum (Item B.7), derivatives transactions (Item B.8), Derivatives
Exposure for limited derivatives users (Item B.9), median daily VaR
(Item B.10.a), median VaR Ratio (Item B.10.b.iii), VaR backtesting
results (Item B.10.c), country of risk and economic exposure (Item
C.5.b), delta (Items C.9.f.v, C.11.c.vii, or C.11.g.iv), liquidity
classification for portfolio investments (Item C.7), or miscellaneous
securities (Part D), or explanatory notes related to any of those
topics (Part E) that is identifiable to any particular fund or adviser.
However, the SEC may use information reported on this Form in its
regulatory programs, including examinations, investigations, and
enforcement actions.
* * * * *

PART B. * * *

    Item B.8. Derivatives Transactions. For portfolio investments of
open-end management investment companies, provide the percentage of the
Fund's Highly Liquid Investments that it has pledged as margin or
collateral in connection with derivatives transactions that are
classified among the following categories as specified in rule 22e-4
[17 CFR 270.22e-4]:

1. Moderately Liquid Investments
2. Less Liquid Investments
3. Illiquid Investments

For purposes of Item B.8, when computing the required percentage, the
denominator should only include assets (and exclude liabilities) that
are categorized by the Fund as Highly Liquid Investments.
    Item B.9. Derivatives Exposure for limited derivatives users. If
the Fund is excepted from the rule 18f-4 [17 CFR 270.18f-4] program
requirement and limit on fund leverage risk under rule 18f-4(c)(4) [17
CFR 270.18f-4(c)(4)], provide the following information:
    a. Derivatives exposure (as defined in rule 18f-4(a) [17 CFR
270.18f-4(a)]), reported as a percentage of the Fund's net asset value.
    b. Exposure from currency derivatives that hedge currency risks, as
provided in rule 18f-4(c)(4)(i)(B) [17 CFR 270.18f-4(c)(4)(i)(B)],
reported as a percentage of the Fund's net asset value.
    c. Exposure from interest rate derivatives that hedge interest rate
risks, as provided in rule 18f-4(c)(4)(i)(B) [17 CFR 270.18f-
4(c)(4)(i)(B)], reported as a percentage of the Fund's net asset value.
    d. The number of business days, if any, in excess of the five-
business-day period described in rule 18f-4(c)(4)(ii) [17 CFR 270.18f-
4(c)(4)(ii)], that the Fund's derivatives exposure exceeded 10 percent
of its net assets during the reporting period.
    Item B.10. VaR information. For Funds subject to the limit on fund
leverage risk described in rule 18f-4(c)(2) [17 CFR 270.18f-4(c)(2)],
provide the following information, as determined in accordance with the
requirement under rule 18f-4(c)(2)(ii) to determine the fund's
compliance with the applicable VaR test at least once each business
day:
    a. Median daily VaR during the reporting period, reported as a
percentage of the Fund's net asset value.
    b. For Funds that were subject to the Relative VaR Test during the
reporting period, provide:
    i. As applicable, the name of the Fund's Designated Index, or a
statement that the Fund's Designated Reference Portfolio is the Fund's
Securities Portfolio.
    ii. As applicable, the index identifier for the Fund's Designated
Index.
    iii. Median VaR Ratio during the reporting period, reported as a
percentage of the VaR of the Fund's Designated Reference Portfolio.
    c. Backtesting Results. Number of exceptions that the Fund
identified as a result of its backtesting of its VaR calculation model
(as described in rule 18f-4(c)(1)(iv) [17 CFR 270.18f-4(c)(1)(iv)]
during the reporting period.
* * * * *

0
12. Revise Sec.  274.223 to read as follows:

Sec.  274.223  Form N-RN, Current report, open- and closed-end
investment company reporting.

    This form shall be used by registered open-end management
investment companies, or series thereof, and closed-end management
investment companies, to file reports pursuant to

Sec.  270.18f-4(c)(7) and Sec.  270.30b1-10 of this chapter.

0
13. Revise Form N-LIQUID (referenced in Sec.  274.223) and its title to
read as follows:

    Note: The text of Form N-RN does not, and this amendment will
not, appear in the Code of Federal Regulations.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM N-RN

CURRENT REPORT FOR REGISTERED MANAGEMENT INVESTMENT COMPANIES AND
BUSINESS DEVELOPMENT COMPANIES

    Form N-RN is to be used by a registered open-end management
investment company or series thereof, but not including a fund that is
regulated as a money market fund under rule 2a-7 under the Act (17 CFR
270.2A-7) (a ``registered open-end fund''), a registered closed-end
management investment company (a ``registered closed-end fund''), or a
closed-end management investment company that has elected to be
regulated as a business development company (a ``business development
company''), to file current reports with the Commission pursuant to
rule 18f-4(c)(7) and rule 30b1-10 under the Investment Company of 1940
Act [15 U.S.C. 80a] (``Act'') (17 CFR 270.18f-4(c)(7); 17 CFR 270.30b1-
10). The Commission may use the information provided on Form N-RN in
its regulatory, disclosure review, inspection, and policymaking roles.

General Instructions

A. Rules as To Use of Form N-RN

    (1) Form N-RN is the reporting form that is to be used for current
reports of registered open-end funds (not including funds that are
regulated as money market funds under rule 2a-7 under the Act),
registered closed-end funds, and business development companies
(together, ``registrants'') required by, as applicable, section 30(b)
of the Act and rule 30b1-10 under the Act, as well as rule 18f-4(c)(7)
under the Act. The Commission does not intend to make public
information reported on Form N-RN that is identifiable to any
particular registrant, although the Commission may use Form N-RN
information in an enforcement action.
    (2) Unless otherwise specified, a report on this Form N-RN is
required to be filed, as applicable, within one business day of the
occurrence of the event specified in Parts B-G of this form. If the
event occurs on a Saturday, Sunday, or holiday on which the Commission
is not open for business, then the one business day period shall begin
to run on, and include, the first business day thereafter.
    (3) For registered open-end funds required to comply with rule 22e-
4 under the Investment Company Act [17 CFR 270.22e-4], complete Parts
B-D of this form, as applicable. For registrants that are subject to a
VaR test under rule 18f-4(c)(2)(i) [17 CFR 270.18f-4(c)(2)(i)],
complete Parts E-G of this form, as applicable.

B. Application of General Rules and Regulations

    The General Rules and Regulations under the Act contain certain
general requirements that are applicable to reporting on any form under
the Act. These general requirements should be carefully read and
observed in the preparation and filing of reports on this form, except
that any provision in the form or in these instructions shall be
controlling.

C. Information To Be Included in Report Filed on Form N-RN

    Upon the occurrence of the event specified in Parts B-G of Form N-
RN, as applicable, a registrant must file a report on Form N-RN that
includes information in response to each of the items in Part A of the
form, as well as each of the items in the applicable Parts B-G of the
Form.

D. Filing of Form N-RN

    A registrant must file Form N-RN in accordance with rule 232.13 of
Regulation S-T (17 CFR part 232). Form N-RN must be filed
electronically using the Commission's Electronic Data Gathering,
Analysis and Retrieval System (``EDGAR'').

E. Paperwork Reduction Act Information

    A registrant is not required to respond to the collection of
information contained in Form N-RN unless the form displays a currently
valid Office of Management and Budget (``OMB'') control number. Please
direct comments concerning the accuracy of the information collection
burden estimate and any suggestions for reducing the burden to the
Secretary, Securities and Exchange Commission, 100 F Street NE,
Washington, DC 20549-1090. The OMB has reviewed this collection of
information under the clearance requirements of 44 U.S.C. 3507.

F. Definitions

    References to sections and rules in this Form N-RN are to the
Investment Company Act (15 U.S.C 80a), unless otherwise indicated.
Terms used in this Form N-RN have the same meaning as in the Investment
Company Act, rule 22e-4 under the Investment Company Act (for Parts B-D
of the Form), or rule 18f-4 under the Investment Company Act (for Part
E-G of the Form), unless otherwise indicated. In addition, as used in
this Form N-RN, the term registrant means the registrant or a separate
series of the registrant, as applicable.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM N-RN

CURRENT REPORT FOR REGISTERED MANAGEMENT INVESTMENT COMPANIES AND
BUSINESS DEVELOPMENT COMPANIES

PART A. General Information

    Item A.1. Report for [mm/dd/yyyy].
    Item A.2. Name of Registrant.
    Item A.3. CIK Number of registrant.
    Item A.4. Name of Series, if applicable.
    Item A.3. EDGAR Series Identifier, if applicable.
    Item A.4. Securities Act File Number, if applicable.
    Item A.5. Provide the name, email address, and telephone number of
the person authorized to receive information and respond to questions
about this Form N-RN.

PART B. Above 15% Illiquid Investments

    If more than 15 percent of the registrant's net assets are, or
become, illiquid investments that are assets as defined in rule 22e-4,
then report the following information:
    Item B.1. Date(s) on which the registrant's illiquid investments
that are assets exceeded 15 percent of its net assets.
    Item B.2. The current percentage of the registrant's net assets
that are illiquid investments that are assets.
    Item B.3. Identification of illiquid investments. For each
investment that is an asset that is held by the registrant that is
considered illiquid, disclose (1) the name of the issuer, the title of
the issue or description of the investment, the CUSIP (if any), and at
least one other identifier, if available (e.g., ISIN, Ticker, or other
unique identifier (if ticker and ISIN are not available)) (indicate the

type of identifier used), and (2) the percentage of the fund's net
assets attributable to that investment.

PART C. At or Below 15% Illiquid Investments

    If a registrant that has filed Part B of Form N-RN determines that
its holdings in illiquid investments that are assets have changed to be
less than or equal to 15 percent of the registrant's net assets, then
report the following information:
    Item C.1. Date(s) on which the registrant's illiquid investments
that are assets fell to or below 15 percent of net assets.
    Item C.2. The current percentage of the registrant's net assets
that are illiquid investments that are assets.

PART D. Assets That Are Highly Liquid Investments Below the Highly
Liquid Investment Minimum

    If a registrant's holdings in assets that are highly liquid
investments fall below its highly liquid investment minimum for more
than 7 consecutive calendar days, then report the following
information:
    Item D.1. Date(s) on which the registrant's holdings of assets that
are highly liquid investments fell below the fund's highly liquid
investment minimum.

PART E. Relative VaR Test Breaches

    If a registrant is subject to the relative VaR test under rule 18f-
4(c)(2)(i) [17 CFR 270.18f-4(c)(2)(i)], and the fund determines that it
is not in compliance with the relative VaR test and has not come back
into compliance within 5 business days after such determination,
provide:
    Item E.1. The dates on which the VaR of the registrant's portfolio
exceeded 200% or 250% (as applicable under rule 18f-4 [17 CFR 270.18f-
4]) of the VaR of its designated reference portfolio.
    Item E.2. The VaR of the registrant's portfolio on the dates each
exceedance occurred.
    Item E.3. The VaR of the registrant's designated reference
portfolio on the dates each exceedance occurred.
    Item E.4. As applicable, either the name of the registrant's
designated index, or a statement that the registrant's designated
reference portfolio is the registrant's securities portfolio.
    Item E.5. As applicable, the index identifier for the registrant's
designated index.

PART F. Absolute VaR Test Breaches

    If a registrant is subject to the absolute VaR test under rule 18f-
4(c)(2)(i) [17 CFR 270.18f-4(c)(2)(i)], and the fund determines that it
is not in compliance with the absolute VaR test and has not come back
into compliance within 5 business days after such determination,
provide:
    Item F.1. The dates on which the VaR of the registrant's portfolio
exceeded 20% or 25% (as applicable under rule 18f-4 [17 CFR 270.18f-4])
of the value of the registrant's net assets.
    Item F.2. The VaR of the registrant's portfolio on the dates each
exceedance occurred.
    Item F.3. The value of the registrant's net assets on the dates
each exceedance occurred.

PART G. Compliance With VaR Test

    If a registrant that has filed Part E or Part F of Form N-RN has
come back into compliance with either the relative VaR test or the
absolute VaR test, as applicable, then report the following
information:
    Item G.1. Dates on which the VaR of the registrant's portfolio
exceeded applicable VaR limit described in Item E.1 or Item F.1.
    Item G.2. The current VaR of the registrant's portfolio.

PART H. Explanatory Notes (if any)

    A registrant may provide any information it believes would be
helpful in understanding the information reported in response to any
Item of this Form.

Signatures

Pursuant to the requirements of the Investment Company Act of 1940, the
registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.

-----------------------------------------------------------------------
(Registrant)
Date-------------------------------------------------------------------
-----------------------------------------------------------------------
(Signature)*

* Print name and title of the signing officer under his/her
signature.

    By the Commission.

    Dated: November 2, 2020.
Vanessa A. Countryman
Secretary.
[FR Doc. 2020-24781 Filed 12-18-20; 8:45 am]
BILLING CODE 8011-01-P