[Federal Register Volume 80, Number 113 (Friday, June 12, 2015)]
[Proposed Rules]
[Pages 33590-33716]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-12779]



[[Page 33589]]

Vol. 80

Friday,

No. 113

June 12, 2015

Part II





Securities and Exchange Commission





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17 CFR Parts 200, 210, 230, et al.





Investment Company Reporting Modernization; Proposed Rule

Federal Register / Vol. 80 , No. 113 / Friday, June 12, 2015 / 
Proposed Rules

[[Page 33590]]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 200, 210, 230, 232, 239, 240, 249, 270, 274

[Release Nos. 33-9776; 34-75002; IC-31610; File No. S7-08-15]
RIN 3235-AL42


Investment Company Reporting Modernization

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule.

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SUMMARY: The Securities and Exchange Commission is proposing new rules 
and forms as well as amendments to its rules and forms to modernize the 
reporting and disclosure of information by registered investment 
companies. The Commission is proposing new Form N-PORT, which would 
require certain registered investment companies to report information 
about their monthly portfolio holdings to the Commission in a 
structured data format. In addition, the Commission is proposing 
amendments to Regulation S-X, which would require standardized, 
enhanced disclosure about derivatives in investment company financial 
statements, as well as other amendments. The Commission is also 
proposing new rule 30e-3, which would permit but not require registered 
investment companies to transmit periodic reports to their shareholders 
by making the reports accessible on a Web site and satisfying certain 
other conditions. The Commission is proposing new Form N-CEN, which 
would require registered investment companies, other than face amount 
certificate companies, to annually report certain census-type 
information to the Commission in a structured data format. Finally, the 
Commission is proposing to rescind current Forms N-Q and N-SAR and to 
amend certain other rules and forms. Collectively, these amendments 
would, among other things, improve the information that the Commission 
receives from investment companies and assist the Commission, in its 
role as primary regulator of investment companies, to better fulfill 
its mission of protecting investors, maintaining fair, orderly and 
efficient markets, and facilitating capital formation. Investors and 
other potential users could also utilize this information to help 
investors make more informed investment decisions.

DATES: Comments should be received on or before August 11, 2015.

ADDRESSES: Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/proposed.shtml);
     Send an email to [email protected]. Please include 
File No. S7-08-15 on the subject line; or
     Use the Federal eRulemaking Portal (http://www.regulations.gov). Follow the instructions for submitting comments.

Paper Comments

     Send paper comments to Secretary, Securities and Exchange 
Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number S7-08-15. This file number 
should be included on the subject line if email is used. To help the 
Commission process and review your comments more efficiently, please 
use only one method. The Commission will post all comments on the 
Commission's Internet Web site (http://www.sec.gov/rules/proposed.shtml). Comments are also available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. All comments received will be posted without 
change; the Commission does not edit personal identifying information 
from submissions. You should submit only information you wish to make 
available publicly.
    Studies, memoranda, or other substantive items may be added by the 
Commission or staff to the comment file during this rulemaking. A 
notification of the inclusion in the comment file of any such materials 
will be made available on the Commission's Web site. To ensure direct 
electronic receipt of such notifications, sign up through the ``Stay 
Connected'' option at www.sec.gov to receive notifications by email.

FOR FURTHER INFORMATION CONTACT: Daniel K. Chang, Senior Counsel, J. 
Matthew DeLesDernier, Senior Counsel, Jacob D. Krawitz, Senior Counsel, 
Andrea Ottomanelli Magovern, Senior Counsel, Michael C. Pawluk, Branch 
Chief, or Sara Cortes, Senior Special Counsel, at (202) 551-6792, 
Investment Company Rulemaking Office, Alan Dupski, Assistant Chief 
Accountant, Chief Accountant's Office, at (202) 551-6918, Division of 
Investment Management, Securities and Exchange Commission, 100 F Street 
NE., Washington, DC 20549-8549.

SUPPLEMENTARY INFORMATION: The Securities and Exchange Commission (the 
``Commission'') is proposing for comment new Form N-PORT [referenced in 
17 CFR 274.150], new Form N-CEN [referenced in 17 CFR 274.101] under 
the Investment Company Act of 1940 [15 U.S.C. 80a-1 et seq.] 
(``Investment Company Act''); new rules 30a-4 [17 CFR 270.30a-4], 30b1-
9 [17 CFR 270.30b1-9] and 30e-3 [17 CFR 270.30e-3] under the Investment 
Company Act; rescission of rules 30b1-1 [17 CFR 270.30b1-1], 30b1-2 [17 
CFR 270.30b1-2], 30b1-3 [17 CFR 270.30b1-3], and 30b1-5 [17 CFR 
270.30b1-5] under the Investment Company Act; amendments to rules 8b-16 
[17 CFR 270.8b-16], 8b-33 [17 CFR 270.8b-33], 10f-3 [17 CFR 270.10f-3], 
30a-1 [17 CFR 270.30a-1], 30a-2 [17 CFR 270.30a-2], 30a-3 [17 CFR 
270.30a-3], and 30d-1 [17 CFR 270.30d-1] under the Investment Company; 
amendments to Forms N-1A [referenced in 17 CFR 274.11A], N-2 
[referenced in 274.11a-1], N-3 [referenced in 274.11b], N-4 [referenced 
in 17 CFR 274.11c], and N-6 [referenced in 17 CFR 274.11d] under the 
Investment Company Act and the Securities Act of 1933 [15 U.S.C. 77a et 
seq.] (``Securities Act''); amendments to rule 498 [17 CFR 230.498] and 
Form N-14 [referenced in 17 CFR 239.23] under the Securities Act; 
rescission of Form N-SAR [referenced in 17 CFR 274.101 and Form N-Q 
[referenced in 17 CFR 274.130] and amendments to Form N-CSR [referenced 
in 17 CFR 274.128] under the Investment Company Act and Securities 
Exchange Act of 1934 [15 U.S.C. 78a et seq.] (``Exchange Act''); 
amendments to rules 10A-1 [17 CFR 240.10A-1], 12b-25 [17 CFR 240.12b-
25], 13a-10 [17 CFR 240.13a-10], 13a-11 [17 CFR 240.13a-11], 13a-13 [17 
CFR 240.13a-13], 13a-16 [17 CFR 240.13a-16], 14a-16 [17 CFR 240.14a-
16]; 15d-10 [17 CFR 240.15d-10], 15d-11 [17 CFR 240.15d-11], 15d-13 [17 
CFR 240.15d-13], and 15d-16 [17 CFR 240.15d-16] under the Exchange Act; 
rescission of section 332 [17 CFR 249.332] and amendments to sections 
322 [17 CFR 249.322] and 330 [17 CFR 249.330] of 17 CFR part 249; 
amendments to Article 6 [17 CFR 210.6-01 et seq.] and Article 12 [17 
CFR 210.12-01 et seq.] of Regulation S-X [17 CFR 210]; amendments to 
section 800 of 17 CFR part 200 [17 CFR 200.800]; and amendments to 
rules 105 [17 CFR 232.105], 301 [17 CFR 232.301], and 401 [17 CFR 
232.401] of Regulation S-T [17 CFR 232].

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Table of Contents

I. Background
    A. Changes in the Industry and Technology
    B. Changes to Current Reporting Regime
    1. Form N-PORT, Amendments to Regulation S-X, and Option for Web 
Site Transmission of Shareholder Reports
    2. Form N-CEN
II. Discussion
    A. Form N-PORT
    1. Who Must File Reports on Form N-PORT
    2. Information Required on Form N-PORT
    3. Reporting of Information on Form N-PORT
    4. Public Disclosure of Information Reported on Form N-PORT
    B. Rescission of Form N-Q and Amendments to Certification 
Requirements of Form N-CSR
    1. Rescission of Form N-Q
    2. Amendments to Certification Requirements of Form N-CSR
    3. Request for Comment
    C. Amendments to Regulation S-X
    1. Overview
    2. Enhanced Derivatives Disclosures
    3. Amendments to Rules 12-12 Through 12-12C
    4. Investments In and Advances to Affiliates
    5. Form and Content of Financial Statements
    D. Option for Web Site Transmission of Shareholder Reports
    1. Overview
    2. Discussion
    3. Rule 30e-3
    4. Use of Summary Schedule of Investments
    5. Related Disclosure Amendments
    6. Requests for Comment
    E. Form N-CEN and Rescission of Form N-SAR
    1. Overview
    2. Who Must File Reports on Form N-CEN
    3. Frequency of Reporting and Filing Deadline
    4. Information Required on Form N-CEN
    5. Items Required by Form N-SAR That Would Be Eliminated by Form 
N-CEN
    F. Technical and Conforming Amendments
    G. Compliance Dates
    1. Form N-PORT, Rescission of Form N-Q, and Amendments to the 
Certification Requirements of Form N-CSR
    2. Form N-CEN and Rescission of Form N-SAR
    3. Option for Web Site Transmission of Shareholder Reports
    4. Regulation S-X and Related Amendments
    5. Request for Comment
III. General Request for Comment
IV. Economic Analysis
    A. Introduction
    B. Form N-PORT, Rescission of Form N-Q, and Amendments to Form 
N-CSR
    C. Amendments to Regulation S-X
    D. Option for Web Site Transmission of Shareholder Reports
    E. Form N-CEN and Rescission of Form N-SAR
    F. Alternatives to the Reporting Requirements
    G. Request for Comments
V. Paperwork Reduction Act
    A. Portfolio Reporting
    1. Form N-PORT
    2. Rescission of Form N-Q
    B. Census Reporting
    1. Form N-CEN
    2. Rescission of Form N-SAR
    C. Amendments to Regulation S-X
    1. Rule 30e-1
    2. Rule 30e-2
    D. Option for Web Site Transmission of Shareholder Reports
    1. Availability of Report and Other Materials and Delivery Upon 
Request
    2. Shareholder Consent and Notice
    3. Impact on Information Collections for Rules 30e-1 and 30e-2
    E. Amendments to Certification Requirements of Form N-CSR
    F. Amendments to Registration Statement Forms
    G. Request for Comments
VI. Initial Regulatory Flexibility Analysis
    A. Reasons for and Objectives of the Proposed Actions
    B. Legal Basis
    C. Small Entities Subject to the Rule
    D. Projected Reporting, Recordkeeping, and Other Compliance 
Requirements
    1. Form N-PORT
    2. Rescission of Form N-Q
    3. Form N-CEN
    4. Rescission of Form N-SAR
    5. Regulation S-X Amendments
    6. Web Site Transmission of Shareholder Reports
    7. Amendments to Form N-CSR
    8. Amendments to Registration Statement Forms
    E. Duplicative, Overlapping, or Conflicting Federal Rules
    F. Significant Alternatives
    G. General Request for Comment
VII. Consideration of Impact on the Economy
VIII. Statutory Authority and Text of Proposed Amendments

I. Background

A. Changes in the Industry and Technology

    As the primary regulator of the asset management industry, the 
Commission relies on information included in reports filed by 
registered investment companies (``funds'') \1\ and investment advisers 
for a number of purposes, including monitoring industry trends, 
informing policy and rulemaking, identifying risks, and assisting 
Commission staff in examination and enforcement efforts. Over the 
years, however, as assets under management and complexity in the 
industry have grown, so too has the volume and complexity of 
information that the Commission must analyze to carry out its 
regulatory duties.
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    \1\ For purposes of the preamble of this release, we use 
``funds'' to mean registered investment companies other than face 
amount certificate companies and any separate series thereof--i.e., 
management companies and unit investment trusts. In addition, we use 
the term ``management companies'' or ``management investment 
companies'' to refer to registered management investment companies 
and any separate series thereof. We note that ``fund'' may be 
separately and differently defined in each of the proposed new forms 
or rules, or proposed rule or form amendments.
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    Commission staff estimates that there were approximately 16,619 
funds registered with the Commission, as of December 2014.\2\ 
Commission staff further estimates that there were about 11,500 
investment advisers registered with the Commission, along with another 
2,845 advisers that file reports with the Commission as exempt 
reporting advisers, as of January 2015.\3\ At year-end 2014, assets of 
registered investment companies exceeded $18 trillion, having grown 
from about $4.7 trillion at the end of 1997.\4\ At the same time, the 
industry has developed new product structures, such as exchange-traded 
funds (``ETFs'') \5\, new fund types, such as target date funds with 
asset allocation strategies,\6\ and increased its use of derivatives 
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other alternative strategies.\7\ These products and strategies can 
offer greater opportunities for investors to achieve their investment 
goals, but they can also add complexity to funds' investment 
strategies, amplify investment risk, or have other risks, such as 
counterparty credit risk.
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    \2\ Based on data obtained from the Investment Company 
Institute. See www.ici.org/research/ stats.
    \3\ Based on Investment Adviser Registration Depository system 
data. In 2010, Congress charged the Commission with implementing new 
reporting and registration requirements for certain investment 
advisers to private funds (known as ``exempt reporting advisers''). 
See Public Law 111-203, 124 Stat. 1376, 1570-80.
     Form ADV is used by registered investment advisers to register 
with the Commission and with the states and by exempt reporting 
advisers to report information to the Commission. Information on 
Form ADV is available to the public through the Investment Adviser 
Public Disclosure System, which allows the public to access the most 
recent Form ADV filing made by an investment adviser and is 
available at http://www.adviserinfo.sec.gov. Today, in a 
contemporaneous release, we are proposing a limited set of 
amendments to Form ADV and certain rules under the Advisers Act to 
fill certain data gaps and to enhance current reporting 
requirements, to incorporate ``umbrella registration'' for private 
fund advisers, and to make clarifying, technical and other 
amendments. See Amendments to Form ADV and Investment Advisers Act 
Rules, Investment Advisers Act Release No. 4091 (May 20, 2015).
    \4\ See Investment Company Institute, 2015 Investment Company 
Fact Book 9 (55th ed., 2015) (``2015 ICI Fact Book''), available at 
http://www.ici.org/research/stats/factbook.
    \5\ See generally Exchange-Traded Funds, Securities Act Release 
No. 8901 (Mar. 11, 2008) [73 FR 14618, 14619 (Mar. 18, 2008)] (``ETF 
Proposing Release''); see also http://www.ici.org/etf_resources/research/etfs_03_15 (discussing March 2015 statistics on ETFs). As 
of March 2015, there were over 1400 ETFs with over $2 trillion in 
assets. In the period of March 2014 to March 2015, assets of ETFs 
increased $352.43 billion or 20.6%. See id.
    \6\ See generally Investment Company Advertising: Target Date 
Retirement Fund Names and Marketing, Securities Act Release No. 9126 
(June 16, 2010) [75 FR 35920 (June 23, 2010)] (``Investment Company 
Advertising Release'').
    \7\ See generally Use of Derivatives by Investment Companies 
Under the Investment Company Act of 1940, Investment Company Act 
Release No. 29776 (Aug. 31, 2011) [76 FR 55237 (Sept. 7, 2011)] 
(``Derivatives Concept Release''); International Swaps and 
Derivatives Association (``ISDA'') Study, Size and Uses of the Non-
Cleared Derivatives Market (Apr. 2014), available at http://www2.isda.org/attachment/NjQ0MA==/FINAL%20-%20Size%20and%20Uses%20of%20the%20Non-Cleared%20Derivatves%20Market.pdf (noting increases in the use of 
inflation swaps by asset managers and other investors); ISDA 
Research Study, Dispelling Myths: End-User Activity in OTC 
Derivatives (Aug. 2014), available at http://www2.isda.org/attachment/Njc2Nw==/ISDA-Dispelling%20myths-final.pdf (noting levels 
of derivative usage by surveyed American and French asset managers 
of 27% in 2011 and 53% in 2013, respectively, with 98% of total 
gross notional exposure of surveyed UK hedge funds related to 
derivatives in 2013; Sam Diedrich, `Alternative' or `Hedged' Mutual 
Funds: What Are They, How Do They Work, and Should You Invest?, 
(Feb. 28, 2014), available at http://www.forbes.com/sites/samdiedrich/2014/02/28/alternative-or-hedged-mutual-funds-what-are-they-how-do-they-work-and-should-you-invest/ (noting that 
``alternative mutual fund products grew at a neck-breaking 43% [in 
2013]. . . .'').
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    While these changes have been taking place in the fund industry, 
there has also been a significant increase in the use of the Internet 
as a tool for disseminating information and advances in the technology 
that can be used to report and analyze information. As discussed below, 
we have allowed the use of the Internet as a platform for providing 
required disclosure to investors. We have also started to use 
structured and interactive data formats to collect, aggregate, and 
analyze data reported by registrants and other filers. These data 
formats for information collection have enabled us and other data 
users, including investors and other industry participants, to better 
collect and analyze reported information and have improved our ability 
to carry out our regulatory functions.
    We have historically acted to modernize our forms and the manner in 
which information is filed with the Commission and disclosed to the 
public in order to keep up with changes in the industry and technology. 
For example, in 1985, the Commission replaced five different reporting 
forms with Form N-SAR, which was designed to require reporting of data 
in a structured manner so that the Commission could construct a 
comprehensive database of information about the fund industry.\8\ In 
2000, we adopted new rules and rule amendments under the Investment 
Advisers Act of 1940 (``Advisers Act'') to require advisers registered 
with the Commission to make filings under the Advisers Act with the 
Commission electronically through the Investment Adviser Registration 
Depository (IARD).\9\ In 2007, we sought to enhance the ability of 
investors to make informed voting decisions and to expand the use of 
the Internet to ultimately lower the costs of proxy solicitations by 
requiring Internet availability of proxy materials.\10\
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    \8\ See Semi-Annual Report Form for Registered Investment 
Companies, Exchange Act Release No. 21633 (Jan. 4, 1985) [50 FR 1442 
(Jan. 11, 1985)]. Reports on Form N-SAR are publicly available on 
the Commission's EDGAR Web site.
    \9\ See Electronic Filing by Investment Advisers; Amendments to 
Form ADV, Investment Advisers Act Release No. 1897 (Sept. 12, 2000) 
[65 FR 57438 (Sept. 22, 2000)].
    \10\ See Shareholder Choice Regarding Proxy Materials, 
Investment Company Act Release No. 27911 (July 26, 2007) [72 FR 
42222 (Aug. 1, 2007)].
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    In 2009, we amended Form N-1A, the registration form for open-end 
funds, to enhance the information provided to investors by requiring 
these funds to include a summary of key information in the front of 
their prospectuses.\11\ The 2009 amendments to Form N-1A also sought to 
harness the benefits of technological advances and increased Internet 
usage by allowing mutual funds to satisfy their prospectus delivery 
obligations by delivering a summary prospectus to investors and posting 
the statutory prospectus and other materials on an Internet Web site.
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    \11\ See Enhanced Disclosure and New Prospectus Delivery Option 
for Registered Open-End Management Investment Companies, Investment 
Company Act Release No. 28584 (Jan. 13, 2009) [74 FR 4546 (Jan. 26, 
2009)].
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    Also in 2009, the Commission sought to take advantage of new 
technology by adopting amendments requiring open-end funds to file 
their prospectus risk/return summaries in eXtensible Business Reporting 
Language (``XBRL'').\12\ In doing so, the Commission noted that this 
interactive data format would make ``risk/return summary information 
easier for investors to analyze [and] assist in automating regulatory 
filings and business information processing.'' Additionally, in 2010, 
the Commission adopted Form N-MFP, which requires money market funds to 
report detailed portfolio holdings information on a monthly basis in 
Extensible Markup Language (``XML'').\13\ Because these disclosures and 
reports are filed in a structured data format using XBRL or XML, 
Commission staff, investors and other potential users are able to 
aggregate and analyze the data in a much less labor-intensive manner 
than plain text or hypertext filing formats would allow. The Commission 
also now uses the XML data format to collect and analyze certain 
information from advisers to private funds on Form PF \14\ and has 
modernized the reporting of securities holdings by institutional 
investment managers on Form 13F,\15\ which we believe resulted in 
efficiencies for data users.\16\
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    \12\ See Interactive Data for Mutual Fund Risk/Return Summary, 
Investment Company Act Release No. 28617 (Feb. 11, 2009) [74 FR 7748 
(Feb. 19, 2009)]. Just prior to adopting the XBRL requirements for 
mutual fund risk/return summaries, the Commission also adopted 
amendments requiring operating companies to provide their financial 
statement information in XBRL format. See Interactive Data to 
Improve Financial Reporting, Securities Act Release No. 33-9002 
(Jan. 30, 2009) [74 FR 6776 (Feb. 10, 2009)]. In adopting these 
requirements, the Commission noted that ``[i]n this format, 
financial statement information could be downloaded directly into 
spreadsheets, analyzed in a variety of ways using commercial off-
the-shelf software, and used within investment models in other 
software formats.'' Id.
    \13\ See Money Market Fund Reform, Investment Company Act 
Release No. 29132 (Feb. 23, 2010) [75 FR 10060, 10082 (Mar. 4, 
2010)] (``Money Market Fund Reform 2010 Release''); see also Money 
Market Fund Reform; Amendments to Form PF, Investment Company Act 
Release No. 31166 (July 23, 2014) [79 FR 47736 (Aug. 14, 2014)] 
(``Money Market Fund Reform 2014 Release'') (adopting amendments to 
Form N-MFP). The information in Form N-MFP allows the Commission, 
investors, and other potential users to monitor compliance with rule 
2a-7 and to better understand and monitor the underlying risks of 
money market fund portfolios. Additionally, pursuant to the 2010 and 
2014 amendments, money market funds are required to disclose certain 
information, including portfolio holdings, on their Web sites.
    \14\ See Reporting by Investment Advisers to Private Funds and 
Certain Commodity Pool Operators and Commodity Trading Advisors on 
Form PF, Investment Advisers Act Release No. 3308 (Oct. 31, 2011) 
[76 FR 71228 (Nov. 16, 2011)] (``Form PF Adopting Release'').
    \15\ See Adoption of Updated EDGAR Filer Manual, Securities Act 
Release No. 9403 (May 14, 2013) [78 FR 29616 (May 21, 2013)].
    \16\ The Commission has also proposed and adopted XML data 
reporting requirements in other contexts. See, e.g., Mandated 
Electronic Filing and Web site Posting For Forms 3, 4 and 5, 
Securities Act Release No. 8230 (May 7, 2003) [68 FR 27588 (May 13, 
2003)]; Electronic Filing and Revision of Form D, Securities Act 
Release No. 8891 (Feb. 6, 2008) [73 FR 10592 (Feb. 27, 2008)]; 
Electronic Filing of Transfer Agent Forms, Securities Exchange Act 
Release No. 54864 (Dec. 4, 2006) [71 FR 74698 (Dec. 12, 2006)]; 
Asset-Backed Securities Disclosure and Registration, Securities Act 
Release No. 9638 (Sept. 4, 2014) [79 FR 57184 (Sept. 24, 2014)]; 
Crowdfunding Securities Act Release No. 9470 (Oct. 23, 2013) [78 FR 
66428 (Nov. 5, 2013)]; Proposed Rule Amendments for Small and 
Additional Issues Exemptions Under Section 3(b) of the Securities 
Act, Securities Act Release No. 9497 (Dec. 18, 2013) [79 FR 3926 
(Jan. 23, 2014)]. See generally Recommendations of the Investor 
Advisory Committee Regarding the SEC and the Need for the Cost 
Effective Retrieval of Information by Investors (July 25, 2013), 
available at http://www.sec.gov/spotlight/investor-advisory-committee-2012/data-tagging-resolution-72513.pdf.

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    As these industry changes and technological advances have occurred 
over the years, we recognize a need to improve the type and format of 
the information that funds provide to us and to investors. We also 
recognize the need to improve the information that the Commission 
receives from funds in order to improve the Commission's monitoring of 
the fund industry in its role as the primary regulator of funds and 
investment advisers. As discussed below, today we are proposing a set 
of reporting and disclosure reforms designed to take advantage of the 
benefits of advanced technology and to modernize the fund reporting 
regime in order to help the Commission, investors, and other market 
participants better assess different fund products and to assist us in 
carrying out our mission to protect investors, maintain fair, orderly, 
and efficient markets, and facilitate capital formation. Our proposed 
reforms seek to (1) increase the transparency of fund portfolios and 
investment practices both to the Commission and to investors, (2) take 
advantage of technological advances both in terms of the manner in 
which information is reported to the Commission and how it is provided 
to investors and other potential users, and (3) where appropriate, 
reduce duplicative or otherwise unnecessary reporting burdens on the 
industry.
    We also note that in December 2014, the Financial Stability 
Oversight Council (``FSOC'') issued a notice requesting comment on 
aspects of the asset management industry, which includes, among other 
entities, registered investment companies.\17\ The notice included 
requests for comment on additional data or information that would be 
helpful to regulators and market participants. Although this rulemaking 
proposal is independent of FSOC, several commenters responding to the 
notice discussed issues concerning data that are relevant to the rules 
we are proposing today, including data regarding derivatives, global 
identifiers, and securities lending activities and are cited in the 
discussions below, as relevant.\18\
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    \17\ Financial Stability Oversight Council, Notice Seeking 
Comment on Asset Management Products and Activities, Docket No. 
FSOC-2014-0001 (``FSOC Notice''), available at http://www.treasury.gov/initiatives/fsoc/rulemaking/Documents/Notice%20Seeking%20Comment%20on%20Asset%20Management%20Products%20and%20Activities.pdf.
    \18\ Comments submitted in response to the FSOC Notice are 
available at http://www.regulations.gov/#!docketDetail;D=FSOC-2014-
0001. We also note that, in addition to commenters that argued for 
additional specific disclosures by funds, several commenters 
asserted, as a general matter, that registered funds are currently 
subject to robust disclosure requirements. See, e.g., Comment Letter 
of the Investment Company Institute to the FSOC Notice (Mar. 25, 
2015); Comment Letter of Federated Investors, Inc. to the FSOC 
Notice (Mar. 10, 2015); Comment Letter of the Capital Group 
Companies to the FSOC Notice (Mar. 25, 2015).
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B. Changes to Current Reporting Regime

1. Form N-PORT, Amendments to Regulation S-X, and Option for Web Site 
Transmission of Shareholder Reports
    Currently, management investment companies (other than small 
business investment companies (``SBICs'')) are required to report their 
complete portfolio holdings to the Commission on a quarterly basis.\19\ 
These funds are required to provide this information in reports on Form 
N-Q under the Investment Company Act and the Exchange Act as of the end 
of each first and third fiscal quarter,\20\ and in reports on Form N-
CSR under those Acts as of the end of each second and fourth fiscal 
quarter.\21\
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    \19\ See Shareholder Reports and Quarterly Portfolio Disclosure 
of Registered Management Investment Companies, Securities Act 
Release No. 8393 (Feb. 27, 2004) [69 FR 11244 (Mar. 9, 2004)] 
(``Quarterly Portfolio Holdings Adopting Release'').
    \20\ Rule 30b1-5 under the Investment Company Act [17 CFR 
270.30b1-5]. While SBICs file reports on Form N-CSR, SBICs are not 
required to file reports on Form N-Q.
    \21\ See rule 30b2-1 under the Investment Company Act [17 CFR 
270.30b2-1].
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    As discussed in Parts II.A and II.B of this release, we propose to 
rescind Form N-Q and adopt a new portfolio holdings reporting form, 
Form N-PORT, which would be filed by all registered management 
investment companies and unit investment trusts (``UITs'') that operate 
as ETFs,\22\ other than money market funds and SBICs.\23\ We are 
proposing that reports on Form N-PORT would be filed with the 
Commission on a monthly basis, with every third month available to the 
public 60 days after the end of the fund's fiscal quarter. The reports 
on Form N-PORT would include a fund's complete portfolio holdings in a 
structured data format. Additionally, as discussed below, proposed Form 
N-PORT would include additional information concerning fund portfolio 
holdings that are not currently provided on Forms N-Q and N-CSR, but 
that would facilitate risk analyses and other Commission oversight. For 
example, Form N-PORT would require reporting of additional information 
relating to derivative investments. It would also include certain risk 
metric calculations that would measure a fund's exposure and 
sensitivity to changing market conditions, such as changes in asset 
prices, interest rates, or credit spreads.
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    \22\ Under the proposal, all ETFs would be required to file 
reports on Form N-PORT, regardless of whether they are organized as 
management companies or UITs. UITs are a type of investment company 
which (a) are organized under a trust indenture contract of 
custodianship or agency or similar instrument, (b) do not have a 
board of directors, and (c) issue only redeemable securities. See 
section 4(2) of the Investment Company Act.
    \23\ Money market funds file reports on Form N-MFP on a monthly 
basis and, thus, would not be required to file reports on Form N-
PORT.
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    We believe that more timely and frequent reporting of portfolio 
holdings information, as well as the additional information we are 
proposing to require, would enable the Commission to further its 
mission to protect investors by assisting the Commission and Commission 
staff in carrying out its regulatory responsibilities related to the 
asset management industry. These responsibilities include its 
examination, enforcement, and monitoring of funds, the Commission's 
formulation of policy, and the staff's review of fund registration 
statements and disclosures.
    While Form N-PORT is primarily designed to assist the Commission 
and Commission staff, we believe that information in Form N-PORT would 
be beneficial to investors and other potential users. In particular, we 
believe that both sophisticated institutional investors and third-party 
users that provide services to investors may find the information we 
propose to require on Form N-PORT useful. For example, Form N-PORT's 
structured format would allow the Commission, investors, and other 
potential users to better collect and analyze portfolio holdings 
information. The portfolio holdings information currently filed on Form 
N-Q, in contrast, is filed in a plain text or hypertext format, which 
often requires labor-intensive manual reformatting by Commission staff 
and other potential users in order to prepare the reported data for 
analysis. While we do not anticipate that many individual investors 
would analyze data using Form N-PORT, although some may, we believe 
that individual investors would benefit indirectly from the information 
collected on reports on Form N-PORT, through enhanced Commission 
monitoring and oversight of the fund industry and through analyses 
prepared by third-party service providers.
    In addition, we are proposing amendments to Regulation S-X that 
would require standardized enhanced derivatives disclosures in fund 
financial statements, as well as other amendments. Currently, 
Regulation S-X does not prescribe specific information for most types 
of derivatives, including swaps, futures, and forwards. While we 
recognize that many fund groups provide disclosures regarding the terms

[[Page 33594]]

of their derivatives contracts, the lack of standard disclosure 
requirements has resulted in inconsistent disclosures in fund financial 
statements.
    We believe our proposed amendments to Regulation S-X to enhance and 
standardize derivatives disclosures in financial statements would allow 
comparability among funds and help all investors better assess funds' 
use of derivatives. We are proposing to require reports on Form N-PORT 
to contain similar derivatives disclosures to facilitate analysis of 
derivatives investments across funds. Because Form N-PORT is not 
primarily designed for individual investors, the proposed amendments to 
Regulation S-X would require disclosures concerning the fund's 
investments in derivatives, as well as other disclosures related to 
liquidity and pricing of investments, in the financial statements that 
are provided to investors. We have endeavored to mitigate burdens on 
the industry by conforming the derivatives disclosures that would be 
required by both Regulation S-X and Form N-PORT.
    Finally, we are also proposing a rule that would provide funds with 
an optional method to satisfy shareholder report transmission 
requirements by posting such reports online if they meet certain 
conditions. In order to rely on the rule, funds would be required to 
make the report and other required materials publicly accessible and 
free of charge at a Web site address specified in a notice to 
shareholders, and meet certain conditions relating to shareholder 
consent, and notice to shareholders of the Web site availability of 
shareholder reports and of the methods by which shareholders would be 
able to request a paper copy of the materials. This optional method is 
intended to modernize the manner in which periodic information is 
transmitted to shareholders, which we believe would improve the 
information's overall accessibility while reducing burdens such as the 
costs associated with printing and mailing shareholder reports.
2. Form N-CEN
    Currently, the Commission collects census-type information on 
management investment companies and UITs on reports on Form N-SAR.\24\ 
As discussed above, Form N-SAR was adopted in 1985 and, at that time, 
was intended to reduce reporting burdens and better align the 
information that was required to be reported with the characteristics 
of the fund industry. While Commission staff has indicated that the 
census-type information reported on Form N-SAR is useful in its support 
of the Commission's regulatory functions, staff has also indicated that 
in the thirty years since Form N-SAR's adoption, changes in the 
industry have reduced the utility of some of the currently required 
data elements. Additionally, the filing format that is required for 
reports on Form N-SAR limits our ability to use the reported 
information for analysis. Commission staff also believes that obtaining 
certain additional census-type information not currently collected by 
Form N-SAR would improve the staff's ability to carry out regulatory 
functions, including risk monitoring and analysis of the industry.
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    \24\ See rules 30a-1 and 30b1-1 under the Investment Company Act 
[17 CFR 270.30a-1 and 17 CFR 270.30b1-1].
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    Accordingly, we are proposing to rescind Form N-SAR and replace it 
with Form N-CEN, a new form on which funds will report census-type 
information to the Commission. Form N-CEN would include many of the 
same data elements as Form N-SAR, but, in order to improve the quality 
and utility of information reported, would replace those items that are 
outdated or of limited usefulness with items that we believe to be of 
greater relevance today. Where possible, we are also proposing to 
eliminate items that are reported on other Commission forms, or are 
available elsewhere. In addition, we are proposing to require that 
reports on Form N-CEN be filed in a structured XML format, which, we 
believe, could reduce reporting burdens for current Form N-SAR filers 
and yield data that can be used more effectively by the Commission and 
other potential users. Finally, we are proposing that reports on new 
Form N-CEN be filed annually, rather than semi-annually as is required 
for reports on Form N-SAR by management companies, which would further 
reduce current burdens on funds.

II. Discussion

A. Form N-PORT

    As discussed above, we are proposing to create a new monthly 
portfolio reporting form, Form N-PORT. Our proposal would require 
registered management investment companies and ETFs organized as UITs, 
other than money market funds and SBICs, to electronically file with 
the Commission monthly portfolio investments information on new Form N-
PORT in an XML format no later than 30 days after the close of each 
month.\25\ As discussed below in Part II.A.4, only information reported 
for the third month of each fund's fiscal quarter on Form N-PORT would 
be publicly available, and that information would not be made public 
until 60 days after the end of the fiscal quarter.\26\
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    \25\ See proposed rule 30b1-9.
    \26\ As used throughout this section, the term ``fund'' 
generally refers to investment companies that would file reports on 
Form N-PORT.
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    As the primary regulator of the fund industry, the Commission 
relies on information that funds file with us, including their 
registration statements, shareholder reports, and various reporting 
forms such as Form N-SAR, Form N-CSR, and Form N-Q. The Commission and 
its staff use this information to understand trends in the fund 
industry and carry out regulatory responsibilities, including 
formulating policy and guidance, reviewing fund registration 
statements, and assessing and examining a fund's regulatory compliance 
with the federal securities laws and Commission rules thereunder.
    Information on fund portfolios is currently filed with the 
Commission quarterly with up to a 70-day delay.\27\ Moreover, the 
reports are currently filed in a format that does not allow for 
efficient searches or analyses across portfolios, and even limits the 
ability to search or analyze a single portfolio. Based on staff 
experience with data analysis of funds, including staff experience 
using Form N-MFP, we believe that more frequent and timely information 
concerning fund portfolios than we currently receive through 
registration statements, shareholder reports on Form N-CSR, and reports 
on Form N-Q will assist the Commission in

[[Page 33595]]

its role as the primary regulator of funds, as discussed further below.
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    \27\ Funds currently file with the Commission portfolio 
schedules for the fund's first and third fiscal quarters on Form N-
Q, and shareholder reports, including portfolio schedules for the 
fund's second and fourth fiscal quarters, on Form N-CSR. These 
reports are available to the public and the Commission with either a 
60- or 70-day delay. See rule 30b1-5 (requiring management 
companies, other than SBICs, to file reports on Form N-Q no more 
than 60 days after the close of the first and third quarters of each 
fiscal year); rule 30b2-1 (requiring management companies to file 
reports on Form N-CSR no later than 10 days after the transmission 
to stockholders of any report required to be transmitted to 
stockholders under rule 30e-1). See also rules 30e-1 and 30e-2 under 
the Investment Company Act [17 CFR 270.30e-1 and 17 CFR 270.30e-2] 
(requiring management companies and certain UITs to transmit to 
stockholders semi-annual reports containing, among other things, the 
fund's portfolio schedules, no more than 60 days after the close of 
the second and fourth quarters of each fiscal year). These reports 
include portfolio holdings information as required by Regulation S-
X. See rule 12-12 of Regulation S-X [17 CFR 210.12-12], et seq.
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    The information we are proposing to collect on Form N-PORT would be 
important to the Commission in analyzing and understanding the various 
risks in a particular fund, as well as risks across specific types of 
funds and the fund industry as a whole. These risks can include the 
investment risk that the fund is undertaking as part of its investment 
strategy, such as interest rate risk, credit risk, volatility risk, 
other market risks, or risks associated with specific types of 
investments, such as emerging market debt or commodities. Additionally, 
the information is helpful to understanding liquidity risks and 
counterparty risks, and determining whether a fund's exposure to price 
movements is leveraged, either through borrowings or the use of 
derivatives. We believe that information we are proposing to require on 
Form N-PORT will assist the Commission in better understanding each of 
these risks in the fund industry. We believe that the ability to 
understand the risks that funds face will help our staff better 
understand and monitor risks and trends in the fund industry as a 
whole, facilitating our informed regulation of the fund industry.
    We also believe that information obtained from Form N-PORT filings 
would facilitate our oversight of funds and assist Commission staff in 
examination, enforcement, and monitoring, as well as in formulating 
policy and in its review of fund registration statements and 
disclosures. In this regard, we expect that Commission staff would use 
the data reported on Form N-PORT for many of the same purposes as 
Commission staff has used data reported on Form N-MFP by money market 
funds. The data received on Form N-MFP has been used extensively by 
Commission staff, including for purposes of assessing regulatory 
compliance, identifying funds for examination, and risk monitoring. 
Form N-MFP data has also informed Commission policy; for example, staff 
used Form N-MFP data in analyses that informed the Commission's 
considerations when it proposed and adopted money market fund reform 
rules in 2013 and 2014.\28\
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    \28\ See, e.g., Money Market Fund Reform; Amendments to Form PF, 
Investment Company Act Release No. 30551 (June 5, 2013) [78 FR 36834 
(June 19, 2013)]; Money Market Fund Reform 2014 Release, supra note 
13 at n.502 and accompanying text (citing use of Form N-MFP data in 
discussing the Commission's decision to require basis point 
rounding); and at n.651 and accompanying text (citing use of Form N-
MFP data in discussing the Commission's decision regarding the size 
of the non-government securities basket for government money market 
funds).
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    We recognize that, unlike money market funds, which as cash 
management vehicles generally share common investment objectives and 
strategies and thus invest in a relatively small number of common 
security types, other funds invest in a much more diverse manner. 
Accordingly, Form N-PORT, as proposed, would require reporting of 
additional information relative to Form N-MFP, in order to facilitate 
understanding and analysis of the investment strategies that funds 
pursue, as well as the large variety of securities, commodities, 
currencies, derivatives, and other investments that funds may invest 
in.
    In addition to assisting the Commission in its regulatory 
functions, we believe that investors and other potential users could 
benefit from the periodic public disclosure of the information reported 
on Form N-PORT. Proposed Form N-PORT is primarily designed for use by 
the Commission and its staff, and not for disclosing information 
directly to individual investors. This is because the form's structured 
format, while needed for quantitative analysis within a fund and across 
funds, is not an easily human-readable format. Additionally, the 
information we are proposing to require on Form N-PORT is more 
voluminous than on a schedule of investments. We believe, however, that 
some investors, particularly institutional investors, could directly 
use the data from the information on proposed Form N-PORT for their own 
quantitative analysis of funds, including to better understand the 
funds' investment strategies and risks, and to better compare funds 
with similar strategies. Additionally, we believe that entities 
providing services to investors, such as investment advisers, broker-
dealers, and entities that provide information and analysis for fund 
investors, could also utilize and analyze the information that would be 
required by proposed Form N-PORT to help all investors make more 
informed investment decisions. Accordingly, whether directly or through 
third parties, we believe that the periodic public disclosure of the 
information on proposed Form N-PORT could benefit all fund investors. 
As discussed further below, in order to mitigate the risk that the 
information on Form N-PORT could be used in ways that might ultimately 
result in investor harm, we are proposing to limit the public 
availability of Form N-PORT reports to those reports filed as of 
quarter end, as well as delay public availability of those reports by 
60 days after quarter end.
    We intend to increase transparency of fund investments through 
proposed Form N-PORT in several ways. First, N-PORT would improve 
reporting of fund derivative usage. As the Commission has previously 
noted, we have observed significant increases in the use of derivatives 
by funds, which have highlighted the need for more robust and 
standardized derivatives disclosures.\29\ Additionally, funds that are 
considered ``alternative'' funds, which often use derivatives for 
implementing their investment strategy, are becoming increasingly 
popular among investors.\30\ Although Regulation S-X establishes 
general disclosure requirements for financial statements in fund 
registration statements, based on staff review of fund filings, the 
lack of standardized requirements as to the terms of derivatives that 
must be reported has sometimes led to inconsistent approaches to 
reporting derivatives information and, in some cases, insufficient 
information concerning the terms and underlying reference assets of 
derivatives to allow the Commission or investors to understand the 
investment. This hinders both an analysis of a particular fund's 
investments, as well as comparability among funds.\31\ The information 
requested in Form N-PORT would create a more detailed, uniform, and 
structured reporting regime. This would allow the Commission and 
investors to better analyze and compare

[[Page 33596]]

funds' derivatives investments and the exposures they create, which can 
be important to understanding funds' investment strategies, use of 
leverage, and potential for risk of loss.
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    \29\ See Derivatives Concept Release, supra note 7, at n.7 and 
accompanying text.
    \30\ While there is no clear definition of ``alternative'' in 
the fund industry, an alternative fund is generally understood to be 
a fund whose primary investment strategy falls into one or more of 
the three following categories: (1) Non-traditional asset classes 
(for example, currencies); (2) non-traditional strategies (such as 
long/short equity positions); and/or (3) less liquid assets (such as 
private debt).
     At the end of December 2014, alternative mutual funds had 
almost $200 billion in assets. Although alternative mutual funds 
only accounted for 1.19% of the mutual fund market as of December 
2014, the almost $20.1 billion of inflows into these funds in 2014 
represented 4.3% of the inflows for the entire mutual fund industry 
in that year. These statistics were obtained from staff analysis of 
Morningstar Direct data, and are based on fund categories as defined 
by Morningstar.
    \31\ See, e.g., rule 12-13 of Regulation S-X [17 CFR 210.12-13] 
(requiring funds to generally disclose derivatives together with 
``other'' investments); rule 6-03 of Regulation S-X [17 CFR 210.6-
03] (applying articles 1-4 of Regulation S-X to investment 
companies, but not specifying where derivative disclosures should be 
made for funds); ASC 815, Disclosures about Derivative Instruments 
and Hedging Activities (discussing general derivative disclosure) 
(``ASC 815''); ASC 820, Fair Value Measurements (requiring 
disclosure of valuation information for major categories of 
investments) (``ASC 820''). See also Part II.C.
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    Furthermore, as discussed further below, proposed Form N-PORT would 
require funds to report certain risk metrics that would provide 
measurements of a fund's exposure to changes in interest rates, credit 
spreads and asset prices, whether through investments in debt 
securities or in derivatives. Financial statement information provides 
historical information over a particular time period (e.g., a statement 
of operations), or information about values of assets at a particular 
point in time (e.g., a balance sheet including, for funds, a schedule 
of investments). Risk metrics, on the other hand, measure the change in 
value of an investment in response to small changes in the underlying 
reference asset of an investment, whether the underlying reference 
asset is a security (or index of securities), commodity, interest rate, 
or credit spread over an interest rate. Based on staff experience, as 
well as staff outreach to asset managers and entities that provide risk 
management services to asset managers, discussed further below, we 
believe that fund portfolio managers and risk managers commonly 
calculate these risk metrics to analyze the exposures in their 
portfolios.\32\ The Commission believes that staff can use these risk 
measures to better understand the exposures in the fund industry, 
thereby facilitating better monitoring of risks and trends in the fund 
industry as a whole.
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    \32\ See generally John C. Hull, Options, Futures, and Other 
Derivatives, Seventh Edition (2009) (discussing, for example, the 
function of duration, convexity, delta, and other calculations used 
for measuring changes in the value of bonds or derivatives as a 
result in changes in underlying asset prices or interest rates); 
Sheldon Natenberg, Option Volatility and Pricing (1994) (same).
---------------------------------------------------------------------------

    Form N-PORT would also require information about certain fund 
activities such as securities lending, repurchase agreements, and 
reverse repurchase agreements, including information regarding the 
counterparties to which the fund is exposed in those transactions, as 
well as in over-the-counter derivatives transactions. Such information 
would increase transparency concerning these activities and would 
provide better information regarding counterparty information, which 
would be useful in assessing both individual and multiple fund 
exposures to a single counterparty.\33\
---------------------------------------------------------------------------

    \33\ See, e.g., Report by Task Force on Tri-Party Repo 
Infrastructure, May 17, 2010 (concluding that insufficient 
transparency of the tri-party repurchase agreement market 
contributed to the build-up of exposures and the lack of prior 
concerted action to address the issues that led to financial turmoil 
during 2007-2009). The Task Force on Tri-Party Repo Infrastructure 
was formed in September 2009 under the purview of the Payments Risk 
Committee, a private sector body sponsored by the Federal Reserve 
Bank of New York. The Task Force membership includes representatives 
from multiple types of market participants that participate in the 
tri-party repo market, as well as relevant industry associations. 
Federal Reserve and Commission staff participated in meetings of the 
Task Force as observers and technical advisors.
---------------------------------------------------------------------------

    Proposed Form N-PORT also requires information that would assist 
the Commission in assessing fund liquidity risk by, for example, 
requiring funds to provide information about the market liquidity and 
pricing of portfolio investments, as well as information regarding fund 
flows, which is helpful to understanding the liquidity pressures a fund 
might experience due to investor redemption activity.
    Finally, as discussed further below, Form N-PORT would be filed 
electronically in a structured, XML format. This format would enhance 
the ability of the Commission, as well as investors and other potential 
users, to analyze portfolio data both on a fund-by-fund basis and also 
across funds. As a result, although we are proposing to collect certain 
information on Form N-PORT that may be similarly disclosed or reported 
elsewhere (e.g., portfolio investments would continue to be included as 
part of the schedules of investments contained in shareholder reports, 
and filed on a semi-annual basis with the Commission on Form N-CSR), we 
believe that it is appropriate to also collect this information in a 
structured format for analysis by our staff as well as investors and 
other potential users.
1. Who Must File Reports on Form N-PORT
    Our proposal would require a report on Form N-PORT to be filed by 
each registered management investment company and each ETF organized as 
a UIT.\34\ Registrants offering multiple series would be required to 
file a report for each series separately, even if some information is 
the same for two or more series. Money market funds and SBICs would not 
be required to file reports on Form N-PORT.\35\
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    \34\ See proposed rule 30b1-9.
    \35\ Money market funds already file their monthly portfolio 
investments with the Commission. See Form N-MFP. SBICs are unique 
investment companies that operate differently than other management 
investment companies. They are ``privately owned and managed 
investment funds, licensed and regulated by [the Small Business 
Administration (``SBA'')], that use their own capital plus funds 
borrowed with an SBA guarantee to make equity and debt investments 
in qualifying small businesses.'' See SBIC Program Overview 
available at https://www.sba.gov/content/sbic-program-overview. As 
of December 31, 2014, only one SBIC had publicly offered securities 
outstanding.
---------------------------------------------------------------------------

    As indicated above, our proposal would require all ETFs to file 
reports on Form N-PORT, regardless of their form of organization. 
Although most ETFs today are structured as open-end management 
investment companies, there are several ETFs that are organized as 
UITs.\36\ ETFs organized as UITs have significant numbers of investors 
who we believe could benefit from the disclosures required in Form N-
PORT.\37\
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    \36\ There are currently eight ETFs organized as UITs that have 
registered with the Commission.
    \37\ Commission staff estimates that as of December 2014, ETFs 
organized as UITs represented 14% of all assets invested in ETFs. 
This analysis is based on data from Morningstar Direct.
---------------------------------------------------------------------------

    We request comment on the entities that would be required to file 
reports on Form N-PORT.
     Should any funds that we are proposing to require to file 
reports on Form N-PORT not be required to do so? If so, what types of 
funds?
     Should we require SBICs to file reports on Form N-PORT? 
How useful would the information reported on Form N-PORT be for 
investors?
     Our proposal would allow investors in different types of 
ETFs to compare their portfolio investments by means of identical 
disclosures on reports on Form N-PORT, regardless of whether an ETF was 
organized as an open-end management investment company or as a UIT. 
Should ETFs organized as UITs not be required to file reports on Form 
N-PORT? If so, why?
2. Information Required on Form N-PORT
    Form N-PORT would require a fund to report certain information 
about the fund and the fund's portfolio investments as of the close of 
the preceding month, including: (a) General information about the fund; 
(b) assets and liabilities; (c) certain portfolio-level metrics, 
including certain risk metrics; (d) information regarding securities 
lending counterparties; (e) information regarding monthly returns; (f) 
flow information; (g) certain information regarding each investment in 
the portfolio; (h) miscellaneous securities (if any); (i) explanatory 
notes (if any), and (j) exhibits. Each of these is discussed in more 
detail below.
a. General Information and Instructions
    Part A of Form N-PORT would require general identifying information 
about the fund, including the name of the registrant, name of the 
series, and relevant file numbers.\38\ Funds would

[[Page 33597]]

also report the date of their fiscal year end, the date as of which 
information is reported on the form, and indicate if they anticipated 
that this would be their final filing on Form N-PORT.\39\ This 
information would be used to identify the registrant and series filing 
the report, track the reporting period, and identify final filings.
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    \38\ See Form N-PORT, Items A.1 and A.2. Funds would provide the 
name of the registrant, the Investment Company Act and CIK file 
numbers for the registrant, and the address and telephone number of 
the registrant. Funds would also provide the name of and EDGAR 
identifier for the series.
    \39\ See Form N-PORT, Items A.3 and A.4.
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    Additionally, we are proposing that funds provide the Legal Entity 
Identifier (``LEI'') number of the registrant and series.\40\ The LEI 
is a unique identifier associated with a single corporate entity and is 
intended to provide a uniform international standard for identifying 
counterparties to a transaction.\41\ Fees are not imposed for the usage 
of or access to LEIs, and all of the associated reference data needed 
to understand, process, and utilize the LEIs are widely and freely 
available and not subject to any usage restrictions. Funds or 
registrants that have not yet obtained an LEI would be required to 
obtain one, which would entail a modest fee.\42\ The inclusion of LEI 
information on Form N-PORT, however, would facilitate the ability of 
investors and the Commission to link the data reported on Form N-PORT 
with data from other filings or sources that is or will be reported 
elsewhere as LEIs become more widely used by regulators and the 
financial industry.\43\
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    \40\ See Form N-PORT, Items A.1.d and A.2.c. The Commission has 
begun to require disclosure of the LEI in other contexts. See, e.g., 
Form PF Adopting Release, supra note 14; Regulation SBSR-Reporting 
and Dissemination of Security-Based Swap Information, Securities 
Exchange Act Release No. 74244 (Feb. 11, 2015) [80 FR 14438 (Mar. 
19, 2015)] (``Regulation SBSR Adopting Release'').
    \41\ The global LEI system operates under an LEI Regulatory 
Oversight Committee (``ROC'') that currently includes members that 
are official bodies from over 40 jurisdictions. The Commission is a 
member of the ROC and currently serves on its Executive Committee. 
The Commission notes that it would expect to revisit the proposed 
requirement to report LEIs if the operation of the LEI system were 
to change significantly.
    \42\ As of December 26, 2014, the cost of obtaining an LEI from 
the Global Markets Entity Identifier (``GMEI'') Utility in the 
United States was $200, plus a $20 surcharge for the LEI Central 
Operating Unit. The annual cost of maintaining an LEI from the GMEI 
Utility was $100, plus a $20 surcharge for the LEI Central Operating 
Unit. See https://www.gmeiutility.org/frequentlyAskedQuestions.jsp.
    \43\ See, e.g., Press Release: Commodities Futures Trading 
Commission (``CFTC'') Announces Mutual Acceptance of Approved Legal 
Entity Identifiers, CFTC (Oct. 30, 2013), available at http://www.cftc.gov/PressRoom/PressReleases/pr6758-13; Letter from Kenneth 
Bentsen, President & CEO of SIFMA to Jacob Lew, Chairman of FSOC re: 
Adoption of the Legal Entity Identifier, SIFMA (Apr. 11, 2014), 
available at http://www.sifma.org/issues/item.aspx?id=8589948488; 
Regulation SBSR Adopting Release, supra note 40.
    Commenters to the FSOC Notice expressed support for regulatory 
acceptance of LEI identifiers. See, e.g., Joint Comment Letter of 
SIFMA/Investment Adviser Association (Mar. 25, 2015) (``SIFMA/IAA 
FSOC Notice Comment Letter'') (expressing support for the LEI 
initiative, and noting that the use of LEIs has already enhanced the 
industry's ability to identify and monitor global market 
participants); Comment Letter of Fidelity to FSOC Notice (Mar. 25, 
2015) (expressing the need to develop analytics to make data 
intelligible, such as the ability to map exposures across the 
financial system, such as through the use of LEIs).
---------------------------------------------------------------------------

    Form N-PORT would also include general filing and reporting 
instructions, as well as definitions of specific terms referenced in 
the form.\44\ These instructions and definitions are intended to 
provide clarity to funds and to assist them in filing reports on Form 
N-PORT.\45\
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    \44\ See Form N-PORT, General Instructions A (Rule as to Use of 
Form N-PORT), B (Application of General Rules and Regulations), C 
(Filing of Reports), D (Paperwork Reduction Act Information), E 
(Definitions), F (Public Availability), G (Responses to Questions), 
and H (Signature and Filing of Report).
    \45\ See id. For example, General Instructions A, B, C, G, and H 
provide specific filing and reporting instructions (including how to 
report entity names, percentages, monetary values, numerical values, 
and dates), General Instructions D and F provide information about 
the Paperwork Reduction Act and the public availability of 
information reported on Form N-PORT, and General Instruction E 
provides definitions for specific terms referenced in Form N-PORT.
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    We seek comment on these proposed disclosures and instructions.
     Is there any additional or alternative information that 
should be required to facilitate identification of funds and analysis 
of the reported information with information from other filings or 
otherwise available elsewhere?
     Should the Commission require funds to obtain LEIs? Is it 
appropriate for the Commission to require LEIs, which are only 
available through the global LEI system? Why or why not? In the case of 
funds that have not obtained an LEI, will those funds seek to obtain an 
LEI in the future absent any regulatory requirement to do so? In 
addition to the fees for obtaining and maintaining an LEI, would there 
be other costs associated with funds obtaining LEIs? \46\
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    \46\ See supra note 42 (discussing the costs of obtaining and 
maintaining an LEI identifier in the United States). The Commission 
has further estimated the one-time burden associated with obtaining 
an LEI is one hour, with ongoing administration of an LEI 
corresponding to one hour per year. See SBSR Adopting Release, supra 
note 40, at nn. 1109-1111 and accompanying text.
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     Are there any instructions or definitions that should be 
revised? If so, how? Should any instructions or definitions be added to 
provide additional clarity, or deleted to avoid confusion with 
conflicting instructions, definitions, or industry practices?
b. Information Regarding Assets and Liabilities
    Part B of proposed Form N-PORT would seek certain portfolio level 
information about the fund. Part B would include questions requiring 
funds to report their total assets, total liabilities, and net 
assets.\47\ Funds would separately report certain assets and 
liabilities, as follows. First, funds would report the aggregate value 
of any ``miscellaneous securities'' held in their portfolios.\48\ 
Currently, Regulation S-X permits funds to report an aggregate amount 
not exceeding five percent of the total value of the portfolio 
investments in one amount as ``Miscellaneous securities,'' provided 
that securities so listed are not restricted, have been held for not 
more than one year prior to the date of the related balance sheet, and 
have not previously been reported by name to the shareholders, or set 
forth in any registration statement, application, or annual report or 
otherwise made available to the public, and, as discussed further 
below, we are proposing the same conditions for Form N-PORT.\49\
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    \47\ See Form N-PORT, Item B.1.
    \48\ See Form N-PORT, Items B.1.a and B.2.a. As discussed 
further below, we are proposing that funds would also report 
information about miscellaneous securities on an investment-by-
investment basis, although such information would be nonpublic and 
would be used for Commission use only. We also request comment below 
on whether funds should continue to be permitted to categorize 
investments as ``miscellaneous securities.'' See infra note 151 and 
accompanying text.
    \49\ See rule 12-12 of Regulation S-X.
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    Funds would also report any assets invested in a controlled foreign 
corporation for the purpose of investing in certain types of 
investments (``controlled foreign corporation'' or ``CFC'').\50\ Some 
funds use CFCs for making certain types of investments, particularly 
commodities and commodity-linked derivatives, often for tax purposes. 
Our proposal would require funds to disclose each underlying investment 
in a CFC, rather than just the investment in the CFC itself, which 
would increase transparency on fund investments through CFCs.\51\ These 
disclosures would allow investors to look through CFCs and understand 
the specific underlying holdings that they are

[[Page 33598]]

investing in, which would in turn allow investors to better analyze 
their fund holdings and risk associated with CFC investments, and hence 
enable investors to make more informed investment decisions. In 
addition, as discussed further below in Part II.E.4, we believe it 
would be beneficial for the Commission to have certain information 
about funds' use of CFCs. The information we are proposing to obtain in 
Form N-PORT, combined with additional information we are proposing to 
require on Form N-CEN regarding CFCs, discussed below, would help the 
Commission better monitor funds' compliance with the Investment Company 
Act and assess funds' use of CFCs, including the extent of their use by 
reporting of total assets in CFCs.\52\
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    \50\ See Form N-PORT, Instruction E (providing that ``controlled 
foreign corporation'' has the meaning defined in section 957 of the 
Internal Revenue Code [26 U.S.C. 957]) and Item B.2.b (requiring 
funds to report assets invested in controlled foreign corporations).
    \51\ See Form N-PORT, Part B Instruction (``Report the following 
information for the Fund and its consolidated subsidiaries.'').
    \52\ See infra note 467 and accompanying and following text.
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    Second, we are proposing to require that funds report the amount of 
certain liabilities, in particular: (1) Borrowings attributable to 
amounts payable for notes payable, bonds, and similar debt, as reported 
pursuant to rule 6-04(13)(a) of Regulation S-X [17 CFR 210.6-
04(13)(a)]; (2) payables for investments purchased either (i) on a 
delayed delivery, when-delivered, or other firm commitment basis, or 
(ii) on a standby commitment basis; and (3) liquidation preference of 
outstanding preferred stock issued by the fund.\53\ This information 
would allow Commission staff, as well as investors and other potential 
users, to better understand a fund's borrowing activities and payment 
obligations for assets that have been already received, which would 
facilitate analysis of the fund's use of financial leverage, as well as 
the fund's liquidity and ability to meet redemptions, which are 
important to understanding the risks such borrowings might create.
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    \53\ See Form N-PORT, Items B.2.c to B.2.e.
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    We request comment on the reporting of assets and liabilities 
proposed on Form N-PORT.
     As discussed above, our proposal would require funds to 
disclose each underlying investment in a CFC. Should we consider 
modifying the information we propose to require, or require additional 
information? How commonly do funds invest in CFCs that in turn invest 
their assets in underlying investments? Should we provide instructions 
to clarify how funds should report investments in this situation? If 
so, should the Commission permit funds to disclose only the ultimate 
underlying investments, or should the Commission require disclosure of 
each layer of investment?
     Are there other methods of reporting the assets (including 
assets in CFCs) and liabilities described above that we should 
consider?
     Are there other assets and liabilities that funds should 
be required to separately report? If so, why? For example, should the 
Commission require funds to separately break out categories of assets 
and liabilities similar to what is currently required by Form N-SAR? 
\54\ What would be the costs associated with providing such information 
on a monthly basis?
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    \54\ See Form N-SAR, Item 74 (requiring funds to report 
consolidated balance sheet data, including cash, repurchase 
agreements, debt-securities, preferred stock, common stock, options, 
other investments, receivables, other assets, total assets, payables 
for portfolio instruments purchased, amounts owed to affiliated 
persons, senior long-term debt, other liabilities, senior equity, 
net assets of common shareholders, number of shares outstanding, net 
asset value per share, total number of shareholder accounts, and 
total value of assets in segregated accounts).
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c. Portfolio Level Risk Metrics
    One of the purposes of Form N-PORT is to provide the Commission 
with information regarding fund portfolios to help us better monitor 
trends in the fund industry, including investment strategies funds are 
pursuing, the investment risks that funds undertake, and how different 
funds might be affected by changes in market conditions. As discussed 
above, the Commission uses information from fund filings, including a 
fund's registration statement and reports on Form N-CSR (which includes 
the fund's shareholder report) and Form N-Q, to inform its 
understanding and regulation of the fund industry. Additionally our 
staff reviews fund disclosures--including registration statements, 
shareholder reports, and other documents--both on an ongoing basis as 
well as retroactively every three years.\55\
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    \55\ See, e.g., section 408 of the Sarbanes-Oxley Act of 2002, 
Pub. L. 107-204, 116 Stat. 745 (2002) (requiring the Commission to 
engage in enhanced review of periodic disclosures by certain issuers 
every three years).
---------------------------------------------------------------------------

    The disclosures in a fund's registration statement about its 
investment objective, investment strategies, and risks of investing in 
the fund, as well as the fund's financial statements, are fundamental 
to understanding a fund's implementation of its investment strategies 
and the risks in the fund. However, the financial statements and 
narrative disclosures in fund registration statements and shareholder 
reports do not always provide a complete picture of a fund's exposure 
to changes in asset prices, particularly as fund strategies and fund 
investments become more complex. The financial statements, including a 
fund's schedule of portfolio investments, provide data regarding 
investments' values as of the end of the reporting period--a 
``snapshot'' of data at a particular point in time--or, in the case of 
the statement of operations, for example, historical data over a 
specified time period. By contrast, based on staff experience and 
outreach to funds, we understand that funds commonly internally use 
multiple risk metrics that provide calculations that measure the change 
in the value of fund investments assuming a specified change in the 
value of underlying assets or, in the case of debt instruments and 
derivatives that provide exposure to interest rates and debt 
instruments, changes in interest rates or in credit spreads above the 
risk-free rate.
    Accordingly, we believe it is appropriate to propose requiring 
funds to report quantitative measurements of certain risk metrics that 
would provide information beyond the narrative, often qualitative 
disclosures about investment strategies and risks in the fund's 
registration statement, as well as a fund's historical financial 
statement disclosures. Monthly reporting on these risk measures, in 
particular, would help provide the Commission with more current 
information on how funds are implementing their investment strategies 
through particular exposures. Receiving this information on a monthly 
basis could help the Commission, for example, more efficiently analyze 
the potential effects of a market event on funds.
    Specifically, we are proposing to require certain funds to provide 
portfolio level measures on Form N-PORT that will help Commission staff 
better understand and monitor funds' exposures to changes in interest 
rates and credit spreads across the yield curve. As discussed in Part 
II.A.2.g below, we are also proposing to require risk measures at the 
investment level for options and convertible bonds. We believe that the 
staff can use these measures, for example, to determine whether 
additional guidance or policy measures are appropriate to improve 
disclosures in order to help investors better understand how changes in 
interest rate or credit spreads might affect their investment in a 
fund.
    Additionally, as we discussed above, we believe that institutional 
investors, as well as entities that provide services to both 
institutional and individual investors, would be able to use these risk 
metrics to conduct their own analyses in order to help them better 
understand fund composition, investment strategy, and interest rate

[[Page 33599]]

and credit spread risk the fund is undertaking. This would complement 
the risk disclosures that are contained in the registration statement, 
thereby potentially helping all investors to make more informed 
investment choices. We believe that our proposal to require these funds 
to publicly disclose these measures quarterly, like other information 
in the schedule of investments, will also help provide investors with 
more specific, quantitative information regarding the nature of a 
fund's exposure to particular asset classes than they do currently. 
Providing this more specific and current information through periodic 
public disclosure of such risk metrics could be especially important 
for investors with respect to funds that continuously offer new shares 
to the public, because such funds are generally required to maintain an 
updated or ``evergreen'' prospectus that must precede or accompany 
delivery of those securities.\56\
---------------------------------------------------------------------------

    \56\ See section 5(b)(2) of the Securities Act.
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    In particular, for funds that invest in debt instruments, or in 
derivatives that provide exposure to debt or debt instruments, we 
believe it is important for the Commission staff, investors, and other 
potential users to have measures that would help them analyze how 
portfolio values might change in response to changes in interest rates 
or credit spreads.\57\ To improve the ability of the Commission staff, 
investors, and other potential users to analyze how changes in interest 
rates and credit spreads might affect a fund's portfolio value, we are 
proposing that a fund that invests in debt instruments, or derivatives 
that provide exposure to debt instruments or interest rates, 
representing at least 20% of the fund's notional exposure, provide a 
portfolio level calculation of duration and spread duration across the 
applicable maturities in the fund's portfolio.
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    \57\ As discussed further below, the Commission also believes 
that there would be a benefit to collecting risk measures for 
derivatives that provide exposure to certain assets, such as 
equities and commodities. Due to the nature of these instruments, 
however, we believe that such information should be provided on an 
instrument-by-instrument basis, instead of as a portfolio level 
calculation.
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    We are proposing to limit this requirement to funds that invest in 
debt instruments or derivatives that provide exposure to debt 
instruments or interest rates that represent at least 20% of the fund's 
notional value as of the reporting date.\58\ We are proposing the 20% 
threshold because we believe that at this level, the Commission would 
still receive measurements of duration and spread duration from funds 
that make investments in debt instruments as a significant part of 
their investment strategy, while providing an appropriate threshold so 
that funds that do not invest in debt to achieve their investment 
strategy would not have to monitor each month whether they trigger the 
requirement for making such calculations. Funds that primarily invest 
in assets other than debt instruments, such as equities, might have 
some level of investments in debt instruments for cash management or 
other purposes. We do not believe that requiring such funds to provide 
monthly calculations of duration or spread duration would be helpful 
for understanding such funds' investment strategy or risk exposures, 
and we believe that the 20% threshold will provide a de minimis level 
to relieve the burden of calculating these measures for such funds. We 
believe that information would be most useful from funds that actually 
use debt exposures as part of their investment strategy. Based on staff 
experience, we believe that such funds have a debt exposure of at least 
20%, and commonly greater than that. As discussed below, we request 
comment on the proposed de minimis threshold.
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    \58\ Specifically, we are proposing to calculate notional value 
as the sum of the absolute values of: (i) The value of each debt 
security, (ii) the notional amount of each swap, including, but not 
limited to, total return swaps, interest rate swaps credit default 
swaps, for which the underlying reference asset or assets are debt 
securities or an interest rate; and (iii) the delta-adjusted 
notional amount of any option for which the underlying reference 
asset is an asset described in clause (i) or (ii). See Form N-PORT, 
Item B.3, Instruction.
    The delta-adjusted notional value of options is needed to have 
an accurate measurement of the exposure that the option creates to 
the underlying reference asset. See, e.g., Comment Letter of 
Morningstar (Nov. 7, 2011) (``Morningstar Derivatives Concept 
Release Comment Letter'') (submitted in response to the Derivatives 
Concept Release, supra note 7, which sought comment regarding the 
use of derivatives by management investment companies).
---------------------------------------------------------------------------

    For duration, we are proposing to require that a fund calculate the 
change in value in the fund's portfolio from a 1 basis point change in 
interest rates (commonly known as DV01) for each applicable key rate 
along the risk-free interest rate curve, i.e., 1 month, 3 month, 6 
month, 1 year, 2 year, 3 year, 5 year, 7 year, 10 year, 20 year, and 30 
year interest rate, for each applicable currency in the fund. We 
realize that funds might not have exposures for every applicable key 
rate. For example, a short-term bond fund is unlikely to have debt 
exposures with longer maturities. Accordingly, a fund would only report 
the key rates that are applicable to the fund. Funds would report zero 
for maturities to which they have no exposure.\59\ For exposures 
outside of the range of listed maturities listed on Form N-PORT (i.e., 
maturities shorter than one month or longer than 30 years), funds would 
be instructed to include those exposures in the nearest maturity.
---------------------------------------------------------------------------

    \59\ For funds with exposures that fall between any of the 
listed maturities in the form, funds would be instructed to use 
linear interpolation to approximate exposure to each maturity listed 
above.
---------------------------------------------------------------------------

    We believe that requiring funds to provide further detail about 
their exposures to interest rate changes along the risk-free rate curve 
would provide the Commission with a better understanding of the risk 
profiles of funds with different strategies for achieving debt 
exposures. For example, funds targeting an effective duration of five 
years could achieve that objective in different ways--one fund could 
invest predominantly in intermediate-term debt; another fund could 
create a long position in longer-term bonds, matched with a short 
position in shorter-term bonds. While both funds would have an 
intermediate-term duration, the risk profiles of these two funds, that 
is, their exposures to changes in long-term and short-term interest 
rates, are different. Having the proposed DV01 calculations along the 
risk-free interest rate curve would clarify this difference. The 
Commission staff could use this information to better understand how 
funds are achieving their exposures to interest rates, and use this 
information to perform analysis across funds with similar strategies to 
identify outliers for potential further inquiry, as appropriate.
    Additionally, we are proposing to require that the same funds 
provide a measure of spread duration (commonly known as SDV01) at the 
portfolio level for each of the same maturities listed above, 
aggregated by non-investment grade and investment grade exposures.\60\ 
This would measure the fund's sensitivity to changes in credit spreads, 
i.e., a measure of spread above the risk-free interest rate. This is 
helpful for analyzing shifts in credit spreads for non-investment grade 
and investment grade debt, respectively, over the yield curve, as 
credit spreads for investment grade and non-investment grade debt do 
not always shift in parallel or in lock

[[Page 33600]]

step, particularly during times of market stress.\61\ Because credit 
spreads can also vary based on the maturity of the bonds, we believe 
that providing credit spread measures for the key rates along the yield 
curve, as with DV01, would help the Commission better analyze credit 
spreads of investments in funds.\62\ Again, similar to the example 
above regarding the potential use of the DV01 metric, SDV01 can provide 
more precise information regarding funds' exposures to credit spreads 
when they engage in a strategy investing in investment-grade or non-
investment grade debt.
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    \60\ Form N-PORT would include instructions stating that 
``Investment Grade'' refers to an investment that is sufficiently 
liquid that it can be sold at or near its carrying value within a 
reasonably short period of time and is subject to no greater than 
moderate credit risk, and ``Non-Investment Grade'' refers to an 
investment that is not Investment Grade. See Form N-PORT, General 
Instruction E. These instructions are consistent with the 
definitions of ``Investment Grade'' and ``Non-Investment Grade'' 
used in Form PF.
    \61\ See, e.g., Frank K. Reilly, David J. Wright, and James A. 
Gentry, Historic Changes in the High Yield Bond Market, Journal of 
Applied Corporate Finance, Volume 21, No. 3, 65-79 (Summer 2009) 
(discussing the historical performance, including the credit spreads 
of the high yield bond market compared to the investment grade bond 
market).
    \62\ The delineation between non-investment grade and investment 
grade debt is similar to information regarding private fund 
exposures gathered on Form PF, which could be helpful for comparing 
and analyzing credit spreads between public and private funds. See, 
e.g., Item 26 of Form PF.
---------------------------------------------------------------------------

    In determining the methodology for the proposed measures of 
duration and spread duration, staff engaged in outreach to asset 
managers and risk service providers that provide risk management and 
other services to asset managers and institutional investors. The 
methodology proposed is both based on staff experience in using 
duration and spread duration, as well as this outreach to better 
understand common fund practices for calculating such measures. The 
Commission recognizes that particular funds might currently vary their 
methodology for calculating duration and spread duration by, for 
example, only providing a single measure of duration or spread duration 
or by only reporting key rate durations for particular maturities. 
Based on staff experience and outreach, the Commission believes that 
the proposed methodologies for reporting duration and spread duration 
will allow for better comparability across funds.
    Also, based on outreach, Commission staff believes that service 
providers that provide risk management services to funds generally use 
a ``bottom up'' approach to calculating duration and spread duration, 
meaning that such measures are first calculated at the position level 
and then aggregated at the portfolio level. Accordingly, we believe 
that providing the specific methodology for aggregation of duration and 
spread duration would not significantly increase the burden of 
calculating such metrics by funds, even if funds analyze such measures 
at the portfolio level using a methodology different from what we are 
proposing. As discussed below, however, we request comment on the 
proposed methodologies, including whether such methodologies should be 
modified.
    For both duration and spread duration, we are proposing to require 
that funds provide the change in value in the fund's portfolio from a 1 
basis point change in interest rates or credit spreads, rather than a 
larger change, such as 5 basis points or 25 basis points. Based on 
staff's outreach, we believe that a 1 basis point change is the 
methodology that many funds currently use to calculate these risk 
measures at the position level for internal risk monitoring and would 
provide sufficient information to assist the Commission in analyzing 
fund exposures to changes in interest rate or credit spreads. We 
believe that requiring funds to calculate such measures based on a 
larger basis point change could require more customized calculations, 
and therefore increase costs to funds, relative to the approach 
proposed. We request comment on this aspect of the proposed 
methodology.
    While the Commission is proposing that funds provide a calculation 
of each of these measures at a portfolio level, the Commission has 
considered whether to propose, instead, that funds report these risk 
metrics for each debt instrument or derivative that has an interest 
rate or credit exposure. This would provide more precise data for 
analysis of various movements in interest rates and credit spreads. 
Additionally, as discussed above, the Commission believes that most 
funds currently calculate these risk metrics at a position level; 
however, we recognize that even if such calculations are available at a 
position level, reporting these metrics could cause funds to make 
additional systems changes to collect such position-level data for 
reporting, as well as potential burdens related to increased review 
time and quality control in submitting the reports. Based on staff's 
outreach and staff's experience, the Commission believes that requiring 
funds to provide this information for each maturity at the portfolio 
level would provide a sufficient level of granularity for purposes of 
Commission staff analysis. Finally, we believe that there would be 
certain efficiencies for the Commission, investors, and other potential 
users to having funds report the portfolio-level calculations relative 
to reporting position-level calculations, as this could allow for more 
timely and efficient analysis of the data by not requiring the 
Commission or other potential users to calculate the portfolio-level 
measures from the position-level measures. We request comment below on 
the relative burdens and benefits of providing portfolio level and 
position level data.
    The Commission also considered whether to require funds to report a 
portfolio level measure (or, for the same reasons discussed immediately 
above in connection with how risk measures are calculated, position 
level measures) for convexity, which facilitates more precise 
measurement of the change in a bond price with larger changes in 
interest rates.\63\ We have preliminarily determined not to require 
reporting of this metric, however, because we believe, based on staff 
outreach, that funds more commonly analyze non-linear changes to 
interest rates through stress testing, rather than through calculating 
convexity. We request comment, however, on whether requiring funds to 
report a portfolio-level measure of convexity would be useful to the 
Commission, investors, and other potential users, and the relative 
burdens and benefits of reporting convexity.
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    \63\ More specifically, convexity measures the non-linearities 
in a bond's price with respect to changes in interest rates. See 
Frank J. Fabozzi, The Handbook of Fixed Income Securities 149-152 
(8th ed. 2012).
---------------------------------------------------------------------------

    We request comment on the proposed requirements to provide risk 
measures at the portfolio level.
     We are proposing a 20% threshold because, based on staff 
experience, we believe that this would require funds that use debt and 
exposure to debt or interest rate changes as part of their investment 
strategy to provide those metrics, while providing a minimum threshold 
so that funds that invest in debt for cash management or other purposes 
unrelated to implementing their investment strategy would not be 
required to collect, calculate, or report such data. Given this 
objective, is 20% the appropriate threshold for determining which funds 
must provide these risk metrics? Should this threshold be lower, such 
as 5% or 10% or higher, such as 30% or 35%? Are there alternative 
methodologies that the Commission should consider for determining which 
funds should be required to provide this information? Should we, 
instead, base the threshold directly on the net asset value (``NAV'') 
of the fund's debt securities and interest rate investments, rather 
than the fund's notional exposure to debt securities or interest rates 
as a percentage of the fund's NAV?
     We are proposing to require reporting information on DV01 
and SDV01 at the portfolio level because we believe that this can 
provide the

[[Page 33601]]

Commission and investors with useful information regarding funds' 
exposures to changes in interest rate and credit spreads, without 
imposing a potential burden that might be involved in providing such 
risk metrics at a position level. We believe, however, based on staff 
outreach that funds or their service providers generally do calculate 
such information at a position level. We request comment on the 
relative burdens and benefits of requiring funds to report portfolio 
level calculations of duration and spread duration, as opposed to 
providing those for each relevant instrument in the portfolio. What, if 
any, would be the added costs and burdens associated with adapting 
systems in order to centrally collect and report such information? What 
would be the benefits to the Commission, investors, and other potential 
users to having more precise information in order to evaluate such 
exposures? Conversely, are there benefits to having funds report these 
measures at the portfolio level rather than the position level, even if 
reporting at the position level would not significantly increase costs?
     To what extent would the values reported for these risk 
metrics be affected by the inputs and assumptions underlying the 
methodologies by which funds would calculate these metrics, including 
assumptions regarding the valuation of the investments or underlying 
securities of investments, particularly for investments that have pre-
payment options, such as mortgage-backed securities? Specifically, how 
would the comparability of information reported by different funds be 
affected if funds used different inputs and assumptions in their 
methodologies? Do funds have concerns regarding reporting measures that 
include such assumptions, such as proprietary or liability concerns? 
Are there ways the Commission could improve the standardization of the 
calculation of these risk metrics? If so, how?
     To the extent that funds are calculating such measures 
using a methodology other than what the Commission is proposing, what 
would the associated costs and other burdens be for funds to calculate 
and report these measures according to a different methodology than 
that typically used by the fund?
     Are there any alternatives or modifications to the 
methodologies that the Commission is proposing that the Commission 
should consider? \64\ For example, should the Commission require, or 
permit, funds to report duration and spread duration only for the 
maturities that represent the highest exposures in the fund, such as 
the top three or the top five (or another quantity)? Should the 
Commission require, or permit, funds to report duration and spread 
duration based on a larger change in interest rates or credit spreads, 
such as 5 basis points or 25 basis points? How would these 
methodologies affect the burden on funds of reporting duration and 
credit spread duration? Are there more efficient ways for the 
Commission to collect information to increase the transparency of 
funds' duration and spread duration?
---------------------------------------------------------------------------

    \64\ As discussed further below, we separately propose and 
request comment on additional and alternative risk metrics. See, 
e.g., infra note 127 and accompanying and following text (proposing 
that funds report delta for certain derivative contracts), text 
following note 142 (requesting comment on vega, gamma, and other 
risk metrics), and Part II.A.4.k (generally requesting comment on 
additional risk measures).
---------------------------------------------------------------------------

     Should we provide a de minimis amount for exposure to 
different currencies, under which level a fund would not have to report 
the DV01 or SDV01 for exposures in that currency? For example, should 
we only require funds with exposure to a currency equal to 5% or more 
of the fund's NAV to provide a DV01 and SDV01 calculation for such 
currency? If we were to provide a de miminis, should the threshold be 
higher or lower?
d. Securities Lending
    To increase the rate of return on their portfolios, some funds 
engage in securities lending activities whereby a fund lends certain of 
its portfolio securities to other financial institutions such as 
broker-dealers. In return for the security lent, funds receive 
collateral and sometimes a fee. To protect the fund from the risk of 
borrower default, the borrower generally posts collateral with the fund 
in an amount at least equal to the value of the borrowed securities, 
and this amount of collateral is adjusted daily as the value of the 
borrowed securities is marked to market.\65\ Funds generally receive 
cash as collateral. A fund will typically invest cash collateral that 
it receives in short-term, highly liquid instruments, such as money 
market funds or similar pooled investment vehicles, or directly in 
money market instruments.\66\
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    \65\ See Securities Industry and Financial Markets Association, 
Master Securities Loan Agreement (2000 Version) Sec. Sec.  4, 9, 
available at http://www.sifma.org/services/standard-forms-and-documentation/. See also Division of Investment Management, 
Securities and Exchange Commission, Securities Lending by U.S. Open-
End and Closed-End Investment Companies (``Securities Lending 
Summary''), available at http://www.sec.gov/divisions/investment/securities-lending-open-closed-end-investment-companies.htm.
    \66\ Lending funds and borrowers may negotiate the collateral 
that the borrower posts to the lender, and a cash collateral fee, 
commonly called a ``rebate,'' that the lender pays to the borrower. 
The rebate is negotiated and can be negative (i.e., a fee paid from 
the borrower to the lender) when demand for the loan of a particular 
security is especially great or its supply especially constrained. 
See id. at Sec.  5.
---------------------------------------------------------------------------

    The fund's income from these activities may come from fees paid by 
the borrowers to the fund and/or from the reinvestment of collateral. 
Many funds engage an external service provider--commonly called a 
``securities lending agent''--to administer the securities lending 
program. The securities lending agent is typically compensated by being 
paid a share of the fund's securities lending revenue after the 
counterparty has been paid any rebate due to it.\67\
---------------------------------------------------------------------------

    \67\ See Securities Lending Summary, supra note 65.
---------------------------------------------------------------------------

    Securities lending implicates certain provisions of the Investment 
Company Act, and funds that engage in securities lending do so in 
reliance on Commission staff no-action letters, and in some 
circumstances, exemptive orders.\68\ These letters and orders address a 
number of areas, including loan collateralization and termination, fees 
and compensation, board approval and oversight, and voting of proxies.
---------------------------------------------------------------------------

    \68\ For example, the transfer of a fund's portfolio securities 
to a borrower implicates section 17(f) of the Investment Company 
Act, which generally requires that a fund's portfolio securities be 
held by an eligible custodian. A fund's obligation to return 
collateral at the termination of a loan implicates section 18 of the 
Investment Company Act, which governs the extent to which a fund may 
incur indebtedness. See id.
---------------------------------------------------------------------------

    Currently, the information that funds are required to report about 
securities lending activity, whether in a structured format or 
otherwise, is limited. For example, funds disclose on Form N-SAR 
whether they are permitted under their investment policies to, and 
whether they did engage during the reporting period in, securities 
lending activities.\69\ Funds generally also disclose additional 
information regarding their securities lending programs in their 
registration statements.\70\ In addition, consistent with current 
industry practices, many funds voluntarily identify particular 
securities that are on loan in their schedules of portfolio investments 
prepared pursuant to Regulation S-X. These requirements do not address 
other pertinent considerations, such as

[[Page 33602]]

the extent to which a fund lends its portfolio securities, the 
counterparties to which the fund is exposed, the fees and revenues 
associated with those activities, and the significance of securities 
lending revenue to the investment performance of the fund.
---------------------------------------------------------------------------

    \69\ Item 70.N of Form N-SAR.
    \70\ See, e.g., Form N-1A, Items 9(c) (disclosures regarding 
risks), 16(b) (disclosures of investment strategies and risks), 
17(f) (disclosures of proxy voting policy), and 28(h) (exhibits of 
other material contracts).
---------------------------------------------------------------------------

    To address these data gaps and provide additional information to 
the Commission, investors, and other potential users regarding a fund's 
securities lending activities, we are proposing that funds report 
certain counterparty information and position-level information monthly 
on Form N-PORT.\71\ Also, as to other information for which annual 
reporting would be sufficient because it is unlikely to change on a 
frequent basis (e.g., name and other identifying information for a 
fund's securities lending agent), we are proposing that funds report 
this information annually on Form N-CEN as discussed below in Part 
II.E. We are also proposing, as discussed below in Part II.C.5, to 
require that certain information about the income from and fees paid in 
connection with securities lending activities, and the monthly average 
of the value of portfolio securities on loan, be disclosed as part of 
the notes to funds' financial statements.\72\
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    \71\ See infra text following note 74 (discussing the reporting 
of counterparty information); Part II.A.2.g (discussing the proposed 
requirements regarding position-level information). Commenters to 
the FSOC Notice also suggested that enhanced securities lending 
disclosures could be beneficial to investors and counterparties. 
See, e.g., SIFMA/IAA FSOC Notice Comment Letter, supra note 43 
(``Disclosures related to securities lending practices, if 
appropriately tailored, could potentially assist investors and 
counterparties in making informed choices about where they deploy 
their assets and how they engage in lending practices.''); Comment 
Letter of the Vanguard Group, Inc. (Mar. 25, 2015) (``Vanguard FSOC 
Notice Comment Letter'') (asserting that securities lending as a 
whole suffers from a lack of readily available data, and supporting 
further efforts to gather data and study the practice of securities 
lending).
    \72\ See infra text following note 276 (discussing proposed 
disclosures in the notes to funds' financial statements that would 
allow investors to better understand the income generated from, as 
well as the expenses associated with, securities lending 
activities).
---------------------------------------------------------------------------

    Our proposals today are intended, in part, to increase the 
transparency of information available related to the lending and 
borrowing of securities with respect to funds as a subset of the 
universe of market participants engaged in securities lending 
activities.\73\
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    \73\ See, e.g., section 984(b) of the Dodd-Frank Act, Pub. L. 
No. 111-203, 124 Stat. 1376 (2010) (directing the Commission to 
promulgate rules designed to increase the transparency of 
information available to brokers, dealers, and investors, with 
respect to the loan or borrowing of securities).
---------------------------------------------------------------------------

    Counterparty Information. One risk that funds engaging in 
securities lending are exposed to is counterparty risk because 
borrowers could fail to return the loaned securities. In this event, 
the lender would keep the collateral. Collateral is generally posted in 
cash and, in practice, the loan is generally over-collateralized. The 
collateral requirements thereby mitigate the extent of a fund's 
counterparty risk. In some cases, this risk is further mitigated for 
the fund if the fund's securities lending agent indemnifies the fund 
against default by the borrower.
    While we believe there is value to having information concerning 
securities lending counterparties to monitor risk, as well as to 
monitor compliance with conditions set forth in staff no-action letters 
and exemptive orders,\74\ we are proposing to require that funds 
report, for each of their securities lending counterparties as of the 
reporting date, the full name and LEI of the counterparty (if any), as 
well as the aggregate value of all securities on loan to the 
counterparty, rather than at the loan level.\75\ We believe that 
disclosure of counterparty information at an aggregate portfolio level 
would provide the Commission and investors with information to better 
understand the level of potential counterparty risk assumed as part of 
the fund's securities lending program, with a lower relative burden on 
funds than requesting such information on a per loan level.
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    \74\ See generally Securities Lending Summary, supra note 65.
    \75\ Form N-PORT, Item B.4.
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    We request comment on the portfolio level securities lending 
information requirements we are proposing.
     As discussed above, Form N-PORT would require funds to 
disclose the aggregate value of all securities on loan to each 
securities lending counterparty and the name and LEI (if any) of the 
counterparty. Should we instead require funds to report this 
information on a loan-by-loan or security-by-security basis? To what 
extent, if any, would such information be used by investors and other 
potential users? What, if any, additional issues would funds face in 
tracking and reporting such information on a loan-by-loan or security-
by-security basis? Do funds currently track or have the ability to 
readily determine their counterparty exposure on a loan-by-loan or 
security-by-security basis? If securities lending counterparty 
information should be reported on a loan-by-loan or security-by-
security basis, is there any additional or alternative information we 
should require funds to report, such as the rebate or compensation to 
the securities lending agent?
     Instead of requiring funds to report the aggregate value 
of all securities on loan to each securities lending counterparty, 
should we limit such disclosures to counterparties to which the fund 
has the greatest exposure, such as the top five or top ten 
counterparties? \76\ Alternately, should we require funds to report 
aggregate exposure to a given counterparty only if such exposure 
constitutes more than a certain percentage of the NAV of the fund 
(e.g., one percent)? Would either approach more appropriately consider 
the costs of tracking and reporting such information and the benefits 
that increased transparency would provide to the Commission and other 
potential users?
---------------------------------------------------------------------------

    \76\ Cf. Form PF, Section 1c, Item 22 (requiring advisers to 
private funds to report exposures to the five counterparties to 
which the reporting fund has the greatest mark-to-market net 
counterparty credit exposure).
---------------------------------------------------------------------------

     Alternately, or in addition, should the Commission request 
information regarding other types of counterparty exposures? For 
example, should the Commission require funds to report counterparty 
exposures based on the amount of unsettled trades with each 
counterparty? If so, should such information be reported in terms of 
aggregate or net exposure, and why?
e. Return Information
    We are proposing to require funds to provide monthly total returns 
for each of the preceding three months.\77\ If the fund is a multiple 
class fund, it would report returns for each class.\78\ Funds with 
multiple classes would also report their class identification 
numbers.\79\ Funds would calculate returns using the same standardized 
formulas required for calculation of returns as reported in the 
performance table contained in the risk-return summary of the fund's 
prospectus and in fund sales materials.\80\
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    \77\ See Form N-PORT, Item B.5.a.
    \78\ See id.
    \79\ See Form N-PORT, Item B.5.b.
    \80\ See Form N-1A, Item 26(b)(1); Form N-2, Item 4, Instruction 
13; Form N-3, Item 26(b)(i).
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    We are proposing to require this information on Form N-PORT because 
we believe it would be useful to have such information in a structured 
format to facilitate comparisons across funds. For example, analysis of 
return information over time among similar funds could reveal outliers 
that might merit further inquiry by Commission staff. Additionally, 
performance that appears to be inconsistent with a fund's investment 
strategy or other benchmarks

[[Page 33603]]

can form a basis for further inquiry and monitoring.\81\
---------------------------------------------------------------------------

    \81\ Similar risk analytics were used in the Commission's 
Aberrational Performance Inquiry, an initiative by the Division of 
Enforcement's Asset Management Unit to identify hedge funds with 
suspicious returns. See, e.g., Press Release, SEC Charges Hedge Fund 
Adviser and Two Executives with Fraud in Continuing Probe of 
Suspicious Fund Performance (Oct. 17, 2012), available at http://www.sec.gov/News/PressRelease/Detail/PressRelease/1365171485332.
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    Because only quarter-end reports on Form N-PORT would be made 
public, we are proposing that funds provide return information for each 
of the preceding three months.\82\ This would provide investors and 
other potential users with monthly return information, so that they 
would have access to each month's return on a quarterly basis. 
Otherwise, we are concerned that investors might potentially confuse 
the month's disclosed return as representing the return for the full 
quarter.
---------------------------------------------------------------------------

    \82\ See Form N-PORT, Item B.5.a. Although generally only 
information reported on Form N-PORT for the third month of each 
fund's fiscal quarter would be publicly available, the concerns 
associated with more frequent public disclosure are related to the 
disclosure of portfolio holdings information and would not apply to 
the disclosure of fund return information. See generally note 170 
and accompanying and following text (discussing the risks of 
predatory trading practices such as front-running and the ability of 
outside investors to reverse engineer and copycat fund's investment 
strategies).
---------------------------------------------------------------------------

    We are also proposing that funds report, for each of the preceding 
three months, monthly net realized gain (or loss) and net change in 
unrealized appreciation (or depreciation) attributable to derivatives 
for each of the following categories: Commodity contracts, credit 
contracts, equity contracts, foreign exchange contracts, interest rate 
contracts, and other derivatives contracts.\83\ This item is modeled 
after disclosure requirements in Financial Accounting Standards Board 
(``FASB'') Accounting Standards Codification (``ASC'') 815, which 
governs the accounting disclosure for derivatives and hedging. This 
information would help the Commission staff, investors, and other 
potential users better understand how a fund is using derivatives in 
accomplishing its investment strategy and the impact of derivatives on 
the fund's returns. In order to provide a point of comparison, we are 
also proposing that funds report, for each of the last three months, 
monthly net realized gain (or loss) and net change in unrealized 
appreciation (or depreciation) for investments other than 
derivatives.\84\
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    \83\ See Form N-PORT, Item B.5.c.
    \84\ See Form N-PORT, Item B.5.d. Our proposal would also amend 
Regulation S-X to require funds to report similar information in 
their financial statements, although Regulation S-X would require 
such information to be aggregated by type of derivative contract, 
rather than by category of exposure as required by Form N-PORT. We 
discuss below our reasons for proposing information to be reported 
based on contract type on Regulation S-X. See infra Part II.C.
---------------------------------------------------------------------------

    We request comment on the return information we are proposing in 
Form N-PORT.
     Should the Commission consider, as an alternative, 
requiring funds to provide monthly return information annually on Form 
N-CEN, rather than on Form N-PORT? Would this significantly reduce the 
burden of reporting such information?
     We are proposing to require that funds report three months 
of returns so that investors and other potential users, who would only 
observe reports on Form N-PORT on a quarterly basis, would still 
receive return data for each month of the year. Do commenters agree 
that such disclosure of monthly returns would be helpful to investors? 
Are there preferable alternatives for providing such information to 
investors? Are there potential negative consequences of reporting 
monthly returns? For example, could the availability of this 
information cause investors to emphasize short-term returns?
     We request comment on alternative requirements for fund 
reporting of return information. For example, the Commission requests 
comment on whether to require reporting by funds of gross returns. 
Would gross information, with or without accompanying fee information 
for each class, be confusing for investors? If so, are there ways to 
mitigate the risk of investor confusion? Instead of requiring reporting 
of returns for all classes, should the Commission, for example, require 
funds to report return information for a single class, such as the 
class with the highest expense ratio or the largest share class in 
terms of assets under management? What would be the relative benefits 
and burdens of only requiring disclosure of a single class?
     Are there alternative methods that the Commission should 
consider for requiring funds to report the effect of derivatives on the 
return of the fund? For example, should the Commission require that 
funds report the monthly net realized gain or loss and net change in 
unrealized appreciation or depreciation attributable to derivatives by 
type of derivative (i.e., forward, future, option, swap), rather than 
by category of exposure? What would be the burden and benefits of 
reporting such information relative to the proposed requirement?
f. Flow Information
    Form N-PORT would require funds to separately report, for each of 
the preceding three months, the total net asset value of: (1) Shares 
sold (including exchanges but excluding reinvestment of dividends and 
distributions); (2) shares sold in connection with reinvestments of 
dividends and distributions; and (3) shares redeemed or repurchased 
(including exchanges).\85\ This information is similar to what is 
currently reported on Form N-SAR, and would be generally reported 
subject to the same guidelines that currently govern reporting of flow 
information on that form.\86\ We propose to require this information on 
Form N-PORT because we believe that this information would be more 
helpful if reported on a monthly basis rather than retrospectively on 
an annual basis on Form N-CEN.
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    \85\ See Form N-PORT, Item B.6.
    \86\ Similar to Form N-SAR, Form N-PORT would instruct funds to 
report amounts after any front-end sales loads had been deducted and 
before any deferred or contingent deferred sales loads or charges 
had been deducted. Shares sold would include shares sold by the fund 
to a registered UIT. Funds would also include as shares sold any 
transaction in which the fund acquired the assets of another 
investment company or of a personal holding company in exchange for 
its own shares. Funds would include as shares redeemed any 
transaction in which the fund liquidated all or part of its assets. 
Exchanges would be defined as the redemption or repurchase of shares 
of one fund or series and the investment of all or part of the 
proceeds in shares of another fund or series in the same family of 
investment companies. Cf. Form N-PORT, Item B.6 and Item 28 of Form 
N-SAR (requiring reporting of monthly sales and repurchases of the 
Registrant's/Series' shares for the past six months).
---------------------------------------------------------------------------

    We believe that having flow information reported to us monthly will 
help us better monitor trends in the fund industry. For example, it 
could help us analyze types of funds that are becoming more popular 
among investors and areas of high growth in the industry. It could help 
us better examine investor behavior in response to market events. 
Finally, in combination with other information reported on Form N-PORT 
regarding liquidity of fund positions, it could also help us identify 
funds that might be at risk of experiencing liquidity stress due to 
increased redemptions.
     What would be the costs and burdens of providing flow 
information on a monthly basis on Form N-PORT? Should the Commission 
consider, as an alternative, requiring funds to provide monthly flow 
information annually on Form N-CEN, rather than on Form N-PORT?
     To what extent would the usefulness of the flow 
information be

[[Page 33604]]

affected by the fact that omnibus accounts, which generally have 
significant amounts of purchases and redemptions, typically net their 
transactions prior to executing with the funds' transfer agents? Should 
the Commission revise the proposed flow disclosures to address this 
issue and, if so, how?
     Form N-SAR currently also requires funds to report flow 
information related to ``other'' shares sold (i.e., other than through 
new sales and exchanges and reinvestments of dividends and 
distributions).\87\ Should the Commission also require funds to report 
this category of flow information on Form N-PORT? What would be the 
utility of requesting flow information to be separately reported in 
this additional category?
---------------------------------------------------------------------------

    \87\ See id.
---------------------------------------------------------------------------

     Should we require that flow information be reported as to 
each class of the fund? Would such additional information be helpful to 
investors and other potential users? What would be the burdens to funds 
with multiple classes of reporting such information?
g. Schedule of Portfolio Investments
    Part C of proposed Form N-PORT would require funds to report 
certain information on an investment-by-investment basis about each 
investment held by the fund and its consolidated subsidiaries as of the 
close of the preceding month. Funds would respond to certain questions 
that would apply to all investments (i.e., the investment's 
identification, amount, payoff profile, asset and issuer type, country 
of investment or issuer, and fair value level, and whether the 
investment was a restricted security or illiquid asset). Funds would 
also respond, if relevant, to additional questions related to specific 
types of investments (i.e., debt securities, repurchase and reverse 
repurchase agreements, derivatives, and securities lending).
    Funds would have the option of identifying any investments that are 
``miscellaneous securities.'' \88\ Unless otherwise indicated, funds 
would not report information related to those investments in Part C, 
but would instead report such information in Part D.\89\
---------------------------------------------------------------------------

    \88\ See Form N-PORT, Part D. See also supra note 49 and 
accompanying text.
    \89\ See infra note 150 and accompanying and following text.
---------------------------------------------------------------------------

i. Information for All Investments
    Proposed Form N-PORT would require funds to report certain basic 
information about each investment. In particular, funds would report 
the name of the issuer and title of issue or description of the 
investment, as they are currently required to do on their reported 
schedules of investments.\90\
---------------------------------------------------------------------------

    \90\ See Form N-PORT, Items C.1.a and C.1.c.
---------------------------------------------------------------------------

    To facilitate analysis of fund portfolios, it is important for 
Commission staff to be able to identify individual portfolio 
securities, as well as the reference instruments of derivative 
investments through the use of an identifying code or number, which is 
not currently required to be reported on the schedule of investments. 
Fund shareholders and potential investors that are analyzing fund 
portfolios or investments across funds could similarly benefit from the 
clear identification of a fund's portfolio securities across funds. The 
staff has found that some securities reported by funds lack a 
securities identifier, and this absence has reduced the usefulness of 
other information reported.\91\
---------------------------------------------------------------------------

    \91\ Our inability to identify specific securities has limited 
our ability in other contexts to compare ownership of the securities 
across multiple funds and monitor issuer exposure. For example, 
during the month of February 2013, money market funds reported 6,821 
securities without CUSIPs (approximately 10% of all securities 
reported on Form N-MFP).
---------------------------------------------------------------------------

    To address this issue, we propose to require that funds report 
additional information about the issuer and the security. Funds would 
report certain securities identifiers, if available.\92\ For example, 
for swaps and security-based swaps, funds could report the product 
identification number used for reporting such instrument to a swap data 
repository or securities-based swap data repository, if available.\93\ 
If a unique identifier is reported, funds would also indicate the type 
of identifier used.\94\ Such an identifier may be internally generated 
by the fund or provided by a third party, but should be consistently 
used across the fund's filings for reporting that investment so that 
the Commission, investors, and other potential users of the information 
can track the investment from report to report.
---------------------------------------------------------------------------

    \92\ See Form N-PORT, Item C.1.b and C.1.d to C.1.e (requiring 
reporting of identifiers such as LEI of the issuer, CUSIP, ISIN, 
ticker or other unique identifier).
    \93\ See infra notes 138-140 (discussing product identifiers for 
security-based swaps and swaps, as addressed in rulemakings by the 
Commission and Commodity Futures Trading Commission, respectively).
    \94\ See Form N-PORT, Item C.1.e.iii.
---------------------------------------------------------------------------

    We also propose to require funds to report the amount of each 
investment as of the end of the reporting period, as is currently 
required under Regulation S-X.\95\ Funds would report the number of 
units or principal amount for each investment, as well as the value of 
each investment at the close of the period, and the percentage value of 
each investment when compared to the net assets of the fund.\96\ Funds 
would also report the currency in which the investment was denominated, 
and, if not denominated in U.S. dollars, the exchange rate used to 
calculate value.
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    \95\ See Form N-PORT, Item C.2. See rule 12-12 of Regulation S-
X.
    \96\ See Form N-PORT, Item C.2.a to C.2.d. For derivatives, as 
appropriate, funds would provide the number of contracts.
---------------------------------------------------------------------------

    Our proposal would also require funds to report the payoff profile 
of the investment, indicating whether the investment is held long, 
short, or N/A, which would serve the same purpose as the current 
requirement in Regulation S-X to disclose investments sold short.\97\ 
Funds would respond N/A for derivatives and would respond to relevant 
questions that indicated the payoff profile of each derivative in the 
derivatives portion of the form. These disclosures would identify short 
positions in investments held by funds.
---------------------------------------------------------------------------

    \97\ See Form N-PORT, Item C.3. See rule 12-12A of Regulation S-
X.
---------------------------------------------------------------------------

    Funds would also report the asset type for the investment: Short-
term investment vehicle (e.g., money market fund, liquidity pool, or 
other cash management vehicle), repurchase agreement, equity-common, 
equity-preferred, debt, derivative-commodity, derivative-credit, 
derivative-equity, derivative-foreign exchange, derivative-interest 
rate, structured note, loan, ABS-mortgage backed security, ABS-asset 
backed commercial paper, ABS-collateralized bond/debt obligation, ABS-
other, commodity, real estate, other) and issuer type (corporate, U.S. 
Treasury, U.S. government agency, U.S. government sponsored entity, 
municipal, non-U.S. sovereign, private fund, registered fund, 
other).\98\ We have based these categories in part on staff review of 
how funds currently categorize investments on their schedule of 
investments, and in part on the categories of investments required by 
private funds under Form PF.\99\ These disclosures would allow the 
Commission, investors, and other potential users to assess the 
composition of fund portfolios in terms of asset and issuer types and 
also

[[Page 33605]]

facilitate comparisons among similar types of investments.
---------------------------------------------------------------------------

    \98\ See Form N-PORT, Item C.4.a and C.4.b.
    \99\ See, e.g., Form PF, Item 26 (requiring filers to report 
exposures by asset type); Form N-Q, Item 1 (requiring filers to 
report the schedules of investments required by sections 210.12-12 
to 12-14 of Regulation S-X); Form N-CSR, Item 1 (requiring filers to 
attach a copy of the report transmitted to shareholders, which would 
include schedules of investments required by sections 210.12-12 to 
12-14 of Regulation S-X).
---------------------------------------------------------------------------

    Our proposal would also require funds to report, for each 
investment, whether the investment is a restricted security and whether 
the investment is an illiquid asset.\100\ These disclosures would 
provide investors and the Commission staff with more information about 
liquidity risks associated with the fund's investments.
---------------------------------------------------------------------------

    \100\ See Form N-PORT, Items C.6 and C.7. ``Restricted 
security'' would have the definition provided in rule 144(a)(3) 
under the Securities Act [17 CFR 230.144(a)(3)]. See Form N-PORT, 
General Instruction E. See also proposed rule 12-13, nn.6 and 8 of 
Regulation S-X, which would require similar disclosures in funds' 
schedules of investments to identify securities that are restricted 
or illiquid.
    Form N-PORT would define ``illiquid asset'' as ``an asset that 
cannot be sold or disposed of by the Fund in the ordinary course of 
business within seven calendar days, at approximately the value 
ascribed to it by the Fund.'' See Form N-PORT, General Instruction 
E. This definition is the same definition used in the liquidity 
guidance issued by the Commission for open-end funds. See Revisions 
of Guidelines to Form N-1A, Investment Company Act Release No. 18612 
(Mar. 12, 1992) [57 FR 9829 (Mar. 20, 1992)] (``1992 Release''). As 
recently stated by Chair Mary Jo White, the Division of Investment 
Management is considering a recommendation that the Commission 
update liquidity standards for open-end funds and ETFs, which may 
result in updated guidance on this issue. See Speech by Securities 
and Exchange Commission Chair Mary Jo White (Dec. 11, 2014), 
available at http://www.sec.gov/News/Speech/Detail/Speech/1370543677722.
---------------------------------------------------------------------------

    Each fund would also report whether the investment is categorized 
by the fund as a Level 1, Level 2, or Level 3 fair value measurement in 
the fair value hierarchy under U.S. Generally Accepted Accounting 
Principles (``U.S. GAAP'').\101\ Commission staff could use this 
information to identify and monitor investments that may be more 
susceptible to increased valuation risk and identify potential outliers 
that warrant additional monitoring or inquiry.\102\ In addition, 
Commission staff would be better able to identify anomalies in reported 
data by aggregating all fund investments industry-wide into the various 
level categories. Currently, funds are required to evaluate the fair 
value level measurement of each investment as part of the fair value 
level hierarchy disclosure in their financial statements.\103\ We 
believe that based on this requirement, funds should have pricing 
information available to determine the categorization of their 
portfolio investments as Level 1, Level 2, or Level 3 within the fair 
value hierarchy.
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    \101\ See ASC 820. An investment is categorized in the same 
level of the fair value hierarchy as the lowest level input that is 
significant to its fair value measurement. Level 1 inputs include 
quoted prices (unadjusted) for identical investments in an active 
market (e.g., active exchange-traded equity securities). Level 2 
inputs include other observable inputs, such as: (i) Quoted prices 
for similar securities in active markets; (ii) quoted prices for 
identical or similar securities in non-active markets; and (iii) 
pricing models whose inputs are observable or derived principally 
from or corroborated by observable market data through correlation 
or other means for substantially the full term of the security. 
Level 3 inputs are unobservable inputs. We are proposing amendments 
to Regulation S-X to require that funds identify level 3 securities 
in their schedules of investments. See infra Part II.C.3.
    \102\ For a discussion of some of the challenges regulators may 
face with respect to Level 3 accounting, see, e.g., Konstantin 
Milbradt, Level 3 Assets: Booking Profits and Concealing Losses, in 
25 Rev. Fin. Stud. 55-95 (2011).
    \103\ ASC 820-10-50-2 requires for each class of assets and 
liabilities measured at fair value, the level of the fair value 
hierarchy within which the fair value measurements are categorized 
in their entirety (Level 1, 2, or 3).
---------------------------------------------------------------------------

    Form N-PORT would also require funds to report the country that 
corresponds to the country of investment or issuer based on the 
concentrations of the risk and economic exposure of the investment. 
Additionally, funds would be required to report the country in which 
the issuer is organized if that is different from the country of risk 
and economic exposure.\104\
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    \104\ See Form N-PORT, Item C.5. Currently, funds are required 
to report the related industry, country, or geographic region of the 
investment in their schedules of investments. As discussed below, we 
are proposing to amend Regulation S-X to require funds to report the 
industry and the country or geographic region of the investment. See 
infra Part II.C.3.
---------------------------------------------------------------------------

    These disclosures would provide the Commission staff and investors 
with more information about country-specific exposures associated with 
the fund's investments. Specifically, the Commission believes that 
providing both the country based on concentrations of risk and economic 
exposure and also the country in which the issuer is organized would 
assist the Commission, investors, and other potential users in 
understanding the country-specific risks associated with such 
investments. For example, knowing the country of risk and economic 
exposure is important for understanding the effect of such investments 
in a portfolio when that country might be going through times of 
economic or political stress, regardless of whether the investment is 
issued in a different country. Knowing the country in which the issuer 
is organized would be important information for analyzing the effect of 
any events that could affect the country in which the issuer is 
organized, such as sanctions or monetary controls, as this could affect 
the ability of the fund to liquidate the investment.
    We request comment on our proposed disclosure requirements.
     Our proposal would require funds to report certain 
identifiers for their investments. Should the Commission include 
additional specific identifiers in Form N-PORT, such as the Financial 
Instrumental Global Identifier (``FIGI'') or other similar identifier, 
if available? \105\ If so, which identifier or identifiers would be 
expected to be reported? Are there any special considerations relating 
to the use of any identifiers (e.g., licensing fees associated with 
certain identifiers, the prevalence of a particular identifier as 
adopted by the marketplace, etc.) that could be addressed through these 
reporting requirements? If so, how should the requirements be 
restructured to address those considerations while still providing the 
Commission and investors the necessary identifying information?
---------------------------------------------------------------------------

    \105\ Information about the FIGI is available on the Object 
Management Group's Web site, a not-for-profit technology standards 
consortium. See generally Object Management Group, Documents 
Associated With Financial Industry Global Identifier (FIGI) Version 
1.0--Beta 1, available at http://www.omg.org/spec/FIGI/1.0/Beta1/.
---------------------------------------------------------------------------

     We request comment on our proposal to require funds to 
provide other unique identifiers for investments that do not have ISIN 
or ticker identifiers. Should the Commission require, in certain 
circumstances, specific identifiers to be reported as other unique 
identifiers? For example, in the case of security-based swaps, should 
the Commission require funds to report unique product identifiers? 
\106\ If so, why?
---------------------------------------------------------------------------

    \106\ See infra note 139 and accompanying and following text.
---------------------------------------------------------------------------

     How, if at all, should we modify our proposed disclosures 
for the amount of each investment at the end of the reporting period 
(as well as the currency in which it is denominated)? Likewise, should 
we modify our proposed disclosures for the payoff profile of each 
investment and the restricted/illiquid nature of securities? If so, 
why?
     Would our proposed asset and issuer categories allow funds 
to readily categorize the investments typically held in fund 
portfolios? Should we include additional or alternative categories, and 
if so why? For example, are there any specific asset subcategories with 
sufficiently unique features as to warrant their own asset category? To 
the extent that funds currently are not categorizing their investments 
as proposed in Form N-PORT, what costs would be associated with 
providing such information?
     Should any of these disclosures be aggregated and reported 
on a portfolio

[[Page 33606]]

basis, rather than at an individual investment level? Alternately, 
should any of the proposed portfolio level information be reported on 
an individual investment level?
     We request comment on the incremental burden of reporting 
this information for each investment held by the fund, relative to the 
current burden of reporting the total value of each class of 
investments categorized in each level of the fair value hierarchy, as 
currently required by U.S. GAAP. Are there other ways in which a fund 
could identify and disclose investments that do not have readily 
available market quotations or observable inputs as an alternative to 
disclosing each investment's categorization as a Level 1, Level 2, or 
Level 3 measurement?
     Are there additional items that should be included on Form 
N-PORT in order to improve the transparency regarding the liquidity and 
valuation of investments? For example, should the Commission require 
additional disclosure regarding the fund's valuation of its 
investments, such as the primary pricing source used (e.g., exchange, 
broker quote, third-party pricing service, internal fair value), the 
name of any third-party pricing source, or whether an independent 
consultant or appraiser assisted with development of internal fair 
value? If so, should such information be disclosed on an individual 
security basis? Would such information increase the transparency of the 
pricing of thinly traded securities? Would investors benefit from such 
information and, if so, how? What costs and burdens would be associated 
with providing such information?
     Should the Commission require funds to report both the 
country in which the issuer is organized and also the country with the 
greatest concentrations of risk and economic exposure of the 
investments? What is the burden of reporting both elements, if 
different? Should the Commission provide specific guidance or 
instructions for determining the country with the greatest 
concentration of risks and economic exposure? Should funds have the 
option of reporting more than one country of economic risk, or a 
geographic region of economic risk?
     Should funds not be required to report country codes for 
U.S. investments? Would such an exclusion result in reduced burdens for 
funds that held only domestic securities? On the other hand, would such 
an exclusion result in investor confusion or complicate data validation 
efforts, by, for example, rendering it unclear whether an investment 
with N/A reported for its country code was a U.S. investment or was 
instead a foreign investment for which a country code had not been 
properly reported?
ii. Debt Securities
    In addition to the information required above, Form N-PORT would 
require additional information about each debt security held by the 
fund in order to gain transparency into the payment flows and 
convertibility into equity of such investments, as such information can 
be used to better understand the payoff profile and credit risk of 
these investments. First, funds would report the maturity date and 
coupon (reporting annualized rate and indicating whether fixed, 
floating, variable, or none).\107\ Funds would also indicate whether 
the security is currently in default, whether interest payments for the 
security are in arrears or whether any coupon payments have been 
legally deferred by the issuer, as well as whether any portion of the 
interest is paid in kind.\108\
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    \107\ See Form N-PORT, Items C.9.a and C.9.b.
    \108\ See Form N-PORT, Items C.9.c to C.9.e.
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    Finally, we are proposing to require additional information for 
convertible securities, to indicate whether the conversion is mandatory 
or contingent.\109\ We are also proposing to require funds to disclose 
for each convertible security the conversion ratio, information about 
the asset into which the debt is convertible, and the delta, which is 
the ratio of the change in the value of the option to the change in the 
value of the asset into which the debt is convertible. This reflects 
the sensitivity of the debt's value to changes in the price of the 
asset into which the debt is convertible. The proposed requirement to 
provide the delta would also be required for options, as discussed 
further below, because convertible securities have optionality.\110\ 
For similar reasons discussed below regarding options, the Commission 
believes that providing the delta for convertible securities is 
important to understand the extent of both the credit exposure of the 
debt portion of the convertible bond as well as the market price 
exposure relative to the underlying security into which it can be 
converted or exchanged.
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    \109\ See Form N-PORT, Item C.9.f.
    \110\ See text accompanying and following note 127 (discussing 
information required for options, including delta).
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    We request comment on our proposed disclosure requirements for debt 
securities.
     Are there additional or alternative characteristics of 
debt securities that we should require to be disclosed to assist the 
Commission, investors, or other potential users in understanding the 
nature and risks of a fund's debt security investments? For example, 
would disclosure of which debt securities are guaranteed, the nature of 
such guarantee (e.g., guarantee insurance or letter of credit), and the 
identity of the guarantor, be useful to investors? Alternately, or in 
addition, should the Commission require disclosure regarding the 
frequency of coupon payments, principal payback schedule, priority in 
security structure (e.g., senior, subordinated, etc.), embedded options 
(if any), insurance wrapper (if any), and whether the debt is secured?
     We request comment on our proposed disclosure requirements 
for convertible securities. With regard to the delta, to what extent 
would the inputs and assumptions underlying the methodology by which 
funds calculate price changes affect the values reported? Are there 
liability or other concerns associated with the reporting of such 
measures with such inputs and assumptions? How would the comparability 
of information reported between funds be affected if funds used 
different inputs and assumptions in calculating delta, such as 
different assumptions regarding the values of the funds' portfolios? 
Are there ways the Commission could improve the standardization of the 
calculation of delta? If so, how? What would the associated costs and 
other burdens be for funds to calculate and report these measures 
according to a different methodology than that typically used by the 
fund?
iii. Repurchase and Reverse Repurchase Agreements
    In addition to the information required above for all investments, 
Form N-PORT would require each fund to report additional information 
for each repurchase and reverse repurchase agreement held by the fund. 
The fund would report the category that reflects the transaction from 
the perspective of the fund (repurchase, reverse repurchase), whether 
the transaction is cleared by a central counterparty--and if so the 
name of the central counterparty--or if not the name and LEI (if any) 
of the over-the-counter counterparty, repurchase rate, whether the 
repurchase agreement is tri-party (to distinguish from bilateral 
transactions), and the maturity date.\111\ Funds would also report the 
principal amount and value of collateral, as well as the

[[Page 33607]]

category of investments that most closely represents the 
collateral.\112\
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    \111\ See Form N-PORT, Items C.10.a to C.10.e.
    \112\ See Form N-PORT, Item C.10.f. Funds would report the 
category of investments that most closely represents the collateral, 
selected from among the following (asset-backed securities; agency 
collateralized mortgage obligations; agency debentures and agency 
strips; agency mortgage-backed securities; private label 
collateralized mortgage obligations; corporate debt securities; 
equities; money market; U.S. Treasuries (including strips); other 
instrument). If ``other instrument,'' funds would also include a 
brief description, including, if applicable, whether it is a 
collateralized debt obligation, municipal debt, whole loan, or 
international debt.
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    These disclosures would enhance the information currently reported 
regarding funds' use of repurchase agreements and reverse repurchase 
agreements. Information regarding repurchase agreements would be 
comparable to similar disclosures currently required to be made by 
money market funds on Form N-MFP. The categories used for reporting 
collateral would track the categories currently used to report tri-
party repurchase agreement information to the Federal Reserve Bank of 
New York. We believe that conforming the categories that would be used 
in Form N-PORT to categories used in other reporting contexts would 
ease reporting burdens and enhance comparability.\113\
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    \113\ See Money Market Fund Reform 2014 Release, supra note 13, 
at nn.1515-1518 and accompanying text (discussing comment letter 
stating that the categories used to report collateral for tri-party 
repurchase agreements to the Federal Reserve Bank of New York would 
allow for regular and efficient comparison of current and historical 
risk factors regarding repurchase agreements on a standardized 
basis).
---------------------------------------------------------------------------

    We request comment on our proposed disclosure requirements above.
     As discussed above, the reporting requirements contained 
in Form N-PORT would be comparable to similar disclosures currently 
required to be made by money market funds on Form N-MFP concerning 
repurchase agreements. Should we collect different or additional 
information? For example, should the proposed reporting requirements be 
revised to encompass characteristics of bilateral repurchase and 
reverse repurchase agreements, which are not typically held by money 
market funds but we understand are more commonly held by funds that 
would be reporting on Form N-PORT? If so, how? Should the categories 
used for reporting collateral, which as proposed would track the 
categories currently used to report tri-party repurchase agreement 
information to the Federal Reserve Bank of New York, be revised? If so, 
how and why?
     We believe that funds already track the characteristics of 
their repurchase and reverse repurchase agreements that we would 
require to be reported on Form N-PORT. To the extent this is true, what 
would be the incremental cost and burden of reporting such information 
to the Commission?
     Are there additional or alternative disclosures that we 
should require to be reported to assist investors in understanding 
counterparty and other risks associated with the fund's repurchase and 
reverse repurchase agreements?
iv. Derivatives
    As discussed above, the current reporting regime for derivatives 
has led to inconsistent approaches to reporting derivatives information 
and, in some cases, insufficient information concerning the terms and 
underlying reference assets of derivatives to allow the Commission or 
investors to understand the investment. Additionally, as discussed 
further below, for options, the Commission believes that it would be 
important to have a measurement of ``delta,'' a measure not reported in 
the financial statements or schedule of investments, to better 
understand the exposure to the underlying reference asset that the 
options produce in the portfolio. Currently, the Commission and 
investors are sometimes unable to accurately assess funds' derivatives 
investments and the exposures they create, which can be important to 
understanding funds' investment strategies, use of leverage, and risk 
of loss. Our proposal is intended to increase transparency into funds' 
derivatives investments by requiring funds to disclose certain 
characteristics and terms of derivative contracts that are important to 
understand the payoff profile of a fund's investment in such contracts, 
as well as the exposures they create or hedge in the fund. This would 
include, for example, exposures to currency fluctuations, interest rate 
shifts, prices of the underlying reference asset, and counterparty 
credit risk. As discussed further below, we are also amending 
Regulation S-X to make similar changes to the reporting regime for 
derivatives disclosures in fund financial statements.
    Consequently, in addition to the information required above for all 
investments, Form N-PORT would require additional information about 
each derivative contract in the fund's portfolio. Funds would report 
the category of derivative that most closely represents the investment 
(e.g., forward, future, option, etc.).\114\ Funds would also report the 
name and LEI (if any) of the counterparty (including a central 
counterparty).\115\ This identifying information should assist the 
Commission, investors, and other potential users in better identifying 
and monitoring the categories of derivatives held by funds and the 
associated counterparty risks.\116\
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    \114\ See Form N-PORT, Item C.11.a. Funds would report the 
category of derivative that most closely represents the investment, 
selected from among the following (forward, future, option, 
swaption, swap, warrant, other). If ``other,'' funds would provide a 
brief description.
    \115\ See Form N-PORT, Item C.11.b.
    \116\ Commenters to the FSOC Notice indicated that counterparty 
data for derivative disclosures is not often available and discussed 
the need to have more transparency in this regard. See, e.g., 
Comment Letter of Americans for Financial Reform (Mar. 27, 2015) 
(``Americans For Financial Reform FSOC Notice Comment Letter'') 
(asserting that counterparty data in derivative disclosures is not 
often available); Comment Letter of the Systemic Risk Council (Mar. 
25, 2015) (``Systemic Risk Council FSOC Notice Comment Letter'') 
(discussing the need to have information about investment vehicles 
that hold bank liabilities).
---------------------------------------------------------------------------

    Form N-PORT would also require funds to report terms and conditions 
of each derivative investment that are important to understanding the 
payoff profile of the derivative.\117\ For options and warrants, 
including options on a derivative (e.g., swaptions), funds would report 
the type (e.g., put), payoff profile (e.g., written), number of shares 
or principal amount of underlying reference instrument per contract, 
exercise price or rate, expiration date, and the unrealized 
appreciation or depreciation of the option or warrant.\118\

[[Page 33608]]

Form N-PORT would require funds to provide a description of the 
reference instrument, including name of issuer, title of issue, and 
relevant securities identifier.\119\
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    \117\ We are proposing to require similar information on a 
fund's schedule of investments. See Part II.C.2. Commenters to the 
FSOC Notice were supportive of enhanced derivatives disclosures. 
See, e.g., Systemic Risk Council FSOC Notice Comment Letter, supra 
note 116 (``While most managed funds do not employ leverage to the 
same degree that banks do, we encourage regulators to consider 
carefully whether there are potential improvements to the current 
data collection regime (e.g., for registered investment advisers) 
that would allow regulators to track the presence and concentration 
of leverage in the asset management industry, particularly as it 
arises from use of derivatives. . . .''); Americans for Financial 
Reform FSOC Notice Comment Letter, supra note 116 (stating that 
regulatory oversight should include ensuring appropriate 
transparency of fund positions to both investors and regulators, 
asserting that current derivatives disclosure requirements for 
registered investment companies ``appear very poor,'' noting the 
deficiency of just current accounting values and expressing the need 
for risk and exposure metrics that show the potential losses or 
gains to the fund if market prices change, and suggesting that new 
disclosures should require derivatives data to be sufficiently 
granular such that regulators and market participants could perform 
their own independent calculations of risk exposure, rather than 
relying on aggregated metrics of total risk); Vanguard FSOC Notice 
Comment Letter, supra note 71 (asserting that regulators would 
benefit by better understanding how and why mutual funds use 
derivatives).
    \118\ See Form N-PORT, Item C.11.c. The type of warrant or 
option would be selected from among the following (put or call). The 
payoff profile of the warrant or option would be selected from among 
the following (written or purchased). Funds would respond N/A for 
warrants for both type and payoff profile. As discussed above, funds 
would report the number of option contracts in Item C.2.a of Form N-
PORT. See supra note 96 and accompanying text.
    \119\ See Form N-PORT, Items C.11.c.iii.2 and C.11.c.iii.3. For 
the securities identifier, funds would report, if available, CUSIP 
of the reference asset, ISIN (if CUSIP is not available), ticker (if 
CUSIP and ISIN is not available), or other unique identifier (if 
CUSIP, ISIN, and ticker are not available). See also supra note 92 
and accompanying and following text.
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    We recognize that some derivatives have underlying assets that are 
indices of securities or other assets or a ``custom basket'' of assets, 
the components of which are not publicly available. We are proposing 
requirements to ensure that the Commission, investors, and other 
potential users are aware of the components of such indices or custom 
baskets. If the reference instrument is an index for which the 
components are publicly available on a Web site and are updated on that 
Web site no less frequently than quarterly, funds would identify the 
index and provide the index identifier, if any.\120\ We are proposing 
to require at least quarterly public disclosure for the components of 
the index because it matches the frequency with which funds are 
currently required and, as proposed in this release, would continue to 
be required, to disclose their portfolio holdings.\121\ If the index's 
components are not publicly available as provided above, and the 
notional amount of the derivative represents 1% or less of the NAV of 
the fund, the fund would provide a narrative description of the 
index.\122\ If the index's components are not publicly available in 
that manner, and the notional amount of the derivative represents more 
than 1% of the NAV of the fund, the fund would provide the name, 
identifier, number of shares or notional amount or contract value as of 
the trade date (all of which would be reported as negative for short 
positions), value, and unrealized appreciation or depreciation of every 
component in the index.\123\
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    \120\ See Form N-PORT, Item C.11.c.iii.2.
    \121\ See infra Part II.A.4 (discussing proposed rules 
concerning the public disclosure of reports on Form N-PORT).
    \122\ See supra note 120.
    \123\ See id. Short positions in the index, if any, would be 
reported as negative numbers. The identifier for each index 
component would include CUSIP, ISIN (if CUSIP is not available), 
ticker (if CUSIP and ISIN are not available), or other identifier 
(if CUSIP, ISIN, and ticker are not available. If other identifier 
is provided, the fund would indicate the type of identifier used.
---------------------------------------------------------------------------

    We are proposing this requirement because we believe that it is 
important for the Commission, investors, and other potential users to 
have transparency into all exposures to assets that the fund has, 
regardless of whether the fund directly holds investments in those 
assets or chooses to create those exposures through a derivatives 
contract.\124\ We are proposing the 1% notional amount threshold based 
on our experience with the summary schedule of investments, which 
requires funds to disclose investments for which the value exceeds 1% 
of the fund's NAV in that schedule.\125\ We believe that, similar to 
this threshold in the summary schedule of investments, providing a 1% 
de minimis for disclosing the components of a derivative with nonpublic 
reference assets considers the need for the Commission, investors, and 
other potential users to have transparency into the exposures that 
derivative contracts create while not requiring extensive disclosure of 
multiple components in a non-public index for instruments that 
represent a small amount of the fund's overall value.
---------------------------------------------------------------------------

    \124\ We are also proposing to modify Regulation S-X to require 
similar disclosures. See infra Part II.C.2.a (discussing proposed 
rule 12-13, n.3 of Regulation S-X).
    \125\ See rule 12-12C, n.3 of Regulation S-X.
---------------------------------------------------------------------------

    If the reference instrument is a derivative, funds would indicate 
the category of derivative (e.g., swap) and would provide all 
information required to be reported on Form N-PORT for that type of 
derivative.\126\
---------------------------------------------------------------------------

    \126\ See Form N-PORT, Item C.11.c.iii.1. Funds would report the 
category of derivative that most closely represents the investment, 
selected from among the following (forward, future, option, 
swaption, swap, warrant, other). If ``other,'' funds would provide a 
brief description.
---------------------------------------------------------------------------

    We are also proposing to require funds to report the delta of the 
option, which is the ratio of the change in the value of the option to 
the change in the value of the reference instrument.\127\ This measure 
reflects the sensitivity of the option's value to changes in the price 
of the reference instrument. Disclosure of delta for options and 
warrants would provide the Commission, investors, and other potential 
users a more accurate measure of a fund's full exposure to the 
reference instrument than the option's notional amount, which we would 
otherwise not be able to determine. Accordingly, having the measurement 
of delta for options is important for the Commission, as well as 
investors and other potential users, to measure the impact, on a fund 
or group of funds that holds options on an asset, of a change in such 
asset's price. Also, as the Commission has previously observed, funds 
can use options as a form of obtaining a leveraged position in an 
underlying reference asset.\128\ Having a measurement of exposures 
created through this type of leverage can help the Commission, 
investors, and other potential users better understand the risks that 
the fund faces as asset prices change, since the use of this type of 
leverage can magnify losses or gains in assets.
---------------------------------------------------------------------------

    \127\ See Form N-PORT, Item C.11.c.vii.
    \128\ See Derivatives Concept Release, supra note 7.
---------------------------------------------------------------------------

    For futures and forwards (other than foreign exchange forwards, 
which share similarities with foreign exchange swaps and should be 
reported accordingly as discussed below), Form N-PORT would require 
funds to report a description of the reference instrument, the payoff 
profile (i.e., long or short), expiration date, aggregate notional 
amount or contract value as of the trade date, and unrealized 
appreciation or depreciation.\129\ The description of the reference 
instrument would conform to the same requirements as the description of 
reference instruments for warrants and options.\130\
---------------------------------------------------------------------------

    \129\ See Form N-PORT, Item C.11.d.
    \130\ See Form N-PORT, Item C.11.d.ii. See also supra notes 119-
126 and accompanying text.
---------------------------------------------------------------------------

    For foreign exchange forwards and swaps, funds would report the 
amount and description of currency sold, amount and description of 
currency purchased, settlement date, and unrealized appreciation or 
depreciation.\131\
---------------------------------------------------------------------------

    \131\ See Form N-PORT, Item C.11.e.
---------------------------------------------------------------------------

    For swaps (other than foreign exchange swaps), funds would report 
the description and terms of payments necessary for a user of financial 
information to understand the nature and terms of payments to be paid 
and received, including, as applicable: a description of the reference 
instrument, obligation, or index; financing rate to be paid or 
received; floating or fixed rates to be paid and received; and payment 
frequency.\132\ The description of the reference instrument would 
conform to the same requirements as the description of reference 
instruments for forwards and futures.\133\ Funds would also report 
upfront payments or receipts, unrealized appreciation or

[[Page 33609]]

depreciation, termination or maturity date, and notional amount.\134\
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    \132\ See Form N-PORT, Item C.11.f.i. Funds would separately 
report the description and terms of payments to be paid and 
received. The description of the reference instrument, obligation, 
or index would include the information required to be reported for 
the descriptions of reference instruments for warrants, options, 
futures, or forwards.
    \133\ See id. See also supra note 130 and accompanying text.
    \134\ See Form N-PORT, Items C.11.f.ii to C.11.f.v.
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    Finally, for derivatives that do not fall into the categories 
enumerated in Form N-PORT, funds would provide a description of 
information sufficient for a user of financial information to 
understand the nature and terms of the investment. This description 
would include, as applicable, currency, payment terms, payment rates, 
call or put features, exercise price, and a description of the 
reference instrument, among other things.\135\ The description of the 
reference instrument would conform to the same requirements as the 
description of reference instruments for swaps.\136\ Funds would also 
report termination or maturity (if any), notional amount(s), unrealized 
appreciation or depreciation, and the delta (if applicable).\137\ We 
recognize that new derivative products will continue to evolve, and 
thus the disclosures for this category are intended to be flexible 
enough to encompass the changing needs and products that may emerge.
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    \135\ See Form N-PORT, Item C.11.g.1.
    \136\ See Form N-PORT, Item C.11.f.i. See also supra note 133 
and accompanying text.
    \137\ See Form N-PORT, Items C.11.g.ii to C.11.g.v.
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    We request comment on our proposed disclosure requirements for 
derivatives.
     Is there additional or alternative information about 
derivative contracts that we should be requiring? Should we modify the 
information we are proposing to require for any derivatives contracts? 
Should other terms and conditions, categories of derivatives, payoff 
profiles, or identifiers be included in Form N-PORT so that all 
material elements of derivatives contracts can be reported?
     For options, should funds be required to identify the 
option exercise type (e.g., American, European, Bermudan, Asian, other) 
or report any additional information for more exotic option exercise 
types (e.g., rainbow, barrier, lookback, etc.)?
     We recently adopted Regulation SBSR, which will require 
one of the parties to security-based swap transactions to report 
certain information to registered security-based swaps data 
repositories or the Commission.\138\ The reporting party will report 
certain identifying information, including unique product identifiers 
to identify each security-based swap, as well as certain primary and 
secondary trade information, including the terms of any standardized 
fixed or floating rate payments, the frequency of any such payments, 
and any additional data elements included in the agreement between the 
counterparties that are necessary for a person to determine the market 
value of the transaction.\139\ The Commodities Futures Trading 
Commission has engaged in similar efforts with regards to unique 
product identifiers that would be reported with regards to swaps.\140\ 
Are there methods the Commission should consider to harmonize the SBSR 
reporting requirements with the proposed reporting requirements on Form 
N-PORT? For example, should we consider ways to allow a fund to import 
the data reported to swap and security-based swap data repositories 
automatically into the fund's reports on Form N-PORT? How would this 
affect investors' ability to analyze this data for swaps and security-
based swaps held by funds? Should we require funds to report the 
product identifiers or any other data we are not currently proposing to 
require on Form N-PORT that will be required to be reported for swaps 
or security-based swaps? If so, why?
---------------------------------------------------------------------------

    \138\ See Regulation SBSR Adopting Release, supra note 40 
(requiring the reporting of certain information for each registered 
security-based swap transaction to registered security-based swap 
data repositories or to the Commission, including unique product 
identifiers and transaction identifiers).
    \139\ See rule 901 of Regulation SBSR [17 CFR 242.901].
    \140\ See generally Q&A--Swap Data Recordkeeping and Reporting 
Requirements, CFTC, available at http://www.cftc.gov/ucm/groups/public/@newsroom/documents/file/sdrr_qa.pdf.
---------------------------------------------------------------------------

     Proposed Form N-PORT would require funds to list all 
underlying reference assets unless the underlying reference asset is an 
index whose components are publicly available on a Web site and are 
updated on that Web site no less frequently than quarterly, in which 
case funds would identify the index and publisher of the index, or 
unless the notional amount of the derivative represents 1% or less of 
the NAV of the fund, in which case funds would provide a narrative 
description of the index.\141\ To the extent such indices are 
proprietary or subject to licensing agreements, what would be the 
effect of this requirement? For example, would funds incur costs for 
amending licensing agreements? Would index providers be willing to 
amend existing licensing agreements? If not, how would this impact 
funds that make such investments and the marketplace of fund options 
available to investors generally? Are there other concerns about 
disclosing the components of proprietary indices? Should we alter this 
requirement, and if so how? For example, should we not require funds to 
report underlying index components for derivatives unless the 
derivative's notional amount represents at least 5%, or some other 
percentage, of the NAV of the fund? Alternatively, should we limit the 
required disclosure of index components to the top 50 components and/or 
components that represent more than 1% of the index? If the reference 
asset is a modified version of an index whose components are publicly 
available on a Web site, for example a version that is customized to 
exclude certain issuers that the fund is restricted from owning, would 
requiring a narrative of those modifications be preferable to funds and 
investors rather than requiring each holding of the modified index to 
be listed? If so, should such narrative disclosure be reported in the 
``explanatory notes'' section of Form N-PORT? \142\
---------------------------------------------------------------------------

    \141\ See, e.g., supra notes 120-123.
    \142\ See infra note 155 and accompanying and following text.
---------------------------------------------------------------------------

     How, if at all, should we modify the proposed requirement 
to report delta? To what extent would the inputs and assumptions 
underlying the methodology by which funds calculate this measure affect 
the value reported? Are there potential liability or other concerns 
associated with the reporting of such measures according to such inputs 
and assumptions? For example, how would the comparability of 
information reported between funds be affected if funds used different 
inputs and assumptions in their methodologies?
     Are there additional or alternative metrics that we should 
consider requiring to be reported? Would the disclosure of risk metrics 
such as vega--which measures the amount that an option contract's price 
changes in relation to a 1% change in the volatility of the underlying 
asset--or gamma--which measures the sensitivity of delta in response to 
price changes in the underlying instrument--enhance the utility of the 
derivatives information reported in Form N-PORT? What would be the 
costs and burdens to funds and benefits to investors and other 
potential users of requiring funds to report such additional or 
alternative metrics? How would the comparability of information 
reported by different funds be affected if funds used different inputs 
and assumptions in their methodologies, such as different assumptions 
regarding the values of the funds' portfolios?
     We believe that funds already track the characteristics of 
their derivatives that we would require to be reported on Form N-PORT. 
To the extent this is correct, what would be the incremental

[[Page 33610]]

cost and burden of reporting such information to the Commission?
v. Securities on Loan and Cash Collateral Reinvestment
    As discussed above, our proposal would require funds to report on 
Form N-PORT, for each of their securities lending counterparties as of 
the reporting date, the full name and LEI of the counterparty (if any), 
as well as the aggregate value of all securities on loan to the 
counterparty.\143\ We are also proposing that funds report on Form N-
PORT, on an investment-by-investment level, information about 
securities on loan and the reinvestment of cash collateral that secures 
the loans. For each investment held by the fund, a fund would report: 
(1) Whether any portion of the investment was on loan by the fund, and, 
if so, the value of the securities on loan; \144\ (2) whether any 
amount of the investment represented reinvestment of the cash 
collateral and, if so, the dollar amount of such reinvestment; \145\ 
and (3) whether any portion of the investment represented non-cash 
collateral received to secure loaned securities and, if so, the value 
of the securities representing such non-cash collateral.\146\
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    \143\ See supra note 75 and preceding, accompanying, and 
following text.
    \144\ See Form N-PORT, Item C.12.c.
    \145\ See Form N-PORT, Item C.12.a.
    \146\ See Form N-PORT, Item C.12.b.
---------------------------------------------------------------------------

    These disclosures would provide information about how funds 
reinvest the cash collateral received from securities lending activity 
and should allow for more accurate determination of the value of 
collateral securing such loans. This could improve the ability of 
Commission staff, as well as investors, brokers, dealers, and other 
market participants to assess collateral reinvestment risks and 
associated potential liquidity and loss risks, as well as better 
understand leverage creation through the reinvestment of 
collateral.\147\ These disclosures could also help identify those 
investments that one or more funds might have to sell or redeem in the 
event of widespread termination or default by borrowers. More 
generally, this information could help to address concerns expressed by 
industry participants about the lack of transparency in funds' 
securities lending transactions.\148\
---------------------------------------------------------------------------

    \147\ As discussed above, commenters to the FSOC Notice 
suggested that enhanced securities lending disclosures could be 
beneficial to investors and counterparties. See supra note 71.
    \148\ See, e.g., Transcript of Securities and Exchange 
Commission Securities Lending and Short Sale Roundtable (Sept. 29, 
2009), available at http://www.sec.gov/news/openmeetings/2009/roundtable-transcript-092909.pdf (discussing, among other things, 
the lack of publicly available information to market participants 
about securities lending transactions).
---------------------------------------------------------------------------

    We request comment on our proposed disclosure requirements for 
securities loans and cash collateral reinvestment.
     Should the Commission require funds to report information 
about securities on loan or reinvestment of cash collateral at the 
portfolio level, rather than at the individual security level? If so, 
what categories should be used to report such reinvestment? For 
example, would it be appropriate to use the same collateral categories 
for securities lending that we are proposing to be used for repurchase 
and reverse repurchase agreements?
     As discussed, Form N-PORT would require funds to indicate, 
for each investment, whether any portion of the investment represented 
non-cash collateral received to secure loaned securities. To what 
extent would this information be helpful to brokers, dealers, and 
investors? To what extent do funds receive collateral other than cash?
     Is there additional or alternative information regarding 
securities lending transactions that the Commission should require to 
be disclosed in reports on Form N-PORT?
     We believe that funds already track the characteristics of 
their securities lending and cash collateral reinvestment transactions 
that we would require to be reported on Form N-PORT. Is this belief 
correct? What would be the burden of reporting such information to the 
Commission?
h. Miscellaneous Securities
    In Part D of Form N-PORT, as currently permitted by Regulation S-X, 
funds would have the option of identifying and reporting certain 
investments as ``miscellaneous securities.'' \149\ Funds electing to 
separately report miscellaneous securities would use the same Item 
numbers and report the same information that would be reported for each 
investment if it were not a miscellaneous security.\150\ Consistent 
with the disclosure regime established by Regulation S-X, all such 
responses regarding miscellaneous securities would be nonpublic and 
would be used for Commission use only, notwithstanding the fact that 
all other information reported for the third month of each fund's 
fiscal quarter on Form N-PORT would otherwise be publicly 
available.\151\ Keeping information related to these investments 
nonpublic may serve to guard against the premature release of those 
securities positions and thus deter front-running and other predatory 
trading practices, while still allowing the Commission to have a 
complete record of the portfolio for monitoring, analysis, and checking 
for compliance with Regulation S-X.\152\ The only information publicly 
reported for miscellaneous securities would be their aggregate value, 
which would be consistent with current practice as permitted by 
Regulation S-X.\153\
---------------------------------------------------------------------------

    \149\ See generally supra note 49 and accompanying text.
    \150\ See Form N-PORT, Part D.
    \151\ See rule 12-12 of Regulation S-X.
    \152\ See, e.g., Quarterly Portfolio Holdings Adopting Release, 
supra note 19, at n.64 and accompanying text.
    \153\ See supra notes 48-49 and accompanying text.
---------------------------------------------------------------------------

     Should funds continue to be allowed to use the category of 
miscellaneous securities, either on Form N-PORT or in publicly 
disclosed schedules of investments pursuant to instruction 1 to rule 
12-12 and instruction 5 to rule 12-12C of Regulation S-X? To what 
extent do funds currently use ``miscellaneous securities'' as a line 
item in their schedule of investments, as opposed to disclosing all 
investments in securities of unaffiliated issuers? For what purposes? 
Should we continue to allow funds to exclude the full disclosures of 
such securities from funds' schedules of investments? Alternatively, 
should we consider lowering the threshold, such as to two percent or 
one percent of the total value of securities of unaffiliated issuers?
i. Explanatory Notes
    In Part E of Form N-PORT, funds would have the option of providing 
explanatory notes relating to the filing, if any.\154\ Any notes 
provided in public reports on Form N-PORT (i.e., reports on Form N-PORT 
for the third month of the fund's fiscal quarter) would be publicly 
available, whereas notes provided in nonpublic filings of Form N-PORT 
would remain nonpublic.\155\ Funds would also report, as applicable, 
the Item number(s) to which the notes are related.\156\
---------------------------------------------------------------------------

    \154\ See Form N-PORT, Part E. Cf. Form PF, Item 4 (providing 
advisers to private funds the option of explaining any assumptions 
that they made in responding to any questions in the form).
    \155\ See infra Part II.A.4 of this release.
    \156\ See Form N-PORT, Part E.
---------------------------------------------------------------------------

    These notes, which would be optional, could be used to explain 
assumptions that funds made in responding to specific items in Form N-
PORT. Funds could also provide context for anomalous responses or 
discuss issues that could not be adequately addressed elsewhere given 
the constraints of the form. Similar

[[Page 33611]]

information in other contexts has assisted Commission staff in better 
understanding the information provided by funds, and we expect that 
explanatory notes provided on Form N-PORT would do the same.\157\
---------------------------------------------------------------------------

    \157\ See, e.g., Form N-MFP, Item 43 (``Explanatory notes. 
Disclose any other information that may be material to other 
disclosures related to the portfolio security.'').
---------------------------------------------------------------------------

    We request comment on our proposed disclosure requirements.
     Would the format outlined above for the explanatory notes 
allow funds to adequately discuss their responses on Form N-PORT? If 
not, how should the format be modified?
     Should explanatory notes in publicly available filings of 
Form N-PORT be nonpublic? If so, why?
j. Exhibits
    In Part F of Form N-PORT, for reports filed for the end of the 
first and third quarters of the fund's fiscal year, a fund would also 
attach the fund's complete portfolio holdings as of the close of the 
period covered by the report. These portfolio holdings would be 
presented in accordance with the schedules set forth in Sec. Sec.  
210.12-12 to 12-14 of Regulation S-X.
    As discussed further below in Part B, we are proposing to rescind 
Form N-Q because reports on Form N-PORT for the first and third fiscal 
quarters would make similar reports on Form N-Q unnecessarily 
duplicative. While we recognize that the quarterly, publicly disclosed 
reports on Form N-PORT will provide structured data to investors and 
other potential users, we recognize that the amount and structured 
format of the data contained in those reports are not primarily 
designed for individual investors. We believe that such investors might 
prefer that portfolio holdings schedules for the first and third 
quarters continue to be presented using the form and content specified 
by Regulation S-X, which investors are accustomed to viewing in reports 
on Form N-Q and in shareholder reports. Therefore, we are proposing to 
require that, for reports on Form N-PORT for the first and third 
quarters of a fund's fiscal year, the fund would attach its complete 
portfolio holdings for that fiscal quarter, presented in accordance 
with the schedules set forth in Sec. Sec.  210.12-12 to 12-14 of 
Regulation S-X.
    Requiring funds to attach these portfolio holdings schedules to 
reports on Form N-PORT would provide the Commission, investors, and 
other potential users with access to funds' current and historical 
portfolio holdings for those funds' first and third fiscal quarters. 
Our proposal would also consolidate these disclosures in a central 
location, together with other fund portfolio holdings disclosures in 
shareholder reports and reports on Form N-CSR for funds' second and 
fourth fiscal quarters.
    Under our proposal, and consistent with current practice, funds 
would have until 60 days after the end of their second and fourth 
fiscal quarters to transmit reports to shareholders containing 
portfolio holdings schedules prepared in accordance with Regulation S-X 
for that reporting period.\158\ In contrast, under our proposal, funds 
would have 30 days after the end of their first and third fiscal 
quarters to file reports on Form N-PORT that would include portfolio 
holdings schedules prepared in accordance with Regulation S-X, although 
such reports would not be required to be made public until 60 days 
after the close of the reporting period. Although our proposal would 
require funds to prepare Regulation S-X compliant portfolio holdings 
schedules for their first and third fiscal quarters 30 days more 
rapidly than they do currently, we believe that this would be 
reasonable given the significant overlap with information that would be 
required to be reported on Form N-PORT, and the fact that funds would 
be required to file reports on Form N-PORT within 30 days after the end 
of each month. In addition, the portfolio schedules attached to Form N-
PORT would be neither audited nor certified, which we believe would 
significantly reduce the time required for preparation and validation. 
We request comment below on the timing of preparing this attachment.
---------------------------------------------------------------------------

    \158\ See supra note 27 (discussing current requirements to 
transmit reports to shareholders); infra Part II.C (discussing our 
proposed amendments to Regulation S-X).
---------------------------------------------------------------------------

    As discussed below, we are proposing to allow funds to transmit 
reports to shareholders by posting online those reports, together with 
the funds' complete portfolio holdings for the first and third fiscal 
quarters presented in accordance with the schedules set forth in 
Sec. Sec.  210.12-12 to 12-14 of Regulation S-X disclosures.\159\ We 
recognize that there would be duplication between the portfolio 
schedules posted online for funds relying upon proposed rule 30e-3 and 
the portfolio schedules for funds attached on reports on Form N-PORT. 
However, we believe that requiring the Regulation S-X schedules to be 
filed as exhibits to Form N-PORT reports would serve the purpose of 
making the schedules permanently available on the Commission's 
Electronic Data Gathering, Analysis, and Retrieval System (``EDGAR'') 
(even when such schedules are no longer required to be maintained 
online pursuant to proposed rule 30e-3).
---------------------------------------------------------------------------

    \159\ See supra Part II.D.3.
---------------------------------------------------------------------------

    We request comment on our proposed exhibits.
     Should funds be required to attach portfolio holdings 
schedules to reports on Form N-PORT? Is there an alternative that would 
be better for funds and investors in terms of informing investors' 
investment decisions with regards to current and historical portfolio 
holdings?
     As discussed above, the attached portfolio holdings 
schedules are intended for investors, but would not be required to be 
made publicly available to investors until 60 days after the close of 
the reporting period; however, as proposed, funds would be required to 
prepare and file this attachment within 30 days of the end of the 
reporting period. Should funds be allowed to file reports on Form N-
PORT for the first and third fiscal quarters without Regulation S-X 
compliant schedules, but then be required to amend those reports on 
Form N-PORT to attach Regulation S-X compliant schedules no later than 
60 days after the end of the reporting period?
     Should the portfolio schedules attached to Form N-PORT, 
which are similar to reports funds are providing currently on Form N-Q, 
be certified, as is currently required by Form N-Q?
k. General Request for Comments Regarding the Information on Form N-
PORT
    In addition to the requests for comment above, we request general 
comment on feasible alternatives to the information we would be 
requiring funds to report on Form N-PORT that would minimize the 
reporting burdens on funds while maintaining the anticipated benefits 
of the reporting and disclosure.\160\ We also request comment on the 
utility of the information proposed to be included in reports to the 
Commission, investors, and the public in relation to the costs to funds 
of providing the reports.\161\
---------------------------------------------------------------------------

    \160\ See section 30(c)(2)(A) of the Investment Company Act [15 
U.S.C. 80a-29(c)(2)(A)] (requiring Commission to consider and seek 
public comment on feasible alternatives to the required filing of 
information that minimize reporting burdens on funds).
    \161\ See section 30(c)(2)(B) of the Investment Company Act 
(requiring Commission to consider and seek public comment on the 
utility of information, documents and reports to the Commission in 
relation to the associated costs).

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

[[Page 33612]]

     Would Form N-PORT, as proposed, appropriately consider the 
usefulness of the information to the Commission, investors, and other 
potential users of the required information and the costs that would be 
associated with reporting this information? If not, which data points 
or items should be enhanced or scaled back? Are there any proposed 
items in Form N-PORT that should be revised to avoid duplication of 
reporting requirements in different Commission rules or forms? If so, 
please explain. On the other hand, are there any elements in Form N-
PORT that the Commission should carry over to other Commission forms or 
rules?
     Are there specific items that the proposed form would 
require that are unnecessary or otherwise should not be required in the 
manner that we propose? Alternately, is there different or additional 
information that we have not identified that could be useful to us or 
investors in monitoring funds? For example, to the extent there are 
fund-specific, sector-specific, or industry-wide risks that would not 
be addressed by the information we are proposing to collect today, 
should we require additional or alternative information that would be 
relevant to an evaluation of the risk characteristics of the fund and 
its portfolio investments? Likewise, is there any investment- or 
entity-specific information that should be included in Form N-PORT to 
facilitate analysis of the information that would be reported? Should 
the manner in which information would be reported in Form N-PORT be 
revised to improve the clarity of disclosures or reduce reporting 
burdens?
     We believe that the information we are proposing to 
require would be readily available to funds as a matter of general 
business practice. Do commenters agree with this assumption? For 
example, do fund accounting or financial reporting systems, or those of 
a fund's custodian, generally contain the investment information that 
we are requesting in our proposal? What is the feasibility and burden 
of requiring funds to report information that is not contained in such 
systems? To the extent that any items that we have requested are not 
contained in fund accounting or financial reporting systems, are there 
other types of readily available data that would provide us with 
similar information?
3. Reporting of Information on Form N-PORT
    As discussed above, the Commission proposes that funds would report 
information on Form N-PORT in XML, so that Commission staff, investors, 
and other potential users could create databases of fund portfolio 
information to be used for data analysis. Forms N-CSR and N-Q are not 
currently filed in a structured format, which results in reports that 
are comprehensible to a human reader, but are not suitable for 
automated processing, and generally require filers to reformat the 
required information from the way it is stored for normal business 
uses.\162\ By contrast, requiring that reports on Form N-PORT be 
structured would allow the Commission and other potential users to 
combine information from more than one report in an automated way to, 
for example, construct a data base of fund portfolio investments 
without additional formatting. Based upon our experiences with Forms N-
MFP and PF, both of which require filers to report information in an 
XML format, we believe that requiring funds to report information on 
Form N-PORT in an XML format would provide the information that we seek 
in the most timely and cost-effective manner.\163\ As discussed further 
below in the economic analysis, the XML format may also improve the 
quality of the information disclosed by imposing constraints on how the 
information would be provided, by providing a built-in validation 
framework of the data in the reports.\164\
---------------------------------------------------------------------------

    \162\ Forms N-CSR and N-Q are required to be filed in HTMA or 
ASCII/SGML. See rule 301 of Regulation S-T; EDGAR Filer Manual 
(Volume II) version 27 (June 2014) at 5-1.
    \163\ We anticipate that the XML interactive data file would be 
compatible with a wide range of open source and proprietary 
information management software applications. Continued advances in 
interactive data software, search engines, and other web-based tools 
may further enhance the accessibility and usability of the data. 
See, e.g., Money Market Fund Reform 2010 Release, supra note 13, at 
n.341.
    \164\ See infra Part IV.B.b.
---------------------------------------------------------------------------

     What would be the costs to funds of providing data 
conforming to a Form N-PORT XML Schema? How would costs be affected, if 
at all, by the size of the funds and fund complexes reporting this 
data? How would this affect smaller fund companies?
     Should the Commission allow or require the form to be 
provided in an XML Schema derived from existing XML based languages, 
such as Financial products Markup Language (``FpML'') or XBRL? FpML is 
an industry standard created by ISDA for exchanging and reporting the 
terms and conditions of derivatives contracts. XBRL is another industry 
standard used by the Commission for many reporting forms.
     Is there another structured format that would allow 
investors and analysts to easily download and analyze the data?
    The Commission is considering whether reports on Form N-PORT should 
be submitted through EDGAR or another electronic filing system, either 
maintained by the Commission or by a third-party contractor. If reports 
on Form N-PORT were required to be submitted through EDGAR, the 
electronic filing requirements of Regulation S-T would apply.\165\
---------------------------------------------------------------------------

    \165\ See generally 17 CFR 232 (governing the electronic 
submission of documents filed with the Commission).
---------------------------------------------------------------------------

    We request comment on this aspect of our proposal.
     Are there specific other capabilities that the Commission 
should consider in developing or selecting an electronic filing system? 
For example, should the system have the capability to cross-check 
information reported to other electronic filing systems, such as the 
Investment Adviser Registration Depository (where registration forms 
for investment advisers are filed)? If so, which platforms and why?
     Is EDGAR the optimal vehicle for filing reports on Form N-
PORT with the Commission? If not, what vehicle would be optimal for 
filing reports and why? Should the Commission allow the filing of 
documents in electronic media other than on EDGAR? If so, please make 
specific recommendations.
     Are there any particular concerns with filing such reports 
on EDGAR as opposed to a third party system or vice versa? If so, what 
are those concerns and what are potential remedies for such concerns? 
For example, as discussed further below, as proposed, reports on Form 
N-PORT for the first and second month of each fiscal quarter would not 
be made public. Accordingly, any filing would need to have 
confidentiality protections to keep the information on such Forms non-
public. How should EDGAR or an alternative filing platform best address 
the confidentiality of this information?
     How important to investors and other interested parties is 
the fact that EDGAR currently serves as the filing system for fund 
filings with the Commission, and thus serves as a single repository 
where investors may examine historical filings by a given fund on 
related forms and generally compare reports made by other funds? To 
what extent, if at all, could investors become confused by the use of a 
new filing system for Form N-PORT and the use of EDGAR for other fund 
filings? How should any such investor confusion be mitigated by funds 
and the Commission?

[[Page 33613]]

    Our proposal would require funds to report information on Form N-
PORT no later than 30 days after the close of each month.\166\ We 
request comment on this aspect of our proposal.
---------------------------------------------------------------------------

    \166\ In contrast, one commenter to the FSOC Notice suggested 
that funds should report information to the Commission on a real-
time basis. See Comment Letter of Occupy the SEC to the FSOC Notice 
(Mar. 25, 2015) (suggesting that asset managers should be required 
to provide real-time data, and that the Commission have the 
capability to monitor all funds' transactions on a real-time basis).
---------------------------------------------------------------------------

     Would 30 days be sufficient for funds to gather and report 
this information to the Commission? If not, what amount of time would 
be required and why? Conversely, could funds easily and reliably gather 
and report this information in less than 30 days, which would provide 
the Commission staff with more timely data? \167\ If so, what amount of 
time would be appropriate? To what extent, if at all, should this 
determination be affected by the fact that funds would have 60 days to 
report their schedule of investments in their financial statements 
prepared pursuant to Regulation S-X?
---------------------------------------------------------------------------

    \167\ See, e.g., Money Market Fund Reform 2014 Release, supra 
note 13 (requiring money market funds to report their holdings and 
other information to the Commission within five days after the end 
of each month).
---------------------------------------------------------------------------

    As an alternative to monthly reports filed on Form N-PORT, should 
the Commission require quarterly reports that include portfolio 
information for each month of that quarter? How would the viability of 
this alternative be affected, if at all, by the technological 
challenges and inadvertent disclosure risks associated with combining 
in a single form nonpublic portfolio information relating to the first 
two months of each quarter with public portfolio information relating 
to the third month of that quarter? We note that this alternative would 
eliminate many of the benefits of monthly reporting, such as the 
ability of monthly data to address the staleness of quarterly data and 
to assist in monitoring funds by decreasing the delay between reports. 
However, this alternative would still provide twelve data points per 
year, which should improve the Commission staff's ability to perform 
analyses of portfolios, and would discourage various forms of portfolio 
manipulation, as discussed above. What, if any, other factors should 
the Commission consider in evaluating this alternative?
4. Public Disclosure of Information Reported on Form N-PORT
    We are proposing that funds report information on Form N-PORT on a 
monthly basis, no later than 30 days after the close of each 
month.\168\ For reasons discussed below, and consistent with current 
disclosure practices, only information reported for the third month of 
each fund's fiscal quarter would be publicly available, and such 
information would not be made public until 60 days after the end of the 
third month of the fund's fiscal quarter.\169\
---------------------------------------------------------------------------

    \168\ Commission staff understands that certain funds currently 
report their investments to shareholders as of the last business day 
of the reporting period, while other funds report their investments 
as of the last calendar day of the reporting period. In recognition 
of this fact, and in an effort to avoid disruptions to current fund 
operations, the information reported on Form N-PORT may reflect the 
fund's investments as of the last business day, or last calendar 
day, of the month for which the report is filed.
    \169\ As discussed above, portfolio schedules are currently 
available to the public in reports that are mailed to shareholders 
or filed with the Commission either 60 or 70 days following the end 
of each reporting period. See supra note 27 and accompanying text.
---------------------------------------------------------------------------

    The quarterly portfolio reports that the Commission currently 
receives on Forms N-Q and N-CSR can quickly become stale due to the 
turnover of portfolio securities and fluctuations in the values of 
portfolio investments. Monthly portfolio reporting would decrease the 
delay between reports, which should prove useful to the Commission for 
fund monitoring, particularly in times of market stress. This would 
also triple the number of data points reported to the Commission in a 
given year, as well as ensure that the Commission has current 
information, which should in turn enhance the ability of Commission 
staff to perform analyses of funds in the course of monitoring for 
industry trends, or identifying issues for examination or inquiry.
    As discussed above, the Commission generally believes that public 
availability of information, including the types of information that 
would be collected on Form N-PORT that may not currently be reported or 
disclosed by funds, can benefit investors by assisting them in making 
more informed investment decisions. Although Form N-PORT is not 
primarily designed for disclosing information to individual investors, 
we believe that many investors, particularly institutional investors, 
as well as academic researchers, financial analysts, and economic 
research firms, could use the information reported on Form N-PORT to 
evaluate fund portfolios and assess the potential for returns and risks 
of a particular fund. Accordingly, whether directly or through third 
parties, we believe that the periodic public disclosure of the 
information on proposed Form N-PORT could benefit all fund investors.
    The Commission, however, recognizes that more frequent portfolio 
disclosure could potentially harm fund shareholders by expanding the 
opportunities for professional traders to exploit this information by 
engaging in predatory trading practices, such as trading ahead of 
funds, often called ``front-running.'' \170\ Similarly, the Commission 
is sensitive to concerns that more frequent portfolio disclosure may 
facilitate the ability of outside investors to ``free ride'' on a 
mutual fund's investment research, by allowing those investors to 
reverse engineer and ``copycat'' the fund's investment strategies and 
obtain for free the benefits of fund research and investment strategies 
that are paid for by fund shareholders.\171\ Both front-running and 
copycatting can reduce the returns of shareholders who invest in 
actively managed funds.\172\
---------------------------------------------------------------------------

    \170\ See, e.g., Quarterly Portfolio Holdings Adopting Release, 
supra note 19, at n.128 and accompanying text.
    \171\ See, e.g., id. at n.129 and accompanying text.
    \172\ See The Potential Effects of More Frequent Portfolio 
Disclosure on Mutual Fund Performance, 7 Investment Company 
Institute Perspective No. 3 (June 2001), available at http://www.ici.org/pdf/per07-03.pdf (``Potential Effects of More Frequent 
Disclosure'').
---------------------------------------------------------------------------

    We discussed these concerns when we first proposed and adopted Form 
N-MFP, and made the determination to make each monthly report on Form 
N-MFP public, with a 60 day delay.\173\ In that release, however, we 
noted that, due to the short-term and restricted nature of money market 
fund securities, and because shares of money market funds are 
ordinarily purchased and redeemed at a stable share price, we believed 
opportunities for such activities were curtailed.\174\ By contrast, 
funds other than money market funds can pursue a variety of investment 
strategies and invest in a variety of securities and other investments. 
Accordingly, we do not believe that the factors that mitigated our 
concerns about the potential for front running or free-riding in money 
market funds are as equally applicable to mutual funds.
---------------------------------------------------------------------------

    \173\ See Money Market Fund Reform 2010 Release, supra note 13 
(adopting Form N-MFP with a 60 day delay for public disclosure). In 
2014, the Commission eliminated the 60 day delay in the public 
disclosure of Form N-MFP. See Money Market Fund Reform 2014 Release, 
supra note 13.
    \174\ See Money Market Fund Reform 2010 Release, supra note 13, 
at text following n.573.
---------------------------------------------------------------------------

    Empirical studies indicate that the portfolio holdings information 
that investment companies disclose to the Commission and to 
shareholders contains information that can be used by other investors 
to front-run and

[[Page 33614]]

copycat the positions of reporting funds.\175\ Based on these studies, 
as well as experience and discussions with fund groups and market 
participants, the Commission is sensitive to the possibility that 
increasing the frequency of public portfolio disclosures to a monthly 
basis could further enable others to discern trading strategies of the 
funds, potentially subjecting registered investment companies to such 
predatory trading practices, resulting in competitive harms to the fund 
and its investors.
---------------------------------------------------------------------------

    \175\ See infra notes 663-667 and accompanying and following 
text.
---------------------------------------------------------------------------

    We recognize that some free-riding and front running activity can 
occur even with quarterly disclosure, with the potential for investor 
harm. Conversely, however, investors previously petitioned for 
quarterly disclosures, noting numerous benefits that quarterly 
disclosure of portfolio schedules could provide, including allowing 
investors to better monitor the extent to which their funds' portfolios 
overlap, and hence enabling investors to make more informed asset 
allocation decisions, and providing investors with greater information 
about how a fund is complying with its stated investment 
objective.\176\ The Commission cited many of these benefits when it 
adopted Form N-Q, and based on staff experience and outreach, believes 
that the current practice of quarterly portfolio disclosures provides 
benefits to investors, notwithstanding the opportunities for front-
running and reverse engineering it might create.
---------------------------------------------------------------------------

    \176\ See Quarterly Portfolio Holdings Adopting Release, supra 
note 19, at n.32 and accompanying text (discussing prior investor 
petitions for rulemaking). Investors that petitioned for quarterly 
disclosure also argued that increasing the frequency of portfolio 
disclosure would expose ``style drift'' (when the actual portfolio 
holdings of a fund deviate from its stated investment objective) and 
shed light on and prevent several potential forms of portfolio 
manipulation, such as ``window dressing'' (buying or selling 
portfolio securities shortly before the date as of which a fund's 
holdings are publicly disclosed, in order to convey an impression 
that the manager has been investing in companies that have had 
exceptional performance during the reporting period) and ``portfolio 
pumping'' (buying shares of stock the fund already owns on the last 
day of the reporting period, in order to drive up the price of the 
stocks and inflate the fund's performance results).
---------------------------------------------------------------------------

    Our proposal is intended to appropriately consider the benefits to 
the Commission, investors, and other potential users of public 
portfolio disclosures, including the reporting of such disclosures in a 
structured format and additional portfolio information that would be 
required on proposed Form N-PORT and the potential costs associated 
with making that information available to the public, which could be 
ultimately borne by investors. Accordingly, in an attempt to minimize 
these potential costs and harms, we propose to require public 
disclosure of fund reports on Form N-PORT once each quarter, rather 
than monthly, thereby maintaining the status quo regarding the 
frequency of public portfolio disclosure. As discussed above, funds are 
currently required to disclose their portfolio investments quarterly, 
via public filings with the Commission and semi-annual reports 
distributed to shareholders. Consequently, the Commission is not 
currently proposing to make public the information reported for the 
first and second months of each fund's fiscal quarter on Form N-PORT. 
Only information reported for the third month of each fund's fiscal 
quarter on Form N-PORT would be made publicly available, and such 
information would not be made public until 60 days after the end of the 
third month of the fund's fiscal quarter. We believe that maintaining 
the status quo with regard to the frequency and the time lag of 
portfolio reporting would allow the Commission, the fund industry, and 
the marketplace to assess the impact of the structured and more 
detailed data reported on Form N-PORT on the mix of information 
available to the public, and the extent to which these changes might 
affect the potential for predatory trading, before determining whether 
more frequent or more timely public disclosure would be, beneficial to 
investors in funds.
    We are proposing to maintain the status quo of public disclosure of 
quarterly information based upon each fund's fiscal quarters, rather 
than calendar quarters, to ensure that public disclosure of information 
filed on Form N-PORT would be the same as the portfolio disclosures 
reported on a semi-annual fiscal year basis on Form N-CSR. We believe 
that such overlap would minimize the risks of predatory trading, 
because otherwise funds with fiscal year-ends that fall other than on a 
calendar quarter- or year-end would have their portfolios publicly 
available more frequently than funds with fiscal year-ends that fall on 
a calendar quarter- or year-end, thus increasing the risks to those 
funds discussed above related to potential front-running or reverse 
engineering.
    We request comment on the proposed frequency and delay of public 
disclosure of information reported on Form N-PORT.
     Should we require information on Form N-PORT reported for 
the first and second month of each fund's fiscal quarter be made 
public? Are the concerns about front-running or other possible harms 
discussed above warranted given the 60-day delay? Would a different 
combination of public disclosure frequency and delay better protect 
funds and their investors from the risks of predatory trading, while 
still providing timely and regular information to investors? To what 
extent would investors benefit from receiving monthly data as opposed 
to quarterly data?
     Are there alternatives we should consider to provide 
investors and other potential users with the information reported on 
Form N-PORT for the first and second months of each quarter? For 
example, would the potential harms discussed above be mitigated if 
reports on Form N-PORT for the first and second months were made public 
60 days (or a shorter or longer time period) after the end of each 
quarter, or 60 days (or a shorter or longer time period) after the end 
of each fund's fiscal year, thereby increasing the time lag of such 
information? If monthly information were to be provided quarterly or 
annually, how would that affect the benefits of such information to 
investors and other potential users?
     Would Form N-PORT contain the type of information that, if 
disclosed on a monthly basis, could reveal information that a fund 
would consider proprietary or confidential or that could place the fund 
at a competitive disadvantage? If so, please explain and provide 
examples, as applicable.
     Would restricting public disclosure of the information 
reported on Form N-PORT to information reported for the third month of 
each fund's fiscal quarter alleviate concerns about front-running or 
other possible harms that might be caused by making the monthly 
information reported on Form N-PORT public? Should we instead provide 
that all or a portion of the requested information on Form N-PORT be 
submitted in nonpublic reports to the Commission? If so, please 
identify the specific items that should remain nonpublic and explain 
why.
     Do commenters believe that our proposed 60-day delay in 
making the information public would be helpful in protecting against 
possible front running or free riding? Would a shorter delay (e.g., 45 
or 30 days) or a longer delay (e.g., 70 days) be more appropriate? If 
so, why? For example, should we provide for a longer delay to prevent 
investors other than shareholders from trading along with the fund, to 
the possible detriment of the fund and its shareholders? Alternately, 
would a shorter delay, for example 30 days, better serve the needs of 
shareholders

[[Page 33615]]

and potential fund investors while still appropriately protecting the 
interests of funds?
     Should information be reported on Form N-PORT as of the 
third month of each fund's fiscal year, as proposed, or should we 
instead require a uniform public reporting schedule for all funds to 
facilitate comparison of information reported on Form N-PORT (e.g., 
March 31, June 30, September 30, and December 31)? To what extent would 
a uniform public disclosure schedule increase burdens to funds, given 
that one of the purposes for selecting fiscal year-ends that vary from 
calendar year-ends is to spread out filing burdens throughout the year 
for fund complexes?

B. Rescission of Form N-Q and Amendments to Certification Requirements 
of Form N-CSR

1. Rescission of Form N-Q
    Along with our proposal to adopt new Form N-PORT, we are proposing 
to rescind Form N-Q. Management companies other than SBICs are 
currently required to report their complete portfolio holdings as of 
the end of their first and third fiscal quarters on Form N-Q. Because 
the data reported on proposed Form N-PORT would include the portfolio 
holdings information contained in reports on Form N-Q, we believe that 
Form N-PORT, if adopted, would render reports on Form N-Q unnecessarily 
duplicative. Therefore, we believe it is appropriate to rescind Form N-
Q rather than require funds to report similar information to the 
Commission on two separate forms.
    However, as noted earlier, we believe that individual investors and 
other potential users might prefer that portfolio holdings schedules 
for the first and third quarters continue to be presented using the 
form and content specified by Regulation S-X, which investors are 
accustomed to viewing in reports on Form N-Q and in shareholder 
reports. Therefore, we are proposing to require that, for reports on 
Form N-PORT for the first and third quarters of a fund's fiscal year, 
the fund would attach its complete portfolio holdings for that fiscal 
quarter, presented in accordance with the schedules set forth in 
Sec. Sec.  210.12-12 to 12-14 of Regulation S-X [17 CFR 210.12-12--12-
14]. Also, as discussed below, proposed new rule 30e-3 would allow 
funds to satisfy requirements to transmit reports to shareholders by 
posting on a Web site those shareholder reports and these same 
portfolio schedules for the funds' first and third quarters.\177\
---------------------------------------------------------------------------

    \177\ See infra Part II.D.
---------------------------------------------------------------------------

2. Amendments to Certification Requirements of Form N-CSR
    In connection with the Commission's implementation of the Sarbanes-
Oxley Act of 2002, Form N-Q and Form N-CSR require the principal 
executive and financial officers of the fund to make quarterly 
certifications relating to (1) the accuracy of information reported to 
the Commission, and (2) disclosure controls and procedures and internal 
control over financial reporting.\178\ Rescission of Form N-Q would 
eliminate certifications as to the accuracy of the portfolio schedules 
reported for the first and third fiscal quarters.
---------------------------------------------------------------------------

    \178\ See Item 3 of Form N-Q (certification requirement); Form 
N-Q Adopting Release, supra note 152; Item 12 of Form N-CSR 
(certification requirement); Certification of Management Investment 
Company Shareholder Reports and Designation of Certified Shareholder 
Reports as Exchange Act Periodic Reporting Forms; Disclosure 
Required by Sections 406 and 407 of the Sarbanes-Oxley Act of 2002, 
Investment Company Act Release No. 24914 (Jan. 27, 2003) [68 FR 5348 
(Feb. 3, 2003)] (adopting release for Form N-CSR).
---------------------------------------------------------------------------

    Under today's proposal, the certifications as to the accuracy of 
the portfolio schedules reported for the second and fourth fiscal 
quarters on Form N-CSR would remain. However, we are proposing to amend 
the form of certification in Form N-CSR to require each certifying 
officer to state that he or she has disclosed in the report any change 
in the registrant's internal control over financial reporting that 
occurred during the most recent fiscal half-year, rather than the 
registrant's most recent fiscal quarter as currently required by the 
form.\179\ Lengthening the look-back of this certification to six 
months, so that the certifications on Form N-CSR for the semi-annual 
and annual reports would cover the first and second fiscal quarters and 
third and fourth fiscal quarters, respectively, would fill the gap in 
certification coverage that would otherwise occur once Form N-Q is 
rescinded. To the extent that certifications improve the accuracy of 
the data reported, removing such certifications could have negative 
effects on the quality of the data reported. Likewise, if the reduced 
frequency of the certifications affects the process by which controls 
and procedures are assessed, requiring such certifications semi-
annually rather than quarterly could reduce the effectiveness of the 
fund's disclosure controls and procedures and internal control over 
financial reporting are assessed. However, we expect such effects, if 
any, to be minimal because certifying officers would continue to 
certify portfolio holdings for the fund's second and fourth fiscal 
quarters and would further provide semi-annual certifications 
concerning disclosure controls and procedures and internal control over 
financial reporting that would cover the entire year.
---------------------------------------------------------------------------

    \179\ Proposed Item 11(b) of Form N-CSR; proposed paragraph 5(b) 
of certification exhibit of Item 11(a)(2) of Form N-CSR.
---------------------------------------------------------------------------

3. Request for Comment
    We request comments on the proposed rescission of Form N-Q and 
related rule and form amendments.
     Should we rescind Form N-Q, as we have proposed? Should we 
instead retain Form N-Q, and not require Regulation S-X compliant 
schedules to be attached to reports for the first and third fiscal 
quarters on Form N-PORT? Why or why not?
     Would the proposed amendments to the certification 
requirements in Form N-CSR be an appropriate substitute for the 
certification requirements in Form N-Q? Would the change from quarterly 
to semiannual certifications have an effect on the quality of funds' 
internal controls or on other costs associated with certifications? If 
so, are those changes appropriate?

C. Amendments to Regulation S-X

1. Overview
    As part of our larger effort to modernize the manner in which funds 
report holdings information to investors, today we are proposing 
amendments to Regulation S-X, which prescribes the form and content of 
financial statements required in registration statements and 
shareholder reports.\180\ As discussed above, many of the proposed 
amendments to Regulation S-X, particularly the amendments to the 
disclosures concerning derivative contracts, are similar to the 
proposed requirements concerning disclosures of derivatives that would 
be required on reports on proposed Form N-PORT. The proposed amendments 
to Regulation S-X would, among other things, require similar 
disclosures in a fund's financial

[[Page 33616]]

statements in its shareholder reports and, as applicable, Web site 
disclosures in order to provide investors, particularly individual 
investors, with clear and consistent disclosures across funds 
concerning fund investments in derivatives in a human-readable format, 
as opposed to the structured format of proposed Form N-PORT.
---------------------------------------------------------------------------

    \180\ See rule 1-01, et seq of Regulation S-X [17 CFR 210.1-01, 
et seq]. While ``funds'' are defined in the preamble as registered 
investment companies other than face amount certificate companies 
and any separate series thereof--i.e., management companies and 
UITs--we note that our proposed amendments to Regulation S-X apply 
to both registered investment companies and BDCs. See infra notes 
264 and 265. Therefore, throughout this section, when discussing 
fund reporting requirements in the context of our proposed 
amendments to Regulation S-X, we are also including changes to the 
reporting requirements for BDCs.
---------------------------------------------------------------------------

    As outlined below, we are proposing amendments to Articles 6 and 12 
of Regulation S-X that would: (1) Require new, standardized disclosures 
regarding fund holdings in open futures contracts, open forward foreign 
currency contracts, and open swap contracts,\181\ and additional 
disclosures regarding fund holdings of written and purchased option 
contracts; (2) update the disclosures for other investments, as well as 
reorganize the order in which some investments are presented; and (3) 
amend the rules regarding the general form and content of fund 
financial statements. Our amendments would also require prominent 
placement of disclosures regarding investments in derivatives in a 
fund's financial statements, rather than allowing such schedules to be 
placed in the notes to the financial statements. Finally, our 
amendments would require a new disclosure in the notes to the financial 
statements relating to a fund's securities lending activities.
---------------------------------------------------------------------------

    \181\ We recognize that under the federal securities laws, 
certain derivatives fall under the definition of securities 
notwithstanding, for purposes of our proposals to Regulation S-X, we 
expect funds to adhere to the requirements of the disclosure 
schedules for the relevant derivative investment, regardless of how 
it would be defined under the federal securities laws. See, e.g., 
proposed rule 12-13C of Regulation S-X (Open swap contracts).
---------------------------------------------------------------------------

    As discussed above, the proposed rules will renumber the current 
schedules in Article 12 of Regulation S-X and break out the disclosure 
of derivatives currently reported on Schedule 12-13 into separate 
schedules. These changes are summarized in Figure 1, below.

            Proposed Changes to Article 12 of Regulation S-X
------------------------------------------------------------------------
             Current rules                        Proposed rules
------------------------------------------------------------------------
12-12 (Investments in securities of      12-12 (Investments in
 unaffiliated issuers).                   securities of unaffiliated
                                          issuers).
12-12A (Investments--securities sold     12-12A (Investments--securities
 short).                                  sold short).
12-12B (Open option contracts written).  12-13 (Open option contracts
                                          written).*
12-12C (Summary schedule of investments  12-12B (Summary schedule of
 in securities of unaffiliated issuers).  investments in securities of
                                          unaffiliated issuers).*
12-13 (Investments other than            12-13A (Open futures
 securities).                             contracts).*
                                         12-13B (Open forward foreign
                                          currency contracts).*
                                         12-13C (Open swap contracts).*
                                         12-13D (Investments other than
                                          those presented in Sec.  Sec.
                                           210.12-12, 12-12A, 12-12B, 12-
                                          13, 12-13A, 12-13B, and 12-
                                          13C)*
12-14 (Investments in and advances to    12-14 (Investments in and
 affiliates).                             advances to affiliates).
------------------------------------------------------------------------
* Denotes new or renumbered schedules.

Figure 1
    We believe the proposed amendments will assist comparability among 
funds, and increase transparency for investors regarding a fund's use 
of derivatives and the liquidity of certain investments. We have 
endeavored to mitigate burdens on the industry by proposing to require 
similar disclosures both on Form N-PORT and in a fund's financial 
statements.\182\ As a further consideration, we believe that the 
amendments we are proposing today are generally consistent with how 
many funds are currently reporting investments (including derivatives), 
and other information according to current industry practices.
---------------------------------------------------------------------------

    \182\ See discussion supra Part II.A.2.g.iv.
---------------------------------------------------------------------------

2. Enhanced Derivatives Disclosures
    In 2011, as part of a wider effort to review the use of derivatives 
by management investment companies, we issued a concept release and 
request for comment on a range of issues.\183\ We received comment 
letters from a variety of stakeholders, including investors, fund 
groups, and third-party users of the information, who commented on a 
number of issues. Several commenters noted that holdings of derivative 
investments are not currently reported by funds in a consistent 
manner.\184\ Commenters also suggested that more disclosure on 
underlying risks was necessary, including more information on 
counterparty exposure and reporting relating to the notional amount of 
certain derivatives.\185\ Another commenter specifically requested that 
we revise Regulation S-X in order to keep ``financial reporting current 
with developments in the financial markets.'' \186\
---------------------------------------------------------------------------

    \183\ Derivatives Concept Release, supra note 7.
    \184\ Comments submitted in response to the Derivatives Concept 
Release are available at http://www.sec.gov/comments/s7-33-11/s73311.shtml. See Morningstar Derivatives Concept Release Comment 
Letter, supra note 58 (``This is because fund companies are not 
reporting derivative holdings in a consistent manner and are not 
reporting derivative holdings in a manner that identifies the 
underlying risk exposure.''); Comment Letter of Rydex[bond]SGI (Nov. 
7, 2011) (``Rydex[bond]SGI Derivatives Concept Release Comment 
Letter'') (``However, the quality and extent of such derivatives 
disclosure still varies greatly from registrant to registrant.''). 
Commenters to the FSOC Notice made similar observations. See, e.g., 
Americans for Financial Reform FSOC Notice Comment Letter, supra 
note 116 (``While full position-level data on securities portfolios 
is available periodically for registered funds, current derivatives 
disclosure requirements appear very poor.''); Systematic Risk 
Council FSOC Notice Comment Letter, supra note 116 (``While most 
managed funds do not employ leverage to the same degree that banks 
do, we encourage regulators to consider carefully whether there are 
potential improvements to the current data collection regime [ ] 
that would allow regulators to track the presence and concentrations 
of leverage in the asset management industry, particularly as it 
arises from the use of derivatives . . . .'').
    \185\ See Morningstar Derivatives Concept Release Comment 
Letter, supra note 58 (``Notional exposure . . . is a better measure 
of risk''); Comment Letter of Oppenheimer Funds to Derivatives 
Concept Release (Nov. 7, 2011) (``Instead, counterparty risks 
incurred through the investments in derivatives . . . should be 
considered in a new SEC rulemaking that is primarily disclosure 
based.''); Rydex[bond]SGI Derivatives Concept Release Comment 
Letter, supra note 184 (recommending that funds that invest in 
derivatives should disclose notional exposure for non-exchanged 
traded derivatives and a fund's exposure to counterparties). 
Commenters to the FSOC Notice made similar observations relating to 
counterparty disclosures. See, e.g., Americans for Financial Reform 
FSOC Notice Comment Letter, supra note 116 (``Counterparty data is 
also often not available.''); Systematic Risk Council Comment 
Letter, supra note 116 (discussing the need to have information 
about investment vehicles that hold bank liabilities).
    \186\ Comment Letter of Stephen A. Keen to Derivatives Concept 
Release (Nov. 8, 2011).
---------------------------------------------------------------------------

    While the rules under Regulation S-X establish general requirements 
for portfolio holdings disclosures in fund financial statements, they 
do not prescribe standardized information to be included for derivative 
instruments

[[Page 33617]]

other than options. Currently, rule 12-13 of Regulation S-X 
(Investments other than securities) requires limited information on the 
fund's investments other than securities--that is, the investments not 
disclosed under rules 12-12, 12-12A, 12-12B, and 12-14.\187\ Thus, 
under Regulation S-X, a fund's disclosures of open futures contracts, 
open forward foreign currency contracts, and open swap contracts are 
generally reported in accordance with rule 12-13.
---------------------------------------------------------------------------

    \187\ The schedule to rule 12-13 requires disclosure of: (1) 
Description; (2) balance held at close of period--quantity; and (3) 
value of each item at close of period. See rule 12-13 of Regulation 
S-X.
---------------------------------------------------------------------------

    To address issues of inconsistent disclosures and lack of 
transparency as to derivative instruments, we are proposing to amend 
Regulation S-X by proposing new schedules for open futures contracts, 
open forward foreign currency contracts, and open swap contracts. We 
are also proposing to modify the current disclosure requirements for 
purchased and written option contracts. Finally, we are proposing to 
include certain instructions regarding the presentation of derivatives 
contracts that are generally consistent with instructions that are 
currently included, or that we are proposing to add, in either rule 12-
12 (Investments in securities of unaffiliated issuers) or rule 12-13 
(Investments other than securities).\188\
---------------------------------------------------------------------------

    \188\ See, e.g., proposed rule 12-12, n.2 of Regulation S-X 
(instructions for categorizing investments); n.10 (disclosure of 
illiquid securities); n.12 (disclosure of costs basis for Federal 
income tax purposes); see also rule 12-13, n.7 of Regulation S-X 
(current requirement for disclosure of costs basis for Federal 
income tax purposes).
---------------------------------------------------------------------------

a. Open Option Contracts Written--Rule 12-13 (Current Rule 12-12B) and 
Options Purchased
    Our proposed rule would modify the current disclosure of written 
option contracts.\189\ First, we are adding new columns to the schedule 
for written option contracts that would require a description of the 
contract (replacing the current column for name of the issuer), the 
counterparty to the transaction,\190\ and the contract's notional 
amount.\191\ Thus, under the new rule 12-13, for each open written 
options contract, funds would be required to disclose: (1) Description; 
(2) counterparty; (3) number of contracts; (4) notional amount; (5) 
exercise price; (6) expiration date; and (7) value.\192\ Second, we are 
proposing to add an instruction to current rule 12-12, which is the 
schedule on which purchased options are required to be disclosed, that 
would require funds to provide all information required by proposed 
rule 12-13 for written option contracts.\193\
---------------------------------------------------------------------------

    \189\ Under current rule 12-12B, funds are required to report, 
for open option contracts, the name of the issuer, number of 
contracts, exercise price, expiration date, and value. See rule 12-
12B of Regulation S-X [17 CFR 210.12-12B].
    \190\ See supra note 116. This information should assist 
investors in identifying and monitoring the counterparty risks 
associated with a fund's investments in over-the-counter 
derivatives.
    \191\ While rule 12-13 is specific to open option contracts 
written, the same disclosures also apply for purchased options as 
required by proposed instruction 3 to rule 12-12. See also proposed 
rule 12-12B, n.5 of Regulation S-X.
    \192\ See proposed rule 12-13 of Regulation S-X.
    \193\ See proposed rule 12-12, n.3 of Regulation S-X.
---------------------------------------------------------------------------

    We are also proposing for options where the underlying investment 
would otherwise be presented in accordance with another provision of 
rule 12-12 or proposed rules 12-13 through 12-13D that the presentation 
of that investment must include a description, as required by those 
provisions.\194\ Thus, if another investment contains some sort of 
optionality (e.g., put or call features), the investment's disclosure 
must include both a description of the optionality (as required by 
proposed rule 12-13), and a description of the underlying investments, 
as required by the applicable provisions of proposed rules 12-12, 12-
12A, and 12-13 through 12-13D. For example, reporting for a swaption 
would include the disclosures required under both the swaps rule 
(proposed rule 12-13C) and the options rule (proposed rule 12-13).
---------------------------------------------------------------------------

    \194\ See proposed rules 12-12, n.3; 12-12B, n.5; and 12-13, n.3 
of Regulation S-X.
---------------------------------------------------------------------------

    As required in proposed Form N-PORT,\195\ in the case of an option 
contract with an underlying investment that is an index or basket of 
investments whose components are publicly available on a Web site as of 
the fund's balance sheet date,\196\ or if the notional amount of the 
holding does not exceed one percent of the fund's NAV as of the close 
of the period, we are proposing that the fund provide information 
sufficient to identify the underlying investment, such as a 
description.\197\ If the underlying investment is an index whose 
components are not publicly available on a Web site as of the fund's 
balance sheet date, or is based upon a custom basket of investments, 
and the notional amount of the option contract exceeds one percent of 
the fund's NAV as of the close of the period, the fund would list 
separately each of the investments comprising the index or basket of 
investments.\198\ We believe that disclosure of the underlying 
investments of an option contract is an important element to assist 
investors in understanding and evaluating the full risks of the 
investment. We are also proposing to include a similar instruction for 
swap contracts.\199\ The disclosures in proposed instruction 3 would 
provide investors with more transparency into both the terms of the 
underlying investment and the terms of the option.
---------------------------------------------------------------------------

    \195\ See Item C.11.c.iii of proposed Form N-PORT.
    \196\ Under the proposal, the components would be required to be 
publicly available on a Web site as of the fund's balance sheet date 
at the time of transmission to stockholders for any report required 
to be transmitted to stockholders under rule 30e-1. The components 
would be required to remain publicly available on a Web site as of 
the fund's balance sheet date until 70 days after the fund's next 
fiscal year-end. For example, components of an index underlying an 
option contract for a fund's 12/31/14 annual report must be made 
publicly available on a Web site as of 12/31/14 by the time that the 
12/31/14 annual report is transmitted to stockholders. The 
components must remain publicly available until 3/10/16.
    \197\ See proposed rule 12-13, n.3 of Regulation S-X. See supra 
note 120 and accompanying text (discussing the rationale for similar 
proposed requirements in Form N-PORT).
    \198\ See id.
    \199\ See proposed rule 12-13C, n.3 of Regulation S-X.
---------------------------------------------------------------------------

    We are also proposing several instructions to rule 12-13 and the 
other rules we are proposing concerning derivatives holdings (e.g., 
open futures contracts, open swap contracts) in order to maintain 
consistency with the disclosures required by current rule 12-13. 
Current rule 12-13 contains an instruction requiring identification of 
``each investment not readily marketable.'' \200\ We are proposing to 
modify this requirement in proposed rule 12-13 and the other rules 
concerning derivatives holdings in order to increase transparency into 
the marketability of, and observability of valuation inputs for, a 
fund's investments by requiring separate identification of investments 
that are restricted securities, as well as those investments that were 
fair valued using significant unobservable inputs. Thus, we are 
proposing to require funds to indicate if an investment cannot be sold 
because of restrictions or conditions applicable to the 
investment.\201\ We are also proposing to require funds to indicate if 
a security's fair value was

[[Page 33618]]

determined using significant unobservable inputs.\202\
---------------------------------------------------------------------------

    \200\ See rule 12-13, n.4 of Regulation S-X (``The term 
`investment not readily marketable' shall include investments for 
which there is no independent publicly quoted market and investments 
which cannot be sold because of restrictions or conditions 
applicable to the investment or the company.'').
    \201\ See proposed rule 12-13, n.6 of Regulation S-X; see also 
proposed rules 12-13A, n.4; 12-13B, n.2; 12-13C, n.5; and 12-13D, 
n.6 of Regulation S-X.
    \202\ See proposed rule 12-13, n.7 of Regulation S-X; see also 
proposed rules 12-13A, n.5; 12-13B, n.3; 12-13C, n.6; and 12-13D, 
n.7 of Regulation S-X. These instructions would require funds to 
identify each investment categorized in Level 3 of the fair value 
hierarchy in accordance with ASC Topic 820. See ASC 820-10-20 
(defining ``level 3 inputs'' as ``unobservable inputs for the asset 
or liability''); see also ASC 820-10-35-37A (``In some cases, the 
inputs used to measure the fair value of an asset or a liability 
might be categorized within different levels of the fair value 
hierarchy. In those cases, the fair value measurement is categorized 
in its entirety in the same level of the fair value hierarchy as the 
lowest level input that is significant to the entire measurement.'') 
(emphasis added); see also discussion supra note 101.
---------------------------------------------------------------------------

    Current rule 12-13 likewise contains an instruction to include tax 
basis disclosures for investments other than securities.\203\ We are 
extending this requirement to proposed rule 12-13, as well as the other 
rules concerning derivatives holdings.\204\ We believe that this type 
of tax basis information is important to investors in investment 
companies, which are generally pass-through entities pursuant to 
Subchapter M of the Internal Revenue Code.\205\
---------------------------------------------------------------------------

    \203\ See rule 12-13, n.7 of Regulation S-X.
    \204\ See proposed rule 12-13, n.10 of Regulation S-X; see also 
proposed rules 12-13A, n.8; 12-13B, n.6; 12-13C, n.9; and 12-13D, 
n.11 of Regulation S-X.
    \205\ See 26 U.S.C. 851, et seq.
---------------------------------------------------------------------------

    In order to provide greater transparency to investors into which 
investments are deemed illiquid, we are also proposing to require funds 
to identify illiquid investments.\206\ Liquidity is an important 
consideration for a fund's investors in understanding the risk exposure 
of a fund. For example, in times of market stress, illiquid investments 
may not be readily sold at their approximate value. Indicating which 
investments are illiquid would allow an investor to understand which 
holdings in a fund are likely to be sold at a discount if a portion of 
the fund's investments must be sold to meet cash needs, such as 
redemptions or distributions.
---------------------------------------------------------------------------

    \206\ See proposed rule 12-13, n.8 of Regulation S-X; see also 
proposed rules 12-13A, n.6; 12-13B, n.4; 12-13C, n.7; and 12-13D, 
n.8 of Regulation S-X. See generally 1992 Release, supra note 100. 
As previously stated, the staff is reviewing possible 
recommendations to the Commission for rulemaking to update liquidity 
standards for mutual funds and ETFs, which may result in changes to 
the Commission's current guidance on this issue. See supra note 100.
---------------------------------------------------------------------------

    Proposed rule 12-13 would also include other new instructions.\207\
---------------------------------------------------------------------------

    \207\ Instruction 2 would add ``description'' and 
``counterparty'' to the organizational categories of options 
contracts that must be listed separately. See proposed rule 12-13, 
n.2 of Regulation S-X. Instruction 4 would clarify that the fund 
need not include counterparty information for exchange-traded 
options. See proposed rule 12-13, n.4 of Regulation S-X.
---------------------------------------------------------------------------

b. Open Futures Contracts--New Rule 12-13A
    We are proposing new rule 12-13A, which would require standardized 
reporting of open futures contracts.\208\ For open futures contracts, 
funds are currently required to report under rule 12-13 a description 
of the futures contract (including its expiration date), the number of 
contracts held (under the balance held--quantity column), and any 
unrealized appreciation and depreciation (under the value column).\209\ 
In order to allow investors to better understand the economics of a 
fund's investment in futures contracts, our proposal would also require 
funds to report notional amount and value.\210\ Therefore, under the 
proposal, funds with open futures contracts would report: (1) 
Description; (2) number of contracts; (3) expiration date; (4) notional 
amount; (5) value; and (6) unrealized appreciation and 
depreciation.\211\ In addition, instruction 7 would include the new 
requirement that funds should reconcile the total of Column F 
(unrealized appreciation/depreciation) to the total variation margin 
receivable or payable on the related balance sheet.\212\ We believe 
that proposed instruction 7 would improve transparency by linking the 
information in the schedule of open futures contracts with the related 
balance sheet.
---------------------------------------------------------------------------

    \208\ See proposed rule 12-13A of Regulation S-X.
    \209\ See rule 12-13 of Regulation S-X.
    \210\ See proposed rule 12-13A, columns D and E of Regulation S-
X.
    \211\ See proposed rule 12-13A of Regulation S-X.
    \212\ See proposed rule 12-13A, n.7 of Regulation S-X.
---------------------------------------------------------------------------

    As discussed above, our proposal also contains certain new 
instructions for rule 12-13A that are generally the same across all of 
the schedules for derivatives contracts.\213\ Based on staff review of 
disclosures of open futures contracts of funds, we believe that these 
proposed disclosures are generally consistent with current industry 
practice.\214\
---------------------------------------------------------------------------

    \213\ Instruction 1 would require funds to organize long 
purchases of futures contracts and futures contracts sold short 
separately. See proposed rule 12-13A, n.1 of Regulation S-X. 
Instruction 2 would require funds to list separately futures 
contracts where the descriptions or expiration dates differ. See 
proposed rule 12-13A, n.2 of Regulation S-X. Instruction 3 would 
clarify that the description should include the name of the 
reference asset or index. See proposed rule 12-13A, n.3 of 
Regulation S-X. Instruction 4 would require the fund to indicate 
each investment which cannot be sold because of restrictions or 
conditions applicable to the investment. See proposed rule 12-13A, 
n.4 of Regulation S-X. Instruction 5 would require the fund to 
indicate each investment whose fair value was determined using 
significant unobservable inputs. See proposed rule 12-13A, n.5 of 
Regulation S-X. Instruction 6 would require the fund to identify 
each illiquid investment. See proposed rule 12-13A, n.6 of 
Regulation S-X. Instruction 8 would extend current rule 12-13's tax 
basis disclosure to disclosures of open futures contracts. See 
proposed rule 12-13A, n.8 of Regulation S-X.
    \214\ We understand that many funds disclose either value or 
notional amount for open futures contracts, but may not disclose 
both. Our proposal would require disclosure of both value and 
notional amount.
---------------------------------------------------------------------------

c. Open Forward Foreign Currency Contracts--New Rule 12-13B
    We are also proposing new rule 12-13B, which would require 
standardized disclosures for open forward foreign currency 
contracts.\215\ Currently, under rule 12-13, funds are required to 
report a description of the contract (including a description of what 
is to be purchased and sold under the contract and the settlement 
date), the amount to be purchased and sold on settlement date (under 
the balance held--quantity column), and any unrealized appreciation or 
depreciation (under the value column).\216\ In order to allow investors 
to better understand counterparty risk for forward foreign currency 
contracts, our proposal would additionally require funds to disclose 
the counterparty to each transaction.\217\ As proposed, funds holding 
open forward foreign currency contracts would therefore report the: (1) 
Amount and description of currency to be purchased; (2) amount and 
description of currency to be sold; (3) counterparty; (4) settlement 
date; and (5) unrealized appreciation/depreciation.\218\ Based on staff 
review of disclosures of open forward foreign currency contracts of 
funds, we believe that these proposed disclosures are generally 
consistent with current industry practice. Our proposal would also 
include certain new instructions to the schedule that are similar to 
the other derivatives disclosure requirements we are proposing 
today.\219\
---------------------------------------------------------------------------

    \215\ See proposed rule 12-13B of Regulation S-X.
    \216\ See rule 12-13 of Regulation S-X.
    \217\ See proposed rule 12-13B, column C of Regulation S-X.
    \218\ See proposed rule 12-13B of Regulation S-X.
    \219\ Instruction 1 would require the fund to separately 
organize forward foreign currency contracts where the description of 
currency purchased, currency sold, counterparties, or settlement 
dates differ. See proposed rule 12-13B, n.1 of Regulation S-X. 
Instruction 2 would require the fund to indicate each investment 
which cannot be sold because of restrictions or conditions 
applicable to the investment. See proposed rule 12-13B, n.2 of 
Regulation S-X. Instruction 3 would require the fund to indicate 
each investment whose fair value was determined using significant 
unobservable inputs. See proposed rule 12-13B, n.3 of Regulation S-
X. Instruction 4 would require the fund to identify each illiquid 
investment. See proposed rule 12-13B, n.4 of Regulation S-X. 
Instruction 5 would clarify that Column E (unrealized appreciation/
depreciation) should be totaled and agree with the total of 
correlative amounts shown on the related balance sheet. See proposed 
rule 12-13B, n.5 of Regulation S-X. Instruction 6 would extend 
current rule 12-13's tax basis disclosure to disclosures of open 
forward foreign currency contracts. See proposed rule 12-13B, n.6 of 
Regulation S-X.

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

[[Page 33619]]

d. Open Swap Contracts--New Rule 12-13C
    We are also proposing new rule 12-13C, which would require 
standardized reporting of fund positions in open swap contracts.\220\ 
Under rule 12-13, funds currently report description (including a 
description of what is to be paid and received by the fund and the 
contract's maturity date), notional amount (under balance held--
quantity column), and any unrealized appreciation or depreciation 
(under the value column).\221\ Our proposal would additionally require 
funds to report the counterparty to each transaction (except for 
exchange-traded swaps), the contract's value, and any upfront payments 
or receipts.\222\ This additional information would allow investors to 
both better understand the economics of the transaction, as well as its 
associated risks.\223\ Thus, as proposed, funds would report for each 
swap the: (1) Description and terms of payments to be received from 
another party; (2) description and terms of payments to be paid to 
another party; (3) counterparty; (4) maturity date; (5) notional 
amount; (6) value; (7) upfront payments/receipts; and (8) unrealized 
appreciation/depreciation.\224\ We are proposing these categories of 
information in an effort to increase transparency of swap contracts, 
while maintaining enough flexibility for the variety of swap products 
that currently exist and future products that might come to 
market.\225\
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    \220\ See proposed rule 12-13C of Regulation S-X.
    \221\ See rule 12-13 of Regulation S-X.
    \222\ See proposed rule 12-13C, columns C, F, and G of 
Regulation S-X.
    \223\ For example, upfront payments disclose whether cash was 
paid or received when entering into a swap contract, allowing 
investors to better understand the initial cost of the investment, 
if any.
    \224\ See proposed rule 12-13C of Regulation S-X. The 
description and terms of payments to be paid and received (and other 
information) to and from another party should reflect the investment 
owned by the fund and allow an investor to understand the full 
nature of the transaction.
    \225\ See id. at n.1 (requiring the fund to list each major 
category of swaps by descriptive title); n.2 (requiring the fund to 
list separately each swap where description, counterparty, or 
maturity dates differ within each major category).
---------------------------------------------------------------------------

    While instruction 3 of proposed rule 12-13C provides specific 
examples for the more common types of swap contracts (e.g., credit 
default swaps, interest rate swaps, and total return swaps), we 
recognize that other types of swaps exist (e.g., currency swaps, 
commodity swaps, variance swaps, and subordinated risk swaps).\226\ For 
example, a cross-currency swap has two notional amounts, one for the 
currency to be received and one for the currency to be paid. For a 
cross-currency swap, funds would report for purposes of Column A of 
proposed rule 12-13C, a description of the interest rate to be received 
and the notional amount that the calculation of interest to be received 
is based upon. Column B of proposed rule 12-13C would include a 
description of the interest rate to be paid and the notional amount 
that the calculation of interest to be paid is based upon. Column E 
would include both notional amounts and the currency in which each is 
denominated, or the same information could be presented in two separate 
columns.
---------------------------------------------------------------------------

    \226\ See proposed rule 12-13C, n.3 of Regulation S-X.
---------------------------------------------------------------------------

    As required in our proposed disclosures for open option contracts 
\227\ and in proposed Form N-PORT,\228\ in the case of a swap with a 
referenced asset that is an index whose components are publicly 
available on a Web site as of the fund's balance sheet date, or if the 
notional amount of the holding does not exceed one percent of the 
fund's NAV as of the close of the period, we are proposing that the 
fund provide information sufficient to identify the referenced asset, 
such as a description.\229\ If the referenced asset is an index whose 
components are not publicly available on a Web site as of the fund's 
balance sheet date, or is based upon a custom basket of investments, 
and the notional amount of the holding exceeds one percent of the 
fund's NAV as of the close of the period, the fund would list 
separately each of the investments comprising the referenced 
assets.\230\ As with underlying investments for option contracts, we 
believe that disclosure of the underlying referenced assets of a swap 
would assist investors in better understanding and evaluating the full 
risks of investments in swaps.
---------------------------------------------------------------------------

    \227\ See proposed rule 12-13, n.3 of Regulation S-X.
    \228\ See Item C.11.f.i of proposed Form N-PORT.
    \229\ See proposed rule 12-13C, n.3 of Regulation S-X.
    \230\ See id.
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    For swaps which pay or receive financing payments, funds would 
disclose variable financing rates in a manner similar to disclosure of 
variable interest rates on securities in accordance with instruction 4 
to proposed rule 12-12.\231\ Our proposal would also include other 
instructions to this rule that are similar across all of our proposed 
rules for derivatives contracts.\232\
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    \231\ See proposed rule 12-13C, n.3; and 12-12, n.4 of 
Regulation S-X.
    \232\ Instruction 4 would clarify that the fund need not list 
counterparty for exchange traded swaps. See proposed rule 12-13C, 
n.4 of Regulation S-X. Instruction 5 would require the fund to 
indicate each investment which cannot be sold because of 
restrictions or conditions applicable to the investment. See 
proposed rule 12-13C, n.5 of Regulation S-X. Instruction 6 would 
require the fund to indicate each investment whose fair value was 
determined using significant unobservable inputs. See proposed rule 
12-13C, n.6 of Regulation S-X. Instruction 7 would require funds to 
identify each illiquid investment. See proposed rule 12-13C, n.7 of 
Regulation S-X. Instruction 8 would require that columns F (value), 
G (upfront payments/receipts), and H (unrealized appreciation/
depreciation) be totaled and agree with the totals of their 
respective amounts shown on the related balance sheet. See proposed 
rule 12-13C, n.8 of Regulation S-X. Instruction 9 would extend 
current rule 12-13's tax basis disclosure to disclosures of swap 
contracts. See proposed rule 12-13C, n.9 of Regulation S-X.
---------------------------------------------------------------------------

e. Other Investments -- Rule 12-13D (Current Rule 12-13)
    We are also proposing to amend current rule 12-13 and, for 
organization and consistency, renumber it as proposed rule 12-13D. 
Proposed rule 12-13D is intended to continue, as is currently required 
by rule 12-13, to be the schedule by which funds report investments not 
otherwise required to be reported pursuant to Article 12.\233\ As 
proposed, rule 12-13D would require reporting of: (1) Description; (2) 
balance held at close of period-quantity; and (3) value of each item at 
close of period.\234\ We expect that funds would report, among other 
holdings, investments in physical holdings, such as real estate or 
commodities, pursuant to proposed rule 12-13D. As discussed above, our 
proposal would also modify current rule 12-13's requirement that funds 
disclose ``each investment not readily marketable'' \235\ in favor of 
disclosures concerning whether an investment is restricted and if an 
investment's fair value was determined using significant unobservable 
inputs.\236\ Our proposal would also include certain new instructions 
to the schedule that are generally the same across all the schedules 
for derivatives contracts.\237\
---------------------------------------------------------------------------

    \233\ See proposed rule 12-13D of Regulation S-X.
    \234\ Id.
    \235\ See rule 12-13, n.4 of Regulation S-X.
    \236\ See proposed rule 12-13D, n.6 of Regulation S-X (requiring 
the fund to indicate each investment which cannot be sold because of 
restrictions or conditions applicable to the investment); n.7 
(requiring the fund to indicate each issue of securities whose fair 
value was determined using significant unobservable inputs).
    \237\ Instruction 1 would require the fund to organize each 
investment separately where any portion of the description differs. 
See proposed rule 12-13D, n.1 of Regulation S-X. Instruction 2 would 
require the fund to categorize the schedule by the type of 
investment, and related industry, country, or geographic region, as 
applicable. See proposed rule 12-13D, n.2 of Regulation S-X. 
Instruction 3 would require that the description of the asset 
include information sufficient for a user to understand the nature 
and terms of the investment. See proposed rule 12-13D, n.3 of 
Regulation S-X. Instruction 8 would require the fund to identify 
each illiquid investment. See proposed rule 12-13D, n.8 of 
Regulation S-X.

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[[Page 33620]]

    We request comment on our proposed amendments to rules 12-13 
through 12-13D of Regulation S-X:
     Many of our proposed portfolio holdings disclosure 
requirements in Article 12 conform with similar requirements on 
proposed Form N-PORT. Are our proposed amendments to Article 12 
appropriate for fund financial statements? Is there information that is 
currently proposed in Form N-PORT, but not in Article 12, that would 
benefit investors? For example, to the extent that proposed Form N-PORT 
instructs filers to report the country code that corresponds to the 
country of investment or issuer based on the concentrations of the risk 
and economic exposure of the investments, or, if different, the country 
where the issuer is organized, should those same instructions be 
integrated into Regulation S-X to standardize how funds report that 
information in their financial statements and in Form N-PORT? \238\
---------------------------------------------------------------------------

    \238\ See supra note 104 and accompanying and following text 
(discussing how funds would report country codes for portfolio 
investments on Form N-PORT).
---------------------------------------------------------------------------

     Are there other categories of investments not specifically 
covered in Article 12 that should be specifically addressed in a new 
rule or directly addressed in rule 12-13D?
     To what extent are proposed rules 12-13 through 12-13D 
consistent with industry practices? How are our proposed amendments 
different? Are there other industry practices that we should include in 
our proposal with respect to the disclosure of derivative investments?
     The schedules to rules 12-13 through 12-13D use the term 
``description'' to require funds to disclose the information sufficient 
for a user of financial information to identify the investment. Should 
the instructions to any of those rules be enhanced or modified to 
clarify what is meant by the term ``description?'' If so, how should 
these be enhanced or modified?
     The schedules to rules 12-13 (Open option contracts 
written), 12-13B (Open forward foreign currency contracts), 12-13C 
(Open swap contracts), and 12-13D (Other investments) would require 
disclosure of the counterparty to the transaction for non-exchange 
traded instruments. Should we, as proposed, require disclosure of the 
counterparty to certain transactions? Should the exchange or clearing 
member be disclosed for exchange-traded derivatives? Are there any 
additional counterparty or exchange risks that should be disclosed? If 
so, why? Are there any confidentiality or other concerns with requiring 
the disclosure of counterparties?
     We request comment on our proposed amendments to rule 12-
13 (Open option contracts written). Should we require different or 
additional information about these contracts? Should any of the 
proposed information requirements be excluded? Is it appropriate to 
require disclosure of ``notional amount'' for option contracts? Is this 
metric useful to investors? Should we require the disclosures of open 
option contracts written to be grouped or subtotaled? For example, 
should we require over-the-counter option contracts to be grouped by 
counterparty?
     As proposed, rule 12-13 would require disclosure of each 
option contract with an underlying investment that is an index or 
basket of investments whose components are not publicly available on a 
Web site and the notional amount of the holding exceeds one percent of 
the NAV of the fund. Are there better alternatives to disclose the 
underlying investments for an options contract if it consists of a 
custom basket of securities? If so, what alternatives and why? To the 
extent such indices are proprietary or subject to licensing agreements, 
what would be the effect of this requirement? For example, would funds 
incur costs for amending licensing agreements? Would index providers be 
unwilling to amend existing licensing agreements? If so, how would this 
impact funds that make such investments and the marketplace generally? 
Are there other concerns about disclosing the components of proprietary 
indices? Should we alter this requirement, and if so how? Is our 
exceeding one percent of the NAV disclosure threshold appropriate? 
Should there be a different disclosure threshold applied to an option 
contract's underlying investments? If so, what threshold and why? For 
example, should there be a disclosure threshold applied to individual 
holdings (e.g., if the notional amount of a single underlying 
investment in a custom basket is less than a certain percentage of a 
fund's net assets)? Should we use a different percentage for the 
disclosure threshold, such as exceeding five percent of the NAV? 
Alternatively, would summary disclosure be adequate to inform 
investors, similar to instruction 3 of rule 12-12C, which requires 
disclosure of the 50 largest issues and any other issue the value of 
which exceeded one percent of net asset value of the fund as of the 
close of the period? If so, how should such a disclosure be handled? If 
the reference asset is a modified version of an index whose components 
are publicly available on a Web site as of the fund's balance sheet 
date, for example a version that is customized to exclude certain 
issuers that the fund is restricted from owning, would requiring a 
narrative of those modifications be preferable to funds and investors 
rather than requiring each holding of the modified index to be listed?
     We request comment on proposed rule 12-13A (Open futures 
contracts). Should we require different or additional information about 
these contracts? Should any of the proposed information requirements be 
excluded? Our proposed rule would require disclosure of notional amount 
and value on open futures contracts. Should we require disclosure of 
notional amount for futures contracts? Should we require disclosure of 
value for futures contracts? Should we require the disclosures of open 
futures contracts to be grouped or subtotaled? If so, how? For example, 
should we require open futures contracts to be organized by country of 
issuance?
     We request comment on proposed rule 12-13B (Open forward 
foreign currency contracts). Should we require different or additional 
information about these contracts? Should any of the proposed 
information requirements be excluded? Rule 12-13B, as proposed, is 
limited to forward foreign currency contracts. Are there other types of 
forwards that should be addressed in this section that would not 
otherwise be presented as other derivative investments, such as swaps? 
Should we require the disclosures of open forward foreign currency 
contracts to be grouped or subtotaled? If so, how? For example, should 
we require open forward foreign currency contracts to be organized by 
currency or type of transaction (e.g., purchased or sold U.S. dollars)?
     We request comment on proposed rule 12-13C (Open swap 
contracts). Should we require different or additional information about 
these contracts? Should any of the proposed information requirements be 
excluded? Instruction 1 to proposed rule 12-13C requires the schedule 
to be organized by descriptive title (e.g., credit default swaps, 
interest rate swaps). Should we require additional subgrouping of the 
schedules beyond what is already required? For example, should we

[[Page 33621]]

require over-the-counter swaps to be grouped by counterparty?
     Instruction 3 of proposed rule 12-13C contains examples of 
information that could be included for credit default swaps, interest 
rate swaps, and total return swaps. Is the example contained in 
proposed rule 12-13C adequate? Is there any other information that 
should be disclosed as part of the description for credit default 
swaps, interest rate swaps, and total return swaps? Are there other 
types of swaps that should be included as examples within proposed rule 
12-13C? If so, what information should be included in the example?
     As proposed, rule 12-13C would require disclosure of each 
investment with a referenced asset that is an index whose components 
are not periodically publicly available on a Web site and the notional 
amount of the holding exceeds one percent of the NAV of the fund. Are 
there better alternatives to disclose the underlying assets of a swap 
if it consists of a custom basket of securities? If so, what 
alternative and why? To the extent such indices are proprietary or 
subject to licensing agreements, what would be the effect of this 
requirement? For example, would funds incur costs for amending 
licensing agreements? Would index providers be unwilling to amend 
existing licensing agreements? If so, how would this impact funds that 
make such investments and the marketplace generally? Are there other 
concerns about disclosing the components of proprietary indices? Should 
we alter this requirement, and if so how? Is our exceeding one percent 
of the NAV disclosure threshold appropriate? Should there be a 
different disclosure threshold applied to a swap's referenced assets? 
If so, what threshold and why? For example, should there be a 
disclosure threshold applied to individual holdings (e.g., if the 
notional amount of a single underlying investment in a custom basket is 
less than a certain percentage of a fund's net assets)? Should we use a 
different percentage for the disclosure threshold, such as exceeding 
five percent of the NAV? Alternatively, would summary disclosure be 
adequate to inform investors, similar to instruction 3 of rule 12-12C, 
which requires disclosure of the 50 largest issues and any other issue 
the value of which exceeded one percent of net asset value of the fund 
as of the close of the period? If so, how should such a disclosure be 
handled? Should we include this disclosure requirement for other 
investments? For example, should we require funds to disclose the 
referenced asset for futures contracts or forward foreign currency 
contracts if their underlying investments are composed of an index or 
custom basket of securities?
     We request comment on our proposed amendments in rule 12-
13D (Investments other than those presented in rules 12-12, 12-12A, 12-
12B, 12-13, 12-13A, 12-13B, and 12-13C). Should we require different or 
additional information about these contracts? Should any of the 
proposed information requirements be excluded?
     We request comment on our proposed requirements in rules 
12-13 through 12-13D that the fund identify investments which cannot be 
sold because of restrictions or conditions applicable to the 
investment. Is this requirement appropriate? Why or why not? Would this 
requirement assist investors and other interested parties with 
understanding the marketability of an investment? Why or why not?
     We request comment on our proposed requirements in rules 
12-13 through 12-13D that the fund identify investments whose fair 
value was determined using significant unobservable inputs. Is this 
requirement appropriate? Why or why not? Would this requirement assist 
investors and other interested parties with understanding risks 
associated with valuation?
     Should we propose a disclosure relating to ``investments 
not readily marketable'' as is currently required by rule 12-13? Why or 
why not?
     We request comment on our proposed requirements in rules 
12-13 through 12-13D that the fund identify investments that are 
considered to be illiquid. Is this requirement appropriate? Why or why 
not? What are the costs and benefits associated with this requirement? 
Will independent accountants be able to audit this disclosure?
     We request comment on our proposed disclosures based on 
cost for Federal income tax purposes under proposed rule 12-12A and 
rules 12-13 through 12-13D. Do these disclosures provide meaningful 
information for investors in addition to tax basis disclosures required 
under U.S. GAAP? What are the costs and benefits associated with 
providing this disclosure? Should our proposed disclosures be reported 
in a separate stand-alone disclosure or, as proposed, as a note to each 
separate schedule? Should we eliminate the current disclosure 
requirement to present tax-basis cost and unrealized appreciation and 
depreciation in both semi-annual and annual shareholder reports? Why or 
why not? As an alternative, should we make the tax-basis disclosure an 
annual requirement?
3. Amendments to Rules 12-12 Through 12-12C
    While we are not proposing changes to the schedules for rules 12-
12, 12-12A, and 12-12C, we are proposing certain additional rule 
instructions that would include new disclosures, as well as certain 
clarifying changes, including renumbering several of the schedules.
    We are proposing several modifications to the instructions to rule 
12-12, the rule concerning disclosure of investments in securities of 
unaffiliated issuers. We are proposing to modify instruction 2 to rule 
12-12 (and the corresponding instructions to proposed rules 12-12A, 12-
12B, 12-13D, and 12-14) which would require funds to categorize the 
schedule by type of investment, the related industry, and the related 
country, or geographic region.\239\ U.S. GAAP requires investment 
companies that are nonregistered investment partnerships to categorize 
investments in securities by type, country or geographic region, and 
industry.\240\ In order to provide more transparency into the industry 
and the country or geographic region of a fund's investments in 
securities, we believe that the disclosures provided by funds should 
provide investors with the same categorization as nonregistered 
investment partnerships. We also believe that disclosure of both the 
industry and the country or geographic region would be particularly 
beneficial for investors in global and international funds, where 
currently funds are only required to categorize their schedule by 
industry, country, or geographic region, as it would provide additional 
transparency into the investments owned by the fund.
---------------------------------------------------------------------------

    \239\ See proposed rule 12-12, n.2 of Regulation S-X; see also 
proposed rules 12-12A, n.2; 12-12B, n.2; 12-13D, n.2; and 12-14, n.2 
of Regulation S-X.
    \240\ See ASC 946-210-50-6, Financial Services--Investment 
Companies (``ASC 946'').
---------------------------------------------------------------------------

    In order to provide more transparency to a fund's investments in 
debt securities, we are proposing an instruction to rule 12-12 
requiring the fund to indicate the interest rate or preferential 
dividend rate and maturity rate for certain enumerated debt 
instruments.\241\ When disclosing the interest rate for variable rate 
securities, we are proposing that the fund describe the referenced rate 
and spread.\242\ In proposing disclosures for variable rate securities, 
we considered other alternatives, such as period-end interest rate 
(e.g. the investment's interest rate in effect at the end of the 
period).

[[Page 33622]]

However, we believe that disclosure of both the referenced rate and 
spread allow investors to better understand the economics of the fund's 
investments in variable rate debt securities, such as the effect of a 
change in the reference rate on the security's income. This proposal is 
intended to result in more consistency across funds in disclosures of 
the interest rate for variable rate securities. For securities with 
payments-in-kind, we are proposing that the fund provide the rate paid 
in-kind in order to provide more transparency to investors when the 
fund is generating income that is not paid in cash.\243\
---------------------------------------------------------------------------

    \241\ See proposed rule 12-12, n.4 of Regulation S-X.
    \242\ See id.
    \243\ Id.
---------------------------------------------------------------------------

    Our proposal would modify the current instruction to rule 12-12 
\244\ that requires a fund to identify each issue of securities held in 
connection with open put or call option contracts and loans for short 
sales, by adding the requirement to also indicate where any portion of 
the issue is on loan.\245\ We believe that this disclosure would 
increase the transparency of the fund's securities lending activities. 
We are also proposing to modify current instruction 3 of rule 12-12 
concerning the organization of subtotals for each category of 
investments, making the instructions consistent with those in proposed 
rule 12-12B (current rule 12-12C), Summary schedule of investments in 
securities of unaffiliated issuers.\246\
---------------------------------------------------------------------------

    \244\ See rule 12-12, n.7 of Regulation S-X.
    \245\ See proposed rule 12-12, n.11 of Regulation S-X; see also 
proposed rule 12-12B, n.14 of Regulation S-X.
    \246\ See rule 12-12, n.3 of Regulations S-X; see also proposed 
rule 12-12B, n.2 of Regulation S-X.
---------------------------------------------------------------------------

    As in our proposed derivatives disclosures,\247\ in order to 
increase transparency into the observability of inputs used in 
determining the value of individual investments, we are adding the 
requirement for funds to disclose those investments whose fair value 
was determined using significant unobservable inputs.\248\ Here, as in 
our proposed derivatives disclosures, we would expect funds to identify 
each investment categorized in Level 3 of the fair value hierarchy in 
accordance with ASC Topic 820. We are also extending this requirement 
to proposed rules 12-12A and 12-12B.\249\
---------------------------------------------------------------------------

    \247\ See proposed rules 12-13, n.7; 12-13A, n.5; 12-13B, n.3; 
12-13C, n.6; and 12-13D, n.7 of Regulation S-X.
    \248\ See proposed rule 12-12, n.9 of Regulation S-X.
    \249\ See proposed rules 12-12A, n.6 and 12-12B, n.12 of 
Regulation S-X.
---------------------------------------------------------------------------

    As in proposed rules 12-13 through 12-13D,\250\ proposed 
instruction 10 to rule 12-12 would contain a requirement to identify 
each issue of illiquid securities.\251\ Like other proposed rules, we 
believe that this requirement would provide investors with greater 
transparency and understanding of the liquidity of a fund's 
investments.\252\
---------------------------------------------------------------------------

    \250\ See proposed rules 12-13, n.8; 12-13A, n.6; 12-13B, n.4; 
12-13C, n.7; and 12-13D, n.8 of Regulation S-X.
    \251\ See proposed rule 12-12, n.10 of Regulation S-X.
    \252\ See supra note 206 and accompanying text.
---------------------------------------------------------------------------

    Likewise, we are proposing several modifications to rule 12-12A 
regarding the presentation of securities sold short, in order to 
conform the instructions to proposed rule 12-12.\253\
---------------------------------------------------------------------------

    \253\ Instruction 2 would require the fund to organize the 
schedule in rule 12-12A in the same manner as is required by 
instruction 2 of rule 12-12. See proposed rule 12-12A, n.2. 
Instruction 3 would require the fund to identify the interest rate 
or preferential dividend rate and maturity rate as required by 
instruction 4 of proposed rule 12-12. See proposed rule 12-12A, n.3 
of Regulation S-X. Instruction 4 would require the subtotals for 
each category of investments be subdivided both by investment type 
and business grouping or instrument type, and be shown together with 
their percentage value compared to net assets, in the same manner as 
is required by proposed instruction 5 of rule 12-12. See proposed 
rule 12-12A, n.4 of Regulation S-X. Instruction 6 would require the 
fund to identify each issue of securities whose fair value was 
determined using significant unobservable inputs. See proposed rule 
12-12A, n.6 of Regulation S-X. Instruction 7 would require the fund 
to identify each issue of securities held in connection with open 
put or call option contracts in the same manner as required by 
proposed instruction 11 of rule 12-12. See proposed rule 12-12A, n.7 
of Regulation S-X. Instruction 8 would extend rule 12-12's tax basis 
disclosure to securities sold short. See proposed rule 12-12A, n.8 
of Regulation S-X.
---------------------------------------------------------------------------

    Funds are permitted to include in their reports to shareholders a 
summary portfolio schedule, in lieu of a complete portfolio schedule, 
so long as it conforms with current rule 12-12C (Summary schedule of 
investments in securities of unaffiliated issuers).\254\ In order to 
maintain numbering consistency and organization throughout the 
regulation, we are proposing to rename current rule 12-12C (Summary 
schedule of investments in securities of unaffiliated issuers) as rule 
12-12B. As in rule 12-12 and 12-12A, we are not proposing to modify the 
schedule of proposed rule 12-12B (current rule 12-12C), but again added 
similar changes to its instructions.\255\
---------------------------------------------------------------------------

    \254\ See rule 6-10(c)(2) of Regulation S-X [17 CFR 210.6-
10(c)(2)]; see also Quarterly Portfolio Holdings Adopting Release, 
supra note 19.
    \255\ Instruction 2 would add ``type of investment'' to the 
current subtotal requirements for the summary schedule. See proposed 
rule 12-12B, n.2 of Regulation S-X. Instruction 3 would extend rule 
12-12's proposed requirement that funds indicate the interest rate 
or preferential dividend rate and maturity rate for certain 
enumerated securities. See proposed rule 12-12B, n.3 of Regulation 
S-X. Instruction 5 would require for options purchased all 
information that would be required by rule 12-13 for written option 
contracts. See proposed rule 12-12B, n.5 of Regulation S-X. 
Instruction 12 would require the fund to indicate each issue of 
securities whose fair value was determined using significant 
unobservable inputs. See proposed rule 12-12B, n.12 of Regulation S-
X. Instruction 13 would require the fund to identify illiquid 
securities. See proposed rule 12-12B, n.13 of Regulation S-X. 
Instruction 14 would extend rule 12-12's requirement that the fund 
indicate where any portion of the issue is on loan. See proposed 
rule 12-12B, n.14 of Regulation S-X.
---------------------------------------------------------------------------

    We request comment on our amendments to proposed rules 12-12 
through 12-12B of Regulation S-X:
     Are our proposed amendments to rule 12-12 through 12-12B 
appropriate? Are there other amendments to rules 12-12 through 12-12B 
that should be made to improve disclosures regarding the investments 
that would be reported under the rules? If so, what amendments and why?
     We request comment on proposed amendments to rule 12-12 
(Investments in securities of unaffiliated issuers). For variable rate 
securities, we propose to require disclosure of a description of the 
reference rate and spread (e.g., USD LIBOR 3-month + 2%). Is this 
requirement appropriate? Should we alternatively require disclosure of 
the period end interest rate?
     We request comment on instruction 2 to proposed rule 12-12 
(and the corresponding instructions to rules 12-12A, 12-12B, and 12-14) 
which would require funds to categorize the schedule by type of 
investment, the related industry, and the related country, or 
geographic region. Should we include this instruction in our proposed 
rules? What are the costs or benefits associated with such a 
requirement?
     We request comment our proposed modifications in rules 12-
12 and 12-12B that would require a fund to indicate where any portion 
of the issue is on loan. Should we include this requirement in our 
proposed rules? Why or why not?
     We request comment on instruction 4 to proposed rule 12-
12. Should we require funds to disclose the interest rate or 
preferential dividend rate and maturity rate for certain debt 
instruments? Are there any types of securities that should (or should 
not) be included in instruction 4's list of applicable debt 
instruments?
     We request comment on our proposal to require a fund to 
disclose each issue of illiquid securities. Should we include this 
requirement in our proposed rules? Why or why not? Would the fund's 
independent accountants be able to audit this disclosure?
     We request comment on our proposed requirements in rules 
12-12, 12-12A, and 12-12B that the fund identify investments whose fair 
value

[[Page 33623]]

was determined using significant unobservable inputs. Is this 
requirement appropriate? Why or why not? Would this requirement assist 
investors and other interested parties with understanding risks 
associated with valuation?
     Are our amendments to proposed rules 12-12 through 12-12B 
consistent with industry practices? If not, how are our amendments 
different and what would be the costs and benefits associated with such 
differences? Are there other industry practices that we should include 
in our proposal?
4. Investments In and Advances to Affiliates
    We are proposing amendments to rule 12-14 (Investments in and 
advances to affiliates).\256\ Rule 12-14 requires a fund to make 
certain disclosures about its investments in and advances to any 
``affiliates'' or companies in which the investment company owns 5% or 
more of the outstanding voting securities.\257\ The rule currently 
requires that a fund disclose the ``amount of equity in net profit and 
loss for the period'' for each controlled company, but does not require 
disclosure of realized or unrealized gains or losses. Based upon staff 
experience, we believe that the presentation of realized gains or 
losses and changes in unrealized appreciation or depreciation would 
assist investors with better understanding the impact of each 
affiliated investment on the fund's statement of operations. As a 
result, we are proposing to modify column C of the schedule to rule 12-
14 to require ``net realized gain or loss for the period,'' \258\ and 
column D to require ``net increase or decrease in unrealized 
appreciation or depreciation for the period'' for each affiliated 
investment.\259\
---------------------------------------------------------------------------

    \256\ See proposed rule 12-14 of Regulation S-X.
    \257\ See rule 12-14 of Regulation S-X.
    \258\ See proposed rule 12-14, column C of Regulation S-X. 
Column C of current rule 12-14 requires disclosure of the ``amount 
of equity in net profit and loss for the period,'' which is derived 
from the controlled company's income statement and does not directly 
translate to the impact to a fund's statement of operations. We are 
proposing to replace this requirement with ``net realized gain or 
loss for the period.''
    \259\ See id. at column D.
---------------------------------------------------------------------------

    Likewise, in instruction 6(e) and (f), we are proposing to require 
disclosure of total realized gain or loss and total net increase or 
decrease in unrealized appreciation or depreciation for affiliated 
investments in order to correlate these totals to the statement of 
operations.\260\ Disclosure of realized gains or losses and changes in 
unrealized appreciation or depreciation, in addition to the current 
requirement to disclose the amount of income, would allow investors to 
understand the full impact of an affiliated investment on a fund's 
statement of operations.
---------------------------------------------------------------------------

    \260\ See proposed rule 12-14, nn.6(e) and (f) of Regulation S-
X.
---------------------------------------------------------------------------

    Additionally, we are proposing a new instruction 7 in order to make 
the categorization of investments in and advances to affiliates 
consistent with the method of categorization used in proposed rules 12-
12, 12-12A, and 12-12B.\261\ We are also proposing several other 
modifications to the instructions to rule 12-14 in order to, in part, 
conform the rule to our proposed disclosure requirements in rules 12-12 
and 12-13.\262\
---------------------------------------------------------------------------

    \261\ See id. at n.7; see also proposed rule 12-12, n.5, 12-12A. 
n.4, 12-12B, n.2 of Regulation S-X.
    \262\ Instruction 1 would delete the instruction to segregate 
subsidiaries consolidated in order to make the disclosures under 
rule 12-14 consistent with the fund's balance sheet. See proposed 
rule 12-14, at n.1 of Regulation S-X. Instruction 2 would require 
the fund to organize the schedule to rule 12-14 in the same manner 
as is required by instruction 2 of rule 12-12. See proposed rule 12-
14, at n.2 of Regulation S-X. Instruction 3 would require the fund 
to identify the interest rate or preferential dividend rated and 
maturity rate, as applicable. See proposed rule 12-14, at n.3 of 
Regulation S-X. Instruction 4 would add column F to the columns to 
be totaled and update the instruction to state that Column F should 
agree with the correlative amount shown on the related balance 
sheet. See proposed rule 12-14, at n.4 of Regulation S-X. 
Instruction 5 would update the reference to instruction 8 of rule 
12-12 and reference to rule 12-13 to reflect the changes in the 
numbering of the instructions for those rules. See proposed rule 12-
14, at n.5 of Regulation S-X. Instruction 6(a) and (b) would update 
references to column D to reference Column E in order to reflect our 
proposed changes to rule 12-14's schedule. See proposed rule 12-14, 
at nn.6(a) and (b) of Regulation S-X. Instruction 6(d), which 
proposes to add clarifying language from instruction 7 of rule 12-
12, would provide the fund with more detail on the definition of 
non-income producing securities. See proposed rule 12-14, at n.6(d) 
of Regulation S-X. Instruction 8 would require the fund to identify 
each issue of securities whose fair value was determined using 
significant unobservable inputs. See proposed rule 12-14, at n.8 of 
Regulation S-X. Instruction 9 would require the fund to identify 
illiquid securities. See proposed rule 12-14, at n.9 of Regulation 
S-X. Instruction 10 would require the fund to indicate each issue of 
securities held in connection with open put or call option 
contracts, loans for short sales, or where any portion of the issue 
is on loan, as required by note 11 to rule 12-12. See proposed rule 
12-14, at n.10 of Regulation S-X. Instruction 11 would extend rule 
12-12's tax basis disclosure to investments in and advances to 
affiliates. See proposed rule 12-14, at n.11 of Regulation S-X.
---------------------------------------------------------------------------

    We request comment on our proposed amendments to rule 12-14 of 
Regulation S-X:
     Are our proposed amendments to rule 12-14 appropriate? Are 
there other amendments to rule 12-14 that should be made to improve 
disclosures regarding the investments that would be reported under the 
rule? If so, what amendments and why?
     In proposed rule 12-14, we are no longer requiring 
information about the fund's equity in the profit or loss of each 
controlled portfolio company. Instead, we are proposing to require the 
realized gain or loss and change in unrealized appreciation or 
depreciation for all affiliated investments. Is this change 
appropriate? Is it still important to understand the equity in the 
profit or loss of each controlled company in addition to the controlled 
portfolio company's effect on the fund's statement of operations? Would 
the presentation of realized gains or losses and changes in unrealized 
appreciation or depreciation assist investors with better understanding 
the impact of each affiliated investment on the fund's statement of 
operations? Why or why not? Are there other changes to the disclosure 
of affiliated transactions that would better assist investors with 
understanding the impact of affiliated investments on the fund's 
statement of operations?
     In addition to those discussed above, what are the costs 
and benefits associated with the proposed changes? Would the proposed 
changes under rule 12-14 reduce any burdens on filers? If so, how?
     Are our amendments to proposed rule 12-14 consistent with 
industry practices? If not, how are our amendments different? Are there 
other industry practices that we should include in our proposal with 
respect to the disclosure of affiliated investments?
5. Form and Content of Financial Statements
    Finally, we are proposing revisions to Article 6 of Regulation S-X, 
which prescribes the form and content of financial statements filed for 
funds. Many of the revisions we are proposing today are intended to 
conform Article 6 with our proposed changes to Article 12 and update 
other financial statement requirements.\263\ As part of these changes, 
we are proposing to modify the title and description of Article 6 from 
``Registered Investment Companies'' to ``Registered Investment 
Companies and Business Development Companies'' to clarify that BDCs are 
subject to Article 6 of Regulation S-X.\264\ This does not

[[Page 33624]]

change existing requirements for BDCs.\265\
---------------------------------------------------------------------------

    \263\ We are also proposing to amend the reference in rule 6-
03(c) to Sec.  210.3A-05, as that section of Regulation S-X was 
rescinded in 2011. See Rescission of Outdated Rules and Forms, and 
Amendments to Correct References, Securities Act Release No. 33-9273 
(Nov. 4, 2011) [76 FR 71872 (Nov. 21, 2011)].
    \264\ See proposed rules 6-01; 6-03; 6-03(c)(1); 6-03(d); 6-
03(i); 6-04; and 6-07 of Regulation S-X.
     A BDC is a closed-end fund that is operated for the purpose of 
making investments in small and developing businesses and 
financially troubled businesses and that elects to be regulated as a 
BDC. See section 2(a)(48) of the Investment Company Act (defining 
BDCs). BDCs are not subject to periodic reporting requirements under 
the Investment Company Act, although they must comply with periodic 
reporting requirements under the Exchange Act.
    \265\ See Instruction 1.a to Item 6.c of Form N-2 (``A business 
development company should comply with the provisions of Regulation 
S-X generally applicable to registered management investment 
companies. (See section 210.3-18 [17 CFR 210.3-18] and sections 
210.6-01 through 210.6-10 of Regulation S-X [17 CFR 210.6-01 through 
210.6-10]).'').
---------------------------------------------------------------------------

    In order to allow a more uniform presentation of investment 
schedules in a fund's financial statements, we are proposing to rescind 
subparagraph (a) of rule 6-10 under Regulation S-X, regarding which 
schedules are to be filed.\266\ We believe that a fund and its 
consolidated subsidiaries should present their consolidated investments 
for each applicable schedule, without indicating which are owned 
directly by the fund or which are owned by the consolidated 
subsidiaries.
---------------------------------------------------------------------------

    \266\ See proposed rule 6-10 of Regulation S-X.
---------------------------------------------------------------------------

    Moreover, current rule 6-10(a) provides that if the information 
required by any schedule (including the notes thereto) is shown in the 
related financial statement or in a note thereto without making such 
statement unclear or confusing, that procedure may be followed and the 
schedule omitted.\267\ We believe that some funds may have interpreted 
this guidance as allowing presentation of some Article 12 schedules 
(e.g., rules 12-13 and 12-14) in the notes to the financial statements, 
as opposed to immediately following the schedules required by rules 12-
12, 12-12A, and 12-12C, and are therefore proposing to eliminate rule 
6-10(a). In light of the increased use of derivatives by funds, we 
believe that all schedules required by rule 6-10 should be presented 
together within a fund's financial statements, and not in the notes to 
the financial statements. We recognize that our proposal would change 
current practice for some funds but believe that, coupled with more 
detailed disclosure rules for derivatives, this amendment would provide 
more consistent disclosure and improve the usability of financial 
statements for investors.\268\
---------------------------------------------------------------------------

    \267\ See rule 6-10 of Regulation S-X.
    \268\ Additionally, in order to conform proposed rule 6-10(b) 
with the new requirements under Article 12, we added schedules 
corresponding to our proposed new schedules of derivatives 
investments.
---------------------------------------------------------------------------

    We are also proposing changes to rules 6-03 and 6-04 to 
specifically reference the investments required to be reported on 
separate schedules in amended Article 12.\269\ Additionally, we are 
proposing to eliminate current rule 6-04.4, which requires disclosure 
of ``Total investments'' on the balance sheet under ``Assets,'' 
recognizing that investments reported under proposed rules 12-13A 
through 12-13D could potentially be presented under both assets and 
liabilities on the balance sheet.\270\ For example, a fund may hold a 
forward foreign currency contract with unrealized appreciation and a 
different forward foreign currency contract with unrealized 
depreciation. The fund presents on its balance sheet an asset balance 
for the contract with unrealized appreciation and a liability balance 
for the contract with unrealized depreciation. Totaling the amounts of 
investments reported under assets could be misleading to investors in 
this example, or in other examples where a fund holds derivatives in a 
liability position (e.g., unrealized depreciation on an interest rate 
swap contract). A ``Total investments'' amount in the Assets section of 
the fund's balance sheet would include the fund's investments in 
securities and derivatives that are in an appreciated position, but it 
would not include the unrealized depreciation on the interest rate swap 
contract, which would be classified under the Liabilities section of 
the fund's balance sheet. Given the increasing use of derivatives by 
funds, we believe eliminating current rule 6-04.4 would provide more 
complete information to investors. We are also proposing a 
corresponding change in rule 6-03(d) to remove the reference to ``total 
investments reported under [rule 6-04.4].'' \271\
---------------------------------------------------------------------------

    \269\ See proposed rules 6-03(d), 6-04.3 and 6-04.9 of 
Regulation S-X.
    \270\ See rule 6-04.4 of Regulation S-X [17 CFR 210.6-04.4].
    \271\ See proposed rule 6-03(d) of Regulation S-X.
---------------------------------------------------------------------------

    We are also proposing to amend rule 6-04 to refer individually to 
our derivatives disclosures in proposed rules 12-13A through 12-
13C.\272\ As is currently the case, these proposed amendments are not 
meant to require gross presentation where netting is allowed under U.S. 
GAAP.\273\ For example, if a fund held a forward foreign currency 
contract which had unrealized appreciation and another forward foreign 
currency contract which had unrealized depreciation, the fact that 
forward foreign currency contracts are mentioned in proposed rules 6-
04.3(b) and 6-04.9(d) is not meant to require both contracts to be 
presented gross on the balance sheet if netting were allowed under U.S. 
GAAP.
---------------------------------------------------------------------------

    \272\ See proposed rules 6-04.3; 6-04.6; and 6-04.9 of 
Regulation S-X.
    \273\ See ASC 210, Balance Sheet (``ASC 210'') and ASC 815.
---------------------------------------------------------------------------

    Proposed rule 6-05.3 would also specifically require presentation 
of items relating to investments other than securities in the notes to 
financial statements.\274\ Current rule 6-05.3 only requires 
presentation in the notes to financial statements of disclosure 
required by rules 6-04.10 through 6-04.13, which include information 
relating to securities sold short and open option contracts 
written.\275\ Our proposal would also amend rule 6-05.3 to require fund 
financial statements to reflect all unaffiliated investments other than 
securities presented on separate schedules under Article 12.\276\
---------------------------------------------------------------------------

    \274\ See proposed rule 6-05.3 of Regulation S-X.
    \275\ See rule 6-05.3 of Regulation S-X [17 CFR 210.6-05.3].
    \276\ See proposed rule 6-05.3 of Regulation S-X.
---------------------------------------------------------------------------

    We are also proposing to add new disclosure requirements that are 
designed to increase transparency to investors about certain 
investments and activities. First, we are proposing to add new 
subsection (m) to rule 6-03 that would require funds to make certain 
disclosures in connection with a fund's securities lending activities 
and cash collateral management.\277\ Specifically, we are proposing to 
require disclosure of (1) the gross income from securities lending, 
including income from cash collateral reinvestment; (2) the dollar 
amount of all fees and/or compensation paid by the registrant for 
securities lending activities and related services, including borrower 
rebates and cash collateral management services; (3) the net income 
from securities lending activities; (4) the terms governing the 
compensation of the securities lending agent, including any revenue 
sharing split, with the related percentage split between the registrant 
and the securities lending agent, and/or any fee-for-service, and a 
description of services included; (5) the details of any other fees 
paid directly or indirectly, including any fees paid directly by the 
registrant for cash collateral management and any management fee 
deducted from a pooled investment vehicle in which cash collateral is 
invested; and (6) the monthly average of the value of portfolio 
securities on loan.\278\ We believe that these proposed disclosures 
would allow investors to better understand the income generated from, 
as well as the expenses associated with, securities lending activities. 
Second, our proposal would also amend rule 6-07 to require funds to 
make a separate disclosure for income from

[[Page 33625]]

non-cash dividends and payment-in-kind interest on the statement of 
operations.\279\ Our proposed amendment to rule 6-07 is intended to 
increase transparency for investors in order to allow them to better 
understand when fund income is earned, but not received, in the form of 
cash.
---------------------------------------------------------------------------

    \277\ See supra note 71 and accompanying text.
    \278\ See proposed rule 6-03(m) of Regulation S-X.
    \279\ See proposed rule 6-07.1 of Regulation S-X.
---------------------------------------------------------------------------

    We are proposing to amend rule 6-07.7(a) in order to conform 
statement of operations disclosures of the net realized gains or losses 
from investments to include our additional derivatives disclosures in 
proposed rules 12-13A through 12-13C.\280\ Likewise, we are proposing 
similar changes to proposed 6-07.7(c) (current rule 6-07.7(d)) in order 
to conform statement of operations disclosures of the net increase or 
decrease in the unrealized appreciation or depreciation of investments 
to include our new derivatives disclosures.\281\ We recognize that 
Regulation S-X, which organizes net realized gains and losses (and net 
increases or decreases in the unrealized appreciation or depreciation) 
by investment type, diverges from our approach in proposed Form N-PORT, 
which organizes net realized gain or loss and net change in unrealized 
appreciation or depreciation attributable to derivatives by each 
instrument's primary underlying risk exposure.\282\ While we believe 
that organizing these disclosures by exposure type, which are derived 
from ASC Topic 815, are appropriate for Form N-PORT; we also believe 
that it is more appropriate for statement of operations disclosures to 
be organized by major types of investment transactions, as doing so 
would be consistent with the types of investments requiring separate 
schedules in Article 12 and allow investors to relate the disclosures 
in the schedule of investments with the statement of operations.\283\
---------------------------------------------------------------------------

    \280\ See proposed rule 6-07.7(a) of Regulation S-X.
    \281\ See proposed rule 6-07.7(c) of Regulation S-X.
    \282\ See Item B.5.c of proposed Form N-PORT.
    \283\ See ASC 815.
---------------------------------------------------------------------------

    We are also proposing to eliminate Regulation S-X's requirement for 
specific disclosure of written options activity under current rule 6-
07.7(c).\284\ This provision was adopted prior to FASB adopting 
disclosures generally applicable to derivatives, including written 
options, now required by ASC Topic 815.\285\ We are proposing that the 
requirement for specific disclosures for written options activity be 
removed because they are generally duplicative of the requirements of 
ASC Topic 815, which include disclosure of the fair value amounts of 
derivative instruments, gains and losses on derivative instruments, and 
information that would enable users to understand the volume of 
derivative activity.\286\
---------------------------------------------------------------------------

    \284\ See rule 6-07.7(c) of Regulation S-X [17 CFR 210.6-
07.7(c)].
    \285\ See ASC 815.
    \286\ Id. Rule 6-07.7(c) requires disclosure in a note to the 
financial statements of the number and associated dollar amounts as 
to option contracts written: (i) At the beginning of the period; 
(ii) during the period; (iii) expired during the period; (iv) closed 
during the period; (v) exercised during the period; (vi) balance at 
end of the period. The balances at the beginning of the period and 
end of the period are available in the prior period-end and current 
period-end schedules of open option contracts written, respectively. 
By eliminating the written options roll-forward, investors would no 
longer have information regarding the number of contracts expired, 
closed, or exercised during the period. However, disclosures 
required by ASC 815 provide gains and losses on derivative 
instruments, including written options, along with information that 
would enable users to understand the volume of derivative activity 
during the period.
---------------------------------------------------------------------------

    We are also proposing to eliminate the exception in Schedule II of 
current rule 6-10 which does not require reporting under current rule 
12-13 if the investments, at both the beginning and end of the period, 
amount to one percent or less of the value of total investments.\287\ 
We believe that it is appropriate to propose eliminating this 
exception, because a fund may have significant notional amount in its 
portfolio that could be valued at one percent or less of the value of 
total investments. Accordingly, removing this exception would provide 
more transparency to investors regarding a fund's derivatives activity.
---------------------------------------------------------------------------

    \287\ See rule 6-10(c)(1) Schedule II of Regulation S-X; see 
also proposed rule 6-10(b)(1) Schedule II of Regulation S-X.
---------------------------------------------------------------------------

    We request comment on our proposed changes to Article 6 of 
Regulation S-X.
     Are our proposed amendments to Article 6 of Regulation S-X 
appropriate? If not, which amendments are not appropriate and why? Are 
there other amendments to Article 6 of Regulation S-X that we should 
propose? If so, what amendments and why?
     Are there alternative methods of presentation of 
derivatives that we should consider, rather than the proposed 
requirement that all schedules be presented in the same location? If 
so, what method and why is it preferable?
     As we discussed above, among others, our basis for 
proposing to eliminate rule 6-10(a) was our belief that a fund and its 
consolidated subsidiaries should present their consolidated investments 
for each applicable schedule, without indicating which are owned 
directly by the fund and which are owned by the consolidated 
subsidiaries. Is this proposed change appropriate? Why or why not? 
Should we require different or additional information about 
consolidated investments?
     We request comment on our proposal to eliminate rule 6-
04.4, which requires disclosure of ``Total investments'' on the balance 
sheet under ``Assets,'' and the corresponding reference to rule 6-04.4 
in rule 6-03(d). Are these proposed changes appropriate? Why or why 
not? Would eliminating current rule 6-04.4 provide more complete 
information to investors?
     We request comment on our proposal to amend rule 6-05.3 to 
specifically require presentation of items relating to investments 
other than securities in the notes to the financial statements, as well 
as require fund financial statements to reflect all unaffiliated 
investments presented on separate schedules under Article 12. Are our 
proposed changes appropriate? Why or why not?
     Would the disclosure required under proposed rule 6.03(m) 
concerning income and expenses in connection with securities lending 
activities provide meaningful information to investors or other 
potential users? For example, would the disclosures regarding 
compensation and other fee and expense information relating to the 
securities lending agent and cash collateral manager be useful to fund 
boards in evaluating their securities lending arrangements? Would these 
disclosures be sufficient for this purpose, or would additional 
information be necessary, for example, to put the fee and expense 
information in context (e.g., the nature of the services provided by 
the securities lending agent and cash collateral manager)? Should the 
Commission instead require that these or other similar disclosures, be 
provided elsewhere in the fund's financial statements (e.g., the 
Statement of Operations), or provided as part of other disclosure 
documents (e.g., the Statement of Additional Information) or reporting 
forms (e.g., proposed Form N-CEN)? Why or why not?
     Is the proposed disclosure under rule 6-07.1 for non-cash 
dividends and payment-in-kind interest on the statement of operations 
meaningful to investors or other potential users of the fund's 
financial statements? Should all non-cash interest be disclosed, 
including amortization and accretion, or should just payment-in-kind 
interest be disclosed?
     Do our proposed amendments to rules 6-07.7(a) and 6-
07.7(c) omit any classifications of gains or loss or changes in 
unrealized appreciation or

[[Page 33626]]

depreciation that should be disclosed? If so, which categories and why?
     We request comment on our proposal to eliminate Regulation 
S-X's requirements for specific disclosure of written options activity 
under rule 6-07.7(c). Does the current requirement for specific 
disclosure of written options activity under rule 6-07.7(c) provide a 
user of financial statements with sufficient incremental benefit to 
merit retaining this disclosure in addition to the disclosures required 
by ASC Topic 815? Why or why not?
     Proposed rule 6-10(b) would no longer allow funds to omit 
the schedule of investments other than securities if the investments, 
other than securities, at both the beginning and end of the period 
amount to one percent or less of the value of total investments. Is 
this change appropriate? Are there any costs associated with this 
change? If so, what are they?
     Are our amendments to Article 6 of Regulation S-X 
generally consistent with industry practices, except where specifically 
noted in the discussion above? If not, how are our amendments 
different? Are there other industry practices that we should include in 
our proposal with respect to the form and content of financial 
statements?

D. Option for Web Site Transmission of Shareholder Reports

1. Overview
    The Commission is proposing new rule 30e-3 under the Investment 
Company Act, which would, if adopted, permit, but not require, a fund 
to satisfy requirements under the Act and rules thereunder to transmit 
reports to shareholders if the fund makes the reports and certain other 
materials accessible on its Web site. Reliance on the rule would be 
subject to certain conditions, including conditions relating to (1) the 
availability of the shareholder report and other required information, 
(2) prior shareholder consent, (3) notice to shareholders of the 
availability of shareholder reports, and (4) shareholder ability to 
request paper copies of the shareholder report or other required 
information.
    This new option is intended to modernize the manner in which 
periodic information is transmitted to shareholders. We believe it 
would improve the information's overall accessibility while reducing 
burdens such as printing and mailing costs borne by funds, and 
ultimately, by fund shareholders. As described below, today's proposal 
draws on the Commission's experience with use of the Internet as a 
medium to provide documents and other information to investors. The 
proposal is supported by recent Commission investor testing efforts and 
other empirical research concerning investors' preferences about report 
transmission methods and use of the Internet for financial and other 
purposes generally. At the same time, the Commission recognizes that 
empirical research, discussed below, demonstrates that some investors 
continue to prefer to receive paper reports. The proposal therefore 
incorporates a set of protections intended to avoid investor confusion 
and protect the ability of investors to choose their preferred means of 
communication.
    Reliance on the rule would be optional. Funds that do not maintain 
Web sites or that otherwise wish to transmit shareholder reports in 
paper or pursuant to the Commission's existing electronic delivery 
guidance would continue to be able to satisfy transmission requirements 
by those transmission methods. Furthermore, under the rule as proposed, 
a fund relying on the rule to satisfy shareholder report transmission 
obligations with respect to certain shareholders would not be precluded 
from transmitting shareholder reports to other shareholders pursuant to 
the Commission's electronic delivery guidance. We expect that funds 
would continue to rely on the Commission's guidance to electronically 
transmit reports to shareholders who have elected to receive reports 
electronically, and rely on the rule with respect to shareholders who 
have not so elected (i.e., those who currently receive printed 
shareholder reports by mail).
2. Discussion
    Funds are generally required to transmit reports to shareholders on 
a semiannual basis.\288\ Historically, these reports have been printed 
and mailed to shareholders. With advances in technology and, in 
particular, the increasing use of the Internet as a medium through 
which information, financial or otherwise, is made accessible, we have 
previously issued guidance describing the circumstances under which 
transmission of disclosure documents may be effected through electronic 
means.\289\ Under that guidance, funds may transmit documents 
electronically provided that a number of conditions related to 
shareholder notice, access, and evidence of delivery are met.\290\
---------------------------------------------------------------------------

    \288\ See section 30(e) of the Investment Company Act [15 U.S.C. 
80a-29(e)]; rule 30e-1 (reports to stockholders of management 
companies); rule 30e-2 (reports to shareholders of unit investment 
trusts substantially all the assets of which consist of securities 
issued by a management company).
    \289\ See generally Use of Electronic Media for Delivery 
Purposes, Investment Company Act Release No. 21399 (Oct. 6, 1995) 
[60 FR 53458 (Oct. 13, 1995)] (``1995 Release'') (providing 
Commission views on the use of electronic media to deliver 
information to investors, with a focus on electronic delivery of 
prospectuses, annual reports to security holders and proxy 
solicitation materials under the federal securities laws); Use of 
Electronic Media by Broker-Dealers, Transfer Agents, and Investment 
Advisers for Delivery of Information, Investment Company Act Release 
No. 21945 (May 9, 1996) [61 FR 24644 (May 15, 1996)] (``1996 
Release'') (providing Commission views on electronic delivery of 
required information by broker-dealers, transfer agents and 
investment advisers); Use of Electronic Media, Investment Company 
Act Release No. 24426 (Apr. 28, 2000) [65 FR 25843 (May 4, 2000)] 
(``2000 Release'') (providing updated interpretive guidance on the 
use of electronic media to deliver documents on matters such as 
telephonic and global consent; issuer liability for Web site 
content; and legal principles that should be considered in 
conducting online offerings).
    More recently, the Division of Investment Management published 
guidance stating the staff's position that electronic delivery of a 
notice pursuant to rule 19a-1 under the Investment Company Act, 
consistent with the Commission's electronic delivery guidance, would 
satisfy the purposes and policies underlying the rule. See Division 
of Investment Management, Securities and Exchange Commission, 
Shareholder Notices of the Sources of Fund Distributions--Electronic 
Delivery, IM Guidance Update No. 2013-11 (Nov. 2013), available at  
http://www.sec.gov/divisions/investment/guidance/im-guidance-2013-11.pdf (``2013-11 IM Guidance Update'').
    \290\ See id.
---------------------------------------------------------------------------

    Recent investor testing and Internet usage trends have highlighted 
that preferences about electronic delivery of information have evolved, 
and that many investors would prefer enhanced availability of fund 
information on the Internet. For example, investor testing sponsored by 
the Commission and conducted in 2011 \291\ suggested that an

[[Page 33627]]

investor looking for a fund's annual report is most likely to seek it 
out on the fund's Web site, rather than request it by mail or phone or 
by retrieving it from the Commission's EDGAR system.\292\ Many 
investors indicated that they would prefer that fund information be 
made available in both electronic and print versions, with a plurality 
of respondents preferring electronic transmission by email with the 
option to easily request a print copy of a particular report, though a 
significant minority indicated that they would still prefer to receive 
a print copy through the mail.\293\
---------------------------------------------------------------------------

    \291\ In 2011, the Commission engaged a consultant to conduct 
investor testing regarding shareholder reports. We have placed the 
consultant's report concerning that testing (``Investor Testing of 
Mutual Fund Shareholder Reports'') in the comment file for the 
proposed rule (available at www.sec.gov/comments/s7-08-15/s70815.shtml). Separately, Commission staff prepared a study of 
investor financial literacy pursuant to section 917 of the Dodd-
Frank Act. Materials relating to this study, including the staff's 
report, are available at http://www.investor.gov/publications-research-studies/sec-research.
    Also, in 2007, the Commission engaged a consultant to conduct 
focus group interviews and a telephone survey concerning investors' 
views and opinions about various disclosure documents filed by 
companies, including mutual funds. We have placed the consultant's 
report concerning the focus group testing and related transcripts in 
the comment file for the proposed rule (available at www.sec.gov/comments/s7-08-15/s70815.shtml). The consultant's report concerning 
the telephone survey (``Telephone Survey Report'') is available at 
http://www.sec.gov/pdf/disclosuredocs.pdf. Respondents to the 
telephone survey who had received a mutual fund shareholder report, 
for example, were asked about their preferences for a mode of 
delivery of the information contained in a shareholder report, and 
``an Internet Web site'' received the highest ratings (with 49% 
rating it 7 or above on a 10 point scale), compared with 42% of 
respondents who rated ``a paper copy'' 7 or above. See Telephone 
Survey Report at 96.
    \292\ See Investor Testing of Mutual Fund Shareholder Reports, 
supra note 291, at 72. When asked ``If you wanted to see a mutual 
fund annual report, how would you access/obtain the report? Please 
check all that apply.,'' 59.5% of respondents selected ``look on the 
mutual fund company's Web site,'' compared with 33.3% who selected 
``ask my financial advisor,'' 24.5% who selected ``request by 
mail,'' 21.0% who selected ``do a web search (Google, etc.),'' 18.8% 
who selected ``request by phone,'' 12.3% who selected ``check with 
my employer's HR or employee benefits representative,'' 11.3% who 
selected ``look on the SEC's Web site or on EDGAR,'' and 2.3% who 
selected ``other.'' Id.
    \293\ See id. at 185. When asked ``How would you prefer to 
receive information about your mutual fund investments?,'' 25.8% of 
respondents selected ``online through a link provided in an email, 
with the option to request a print version,'' compared with 19.5% of 
respondents who selected ``in print through the mail, with a web 
address provided for an online version,'' 18.5% who selected 
``online through a link provided in an email,'' 16.5% who selected 
``a print summary of the key information through the mail, with a 
web address provided for a complete online version,'' 13.8% who 
selected ``in print through the mail,'' and 6.0% who selected ``I 
don't have a preference.'' Id.
---------------------------------------------------------------------------

    In the time since this investor testing was conducted, access to 
and use of the Internet has continued to increase significantly, 
including among demographic groups that have previously been less apt 
to use the Internet. For example, a study conducted by the Pew Research 
Center's Internet & American Life Project in 2013 found that only 15% 
of American adults ages 18 and older do not use the Internet or email--
falling from 26% in 2011, when our investor testing was conducted, and 
from 39% a decade before in 2001.\294\ These researchers also found 
that for the first time in 2012, more than half of adults over the age 
of 64 used the Internet, a figure that climbed to 59% in 2013.\295\
---------------------------------------------------------------------------

    \294\ See Pew Research Center, Who's Not Online and Why, at 2 
(Sept. 25, 2013), available at http://pewinternet.org/Reports/2013/Non-internet-users.aspx.
    \295\ See Pew Research Center, Older Adults and Technology Use, 
at 1 (Apr. 3, 2014), available at http://www.pewinternet.org/2014/04/03/older-adults-and-technology-use/.
---------------------------------------------------------------------------

    These trends have also extended to use of the Internet for 
financial purposes. For example, a recent survey by the Investment 
Company Institute found that in 2014, 94% of U.S. households owning 
mutual funds had Internet access (up from 68% in 2000), with widespread 
use among various age groups, education levels and income levels.\296\ 
The year before, the Investment Company Institute found that 82% of 
U.S. households owning mutual funds used the Internet for financial 
purposes.\297\
---------------------------------------------------------------------------

    \296\ See 2015 ICI Fact Book, at 129, supra note 4. For example, 
the study found the following with respect to Internet access in 
mutual fund owning households: (1) Head of household age 65 or 
older, 86% have access, (2) education level of high school diploma 
or less, 84% have access, and (3) household income of less than 
$50,000, 84% have access.
    \297\ See 2014 Investment Company Fact Book, Investment Company 
Institute, at 115-17, available at http://www.ici.org/pdf/2014_factbook.pdf.
---------------------------------------------------------------------------

    Given the evolving preferences and trends in Internet usage, in 
particular with regard to the delivery of financial information, we 
believe that it is appropriate to propose a rule that would permit the 
Web site transmission of fund shareholder reports, while maintaining 
the ability of shareholders who prefer to receive reports in paper to 
receive reports in that form. Funds and their shareholders would 
benefit from the reductions in related printing and mailing costs. 
Also, the rule, as proposed, would consolidate current and historical 
portfolio holdings information in one location (i.e., a particular Web 
site, as opposed to having some information on one Web site and other 
information on EDGAR), whereas currently, funds are not required to 
transmit or otherwise make accessible to investors holdings information 
as to the first and third fiscal quarters.\298\
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    \298\ Currently, funds report their complete portfolio holdings 
as of the first and third fiscal quarters on Form N-Q, which is 
accessible only through EDGAR. There is no separate requirement for 
funds to transmit or otherwise make this information available to 
shareholders.
---------------------------------------------------------------------------

    Although we believe the proposed rule would benefit many investors, 
we recognize that there are concerns associated with how some investors 
may be affected. For example, as discussed above, investor testing 
suggests that a significant minority of investors prefer to receive 
paper reports and that some demographic groups of investors may be less 
likely to use the Internet. Some of these investors might not fully 
understand the actions they would need to take under the proposed rule 
to continue to receive their reports in paper. We believe that it is 
critical that these investors continue to receive disclosure in a means 
that is convenient and accessible for them. In addition, there is a 
risk that even some investors that prefer to use the Internet might be 
less likely to review reports electronically than they would in paper. 
We also believe it is critical that the proposed rule communicate the 
importance of the information that would be made available on the Web 
site.
    Accordingly, as discussed below, the proposed rule would include 
certain safeguards for investors who wish to continue to receive 
shareholder reports in paper, by requiring prior consent of investors, 
and continuing to make shareholder reports and other required 
information available in paper upon request. The proposed rule would 
also include requirements intended to emphasize the importance of the 
information available on the Web site. These protections are intended 
to maintain the ability of investors who prefer to receive reports in 
paper to continue to do so without confusion, as well as to provide to 
investors clear and prominent printed notifications each time a new 
shareholder report is made available online. We request comment below 
on the potential concerns articulated above, as well as the steps we 
are proposing to address them while capturing the potential benefits 
for investors and funds of electronic communication.
3. Rule 30e-3
    As proposed, new rule 30e-3 would provide that a fund's annual or 
semiannual report to shareholders would be considered transmitted to a 
shareholder of record if certain conditions set forth in the rule are 
satisfied as to (a) availability of the report and other materials, (b) 
shareholder consent, (c) notice to shareholders, and (d) delivery of 
materials upon request of the shareholder.\299\ As discussed below, 
these conditions are generally consistent with similar conditions in 
other rules adopted by the Commission, including its rules regarding 
the use of a summary prospectus, internet delivery of proxy materials, 
and ``householding'' of certain disclosure documents.
---------------------------------------------------------------------------

    \299\ Proposed rule 30e-3(a).
---------------------------------------------------------------------------

a. Availability of Report and Other Materials
    Under the rule as proposed, the fund's report to shareholders under 
rule 30e-1 or 30e-2 would be required to be publicly accessible, free 
of charge, at a

[[Page 33628]]

specified Web site address.\300\ The report would need to be accessible 
beginning no later than the date of the transmission in reliance on 
this option, and ending no earlier than the date when the fund next 
``transmits'' a report required by rule 30e-1 or 30e-2.\301\ This 
requirement is intended to provide shareholders with the opportunity 
for ongoing access from the date of intended transmission until the 
date that the fund transmits its next shareholder report.\302\
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    \300\ Proposed rule 30e-3(b)(1).
    \301\ Id.
    \302\ See 1995 Release, supra note 289 (noting that to satisfy 
access requirements under the Commission's electronic delivery 
guidance, ``as is the case with a paper document, a recipient should 
have the opportunity to retain the information or have ongoing 
access equivalent to personal retention).
---------------------------------------------------------------------------

    In addition to the most current shareholder report, the rule as 
proposed would require that the fund post on its Web site (1) any 
previous shareholder report transmitted to shareholders of record 
within the last 244 days,\303\ and (2) in the case of a fund that is 
not a money market fund or an SBIC, the fund's complete portfolio 
holdings as of the close of its most recent first and third fiscal 
quarters, if any, after the date on which its registration statement 
became effective.\304\ In addition, a fund that is not a money market 
fund or an SBIC would be required to make its portfolio holdings as of 
the end of the next fiscal quarter accessible in the same manner within 
60 days after the close of that period.\305\ We are proposing 
exceptions to the posting requirement of first and third fiscal quarter 
portfolio holdings schedules for money market funds and SBICs because 
money market funds are currently required to post certain portfolio 
holdings and other information on their Web sites pursuant to rule 2a-
7,\306\ and because SBICs are neither currently required to file 
reports on Form N-Q,\307\ nor would SBICs be required to file reports 
on proposed Form N-PORT.\308\
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    \303\ Proposed rule 30e-3(b)(1)(ii). Thus, for example, a fund 
with a December 31 fiscal year end wishing to rely on rule 30e-3 to 
transmit its annual report to shareholders would also be required to 
ensure that its semiannual report as of June 30 is similarly 
accessible. Only those annual and semiannual reports that are 
required under rule 30e-1 or rule 30e-2 are required to be 
accessible in order to rely on rule 30e-3. Thus, for example, if a 
fund is transmitting a report for its first operational semiannual 
period, the fund could rely on rule 30e-3 to transmit that report, 
despite not having made a previous report publicly accessible 
provided that it meets the other required conditions.
    \304\ See proposed rule 30e-3(b)(1)(iii).
    \305\ See proposed rule 30e-3(b)(2). For example, a fund with a 
December 31 fiscal year end wishing to rely on rule 30e-3 to 
transmit its annual report to shareholders would also be required to 
ensure that its complete portfolio holdings for the first quarter of 
the next year is similarly available.
    \306\ See rule 2a-7(h)(10). In 2014, we adopted certain 
amendments to the Web site disclosure requirements for money market 
funds under rule 2a-7. The compliance date for these amendments is 
April 14, 2016. See Money Market Fund Reform 2014 Release, supra 
note 13, at sections III.E.9 and III.N.4.
    \307\ See rule 30b1-5.
    \308\ See proposed rule 30b1-9.
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    These materials would also be required to be publicly accessible in 
the same manner and for the same time period as the current shareholder 
report.\309\ We are proposing this requirement so that shareholders 
have access to a complete year of portfolio holdings information in one 
location (i.e., the Web site on which the report transmitted under the 
proposed rule is made accessible), rather than have to separately 
access portfolio holdings information for the first and third quarters 
by accessing the fund's reports on Form N-PORT for those periods.
---------------------------------------------------------------------------

    \309\ Proposed rules 30e-3(b)(1) and (b)(2).
---------------------------------------------------------------------------

    To conform the form and content of the portfolio holdings schedules 
for the first and third quarters to those schedules presented in the 
fund's shareholder reports for the second and fourth quarters, the 
proposed rule would require the schedules for the first and third 
quarters to be presented in accordance with the schedules set forth in 
Sec. Sec.  210.12-12--12-14 of Regulation S-X [17 CFR 210.12-12--12-
14], which need not be audited.\310\ As discussed above, we have also 
proposed to require that these materials be filed as exhibits to Form 
N-PORT, regardless of whether the fund intends to rely on the rule to 
satisfy its shareholder report transmission obligations.\311\
---------------------------------------------------------------------------

    \310\ Id.
    \311\ See supra Part II.A.2.j.
---------------------------------------------------------------------------

    These Web site portfolio disclosure requirements would be generally 
consistent with funds' current disclosure obligations under Regulation 
S-X for reports filed on Forms N-Q and N-CSR.\312\ Accordingly, we 
anticipate that most funds would have established procedures in place 
to report and validate such disclosures, and that funds would be 
familiar with these disclosure requirements. These Web site portfolio 
disclosure requirements are also intended to provide disclosures that 
would be easily understood and familiar to investors, because these 
disclosures would contain similar information and would be presented in 
a similar manner as those currently included in shareholder reports.
---------------------------------------------------------------------------

    \312\ See generally supra note 27.
---------------------------------------------------------------------------

    Proposed rule 30e-3 would require compliance with certain 
conditions designed to ensure the accessibility of shareholder reports 
and other required materials.\313\ First, the Web site address on which 
the shareholder reports and other required portfolio information are 
made accessible could not be the Commission's Web site address for 
electronic filing.\314\ Second, the materials required to be posted on 
the Web site would have to be presented in a format that is convenient 
for both reading online and printing on paper, and persons accessing 
the materials would have to be able to permanently retain (free of 
charge) an electronic copy of the materials in this format.\315\ These 
conditions are designed to ensure that shareholder reports and other 
information posted on a fund's Web site pursuant to the proposed rule 
are user-friendly and allow shareholders the same ease of reference and 
retention abilities they would have with paper copies of the 
information.
---------------------------------------------------------------------------

    \313\ These requirements are largely similar to the 
accessibility requirements of rule 498 under the Securities Act, 
which allows funds to use a summary prospectus, and rule 14a-16 
under the Securities Exchange Act, which requires issuers and other 
soliciting persons to furnish proxy materials by posting these 
materials on a public Web site and notifying shareholders of the 
availability of these materials and how to access them.
    \314\ See proposed rule 30e-3(b)(3). Currently, the Commission's 
electronic filing system for fund documents is EDGAR.
    \315\ See proposed rules 30e-3(b)(4) and (5).
---------------------------------------------------------------------------

    Third, the rule as proposed would include a safe harbor provision 
that would allow a fund to continue relying on the rule even if it did 
not meet the posting requirements of the rule for a temporary period of 
time.\316\ In order to rely on this safe harbor, a fund would be 
required to have reasonable procedures in place to ensure that the 
required materials are posted on its Web site in the manner required by 
the rule and take prompt action to correct noncompliance with these 
posting requirements.\317\ We are proposing this safe harbor because we 
recognize that there may be times when, due to events beyond a fund's 
control, such as system outages or other technological issues, natural 
disasters, acts of terrorism, pandemic illnesses, or other 
circumstances, a fund is temporarily not

[[Page 33629]]

in compliance with the Internet posting requirements of the rule.\318\
---------------------------------------------------------------------------

    \316\ See proposed rule 30e-3(b)(6). The rule provides that the 
conditions in paragraphs (b)(1) through (b)(5) of the rule (i.e., 
the posting requirements) shall be deemed to be met, notwithstanding 
the fact that the materials required by paragraph (b)(1) of the rule 
are not available for a period of time in the manner required by the 
posting requirements, so long as certain conditions are met. See id.
    \317\ See proposed rules 30e-3(b)(6)(i) and (ii). The rule would 
require prompt action ``as soon as practicable following the earlier 
of the time at which it knows or reasonably should have known'' that 
the required documents are not available in the manner prescribed by 
the posting requirements of the rule.
    \318\ Compare rule 498(e)(4) of the Securities Act (providing a 
similar safe harbor under the summary prospectus rule for the same 
reasons).
---------------------------------------------------------------------------

b. Shareholder Consent
    While we believe that many investors would prefer electronic 
transmission of shareholder reports based on investor testing and 
Internet usage trends, we also acknowledge that there likely will be 
investors that may continue to prefer receiving shareholder reports in 
paper.\319\ To maintain the ability of those shareholders to receive 
paper copies of their shareholder reports, the rule as proposed would 
require that a fund obtain shareholder consent prior to relying on the 
rule to satisfy transmission obligations with respect to a particular 
shareholder.\320\ Specifically, rule 30e-3 as proposed would permit 
electronic transmission of shareholder report to a particular 
shareholder only if the shareholder has either previously consented to 
this method of transmission,\321\ or has been determined to have 
provided implied consent under certain conditions specified in the 
rule.\322\ Under the proposed rule, each series of a registrant 
offering multiple series would need to obtain separate consent as to a 
shareholder, regardless of whether consent was obtained from that 
shareholder by other series offered by that registrant.\323\
---------------------------------------------------------------------------

    \319\ See supra notes 291-296 and accompanying text.
    \320\ These conditions are substantially similar to certain of 
the conditions relating to the Commission's rules on 
``householding'' prospectuses, shareholder reports, and proxy 
statements and information statements to investors who share an 
address. See, e.g., rule 154 under the Securities Act [17 CFR 
230.154] (permitting householding of prospectuses); rules 30e-1 and 
30e-2 under the Investment Company Act (permitting householding of 
fund shareholder reports); rules 14a-3 and 14c-3 under the Exchange 
Act (permitting householding of proxy statements and information 
statements). See generally Delivery of Disclosure Documents to 
Households, Investment Company Act Release No. 24123 (Nov. 4, 1999) 
[64 FR 62540 (Nov. 16, 1999)] (adopting householding rules with 
respect to prospectuses and shareholder reports); Delivery of Proxy 
Statements and Information Statements to Households, Investment 
Company Release No. 24715 (Oct. 27, 2000) [65 FR 65736 (Nov. 2, 
2000) (adopting householding rules with respect to proxy statements 
and information statements). For purposes of the householding rules, 
consent may be written or implied.
    \321\ While the householding rules require that consent be ``in 
writing,'' we are not proposing a similar ``in writing'' requirement 
as, consistent with the Commission's guidance on electronic 
delivery, consent may be provided in a number of ways, including in 
writing, electronically, or telephonically. See 1995 Release, supra 
note 289 (noting that one method for satisfying evidence of delivery 
is to obtain informed consent from an investor to receive 
information through a particular medium); 1996 Release, supra note 
289 (stating that informed consent should be made by written or 
electronic means); 2000 Release, supra note 289 (stating 
Commission's view that an issuer or market intermediary may obtain 
an informed consent telephonically, as long as a record of that 
consent is retained).
    \322\ Proposed rule 30e-3(c).
    \323\ See id.
---------------------------------------------------------------------------

    To obtain implied consent as to a shareholder, the fund would be 
required to transmit to the shareholder a separate written statement 
(``Initial Statement''), at least 60 days before it begins to rely on 
the rule, notifying the shareholder of the fund's intent to make future 
shareholder reports available on the fund's Web site until the 
shareholder revokes consent.\324\ As proposed, the Initial Statement 
must be written using plain English principles so that it will be 
easily understood by most investors \325\ and:
---------------------------------------------------------------------------

    \324\ See proposed rule 30e-3(c)(1). For purposes of the rule, 
``Initial Statement'' would be defined as the notice described in 
paragraph (c)(1) of the rule. See proposed rule 30e-3(h)(2).
    \325\ See proposed rules 30e-3(c)(1) and (e). See also A Plain 
English Handbook, Securities and Exchange Commission, available at 
https://www.sec.gov/pdf/handbook.pdf.
---------------------------------------------------------------------------

     State that future shareholder reports will be accessible, 
free of charge, at a Web site; \326\
---------------------------------------------------------------------------

    \326\ Proposed rule 30e-3(c)(1)(i).
---------------------------------------------------------------------------

     explain that the fund will no longer mail printed copies 
of shareholder reports to the shareholder unless the shareholder 
notifies the fund that he or she wishes to receive printed reports in 
the future; \327\
---------------------------------------------------------------------------

    \327\ Proposed rule 30e-3(c)(1)(ii).
---------------------------------------------------------------------------

     include a toll-free telephone number and be accompanied by 
a reply form that is pre-addressed with postage-paid and that includes 
the information that the fund would need to identify the shareholder, 
and explain that the shareholder can use either of those two methods at 
any time to notify the fund that he or she wishes to receive printed 
reports in the future; \328\
---------------------------------------------------------------------------

    \328\ Proposed rule 30e-3(c)(1)(iii).
---------------------------------------------------------------------------

     state that the fund will mail printed copies of future 
shareholder reports within 30 days after the fund receives notice of 
the shareholder's preference; \329\ and
---------------------------------------------------------------------------

    \329\ Proposed rule 30e-3(c)(1)(iv).
---------------------------------------------------------------------------

     contain a prominent legend in bold-face type that states: 
``How to Continue Receiving Printed Copies of Shareholder Reports.'' 
\330\
---------------------------------------------------------------------------

    \330\ Proposed rule 30e-3(c)(1)(v). This legend would be 
required to appear on the envelope on which the Initial Statement is 
delivered, or alternatively, if the Initial Statement is delivered 
separately from other communications to investors, the legend may 
appear either on the Initial Statement or on the envelope in which 
the Initial Statement is delivered.
---------------------------------------------------------------------------

    The Initial Statement is designed to permit funds to infer that a 
shareholder has consented to electronic transmission of future 
shareholder reports by alerting the shareholder to the fact that the 
shareholder will no longer receive printed copies in the future unless 
the shareholder notifies the fund that he or she wishes to receive 
print copies of such reports in the future. Because of the importance 
of this information, in addition to the required prominent legend on 
the envelope in which the Initial Statement is delivered or on the 
Initial Statement itself, the proposed rule would require certain 
conditions intended to ensure that the Initial Statement is not 
obscured by other materials. Specifically, the proposed rule would 
require that the Initial Statement could not be incorporated into or 
combined with another document,\331\ nor could it be sent along with 
other shareholder communications (with the exception of the fund's 
current summary prospectus, statutory prospectus, statement of 
additional information, or Notice of Internet Availability of Proxy 
Materials under rule 14a-16 under the Exchange Act).\332\
---------------------------------------------------------------------------

    \331\ See proposed rule 30e-3(c)(2).
    \332\ See proposed rule 30e-3(c)(3). For purposes of the 
proposed rule, (1) ``summary prospectus'' would mean the summary 
prospectus described in paragraph (b) of rule 498, (2) ``statutory 
prospectus'' would mean a prospectus that satisfies the requirements 
of section 10(a) of the Securities Act, and (3) ``statement of 
additional information'' means the statement of additional 
information required by Part B of the registration form applicable 
to the fund. See proposed rule 30e-3(h).
---------------------------------------------------------------------------

    If the fund does not receive the reply form or other notification 
indicating that a particular shareholder wishes to continue to receive 
paper reports by mail within 60 days after the fund sends the Initial 
Statement, then the fund may begin to transmit shareholder reports to 
that shareholder electronically, provided that it meets the other 
conditions of the rule.\333\
---------------------------------------------------------------------------

    \333\ Proposed rule 30e-3(c)(4).
---------------------------------------------------------------------------

c. Notice
    Proposed rule 30e-3 would require funds relying on the rule with 
respect to a shareholder who has consented to electronic transmission 
pursuant to the conditions of paragraph (c)(1) of the rule to send a 
notice (``Notice'') within 60 days of the close of the fiscal period to 
which the report relates.\334\ The proposed requirements for a Notice 
largely mirror the notice requirements under the Commission's rules 
mandating the posting of proxy materials online.\335\
---------------------------------------------------------------------------

    \334\ See proposed rule 30e-3(d). For purposes of the rule, 
``Notice'' would be defined as the notice described in paragraph (d) 
of the rule. See proposed rule 30e-3(h)(3).
    \335\ See rule 14a-16 under the Exchange Act [17 CFR 240.14a-
16].
---------------------------------------------------------------------------

    As proposed, the Notice, like the Initial Statement, would be 
required to

[[Page 33630]]

be written using plain English principles so that it will be easily 
understood by most investors.\336\ and:
---------------------------------------------------------------------------

    \336\ See proposed rules 30e-3(d)(1) and (e).
---------------------------------------------------------------------------

     Contain a prominent legend in bold-face type stating that 
an important report to shareholders is available online and in print by 
request; \337\
---------------------------------------------------------------------------

    \337\ Proposed rule 30e-3(d)(1)(i). The rule as proposed would 
also require that the legend include the specific fund name to which 
the Notice relates, or the fund complex name.
---------------------------------------------------------------------------

     state that each shareholder report contains important 
information about the fund, including its portfolio holdings, and is 
available on the Internet or, upon request, by mail, and encouraging 
shareholders to access and review the report; \338\
---------------------------------------------------------------------------

    \338\ Proposed rule 30e-3(d)(1)(ii).
---------------------------------------------------------------------------

     include a Web site address that leads directly to each 
report the fund is transmitting to the recipient shareholder in 
reliance on rule 30e-3; \339\
---------------------------------------------------------------------------

    \339\ Proposed rule 30e-3(d)(1)(iii). A fund could send a joint 
Notice with other funds held by the same shareholder in a fund 
complex; however, the Notice would have to include a link to each of 
those funds' shareholder reports. A fund may also send a separate 
Notice if it so wishes.
---------------------------------------------------------------------------

     include the Web site address where the shareholder report 
and other required portfolio information is posted; \340\
---------------------------------------------------------------------------

    \340\ Proposed rule 30e-3(d)(1)(iv). The Web site address would 
have to be specific enough to lead investors directly to the 
documents that are required to be posted online under the rule. The 
Web site address could be a central site with prominent links to 
each document, but could not be a home page or section of the Web 
site other than where the documents are posted. See id.
---------------------------------------------------------------------------

     provide instructions on how a shareholder may request, at 
no charge, a paper copy of the shareholder report or other materials 
required to be made accessible online, and an indication that the 
shareholder will not receive a paper copy of the report unless 
requested; \341\ and
---------------------------------------------------------------------------

    \341\ Proposed rule 30e-3(d)(1)(v).
---------------------------------------------------------------------------

     include a toll-free telephone number and must be 
accompanied by a reply form that is pre-addressed with postage-paid and 
that includes the information that the fund would need to identify the 
shareholder, and explain that the shareholder can use either of those 
two methods at any time to notify the fund that he or she wishes to 
receive printed reports in the future.\342\
---------------------------------------------------------------------------

    \342\ Proposed rule 30e-3(d)(1)(vi).
---------------------------------------------------------------------------

    The proposed Notice is designed to alert shareholders to the 
availability of a shareholder report online and to provide shareholders 
with information on how to obtain a paper copy of the report if they 
should want one. We believe it is important to limit the information in 
the Notice and the other materials sent along with the Notice in order 
to ensure that shareholders are made aware of the availability of a 
shareholder report and so that the availability of the report does not 
become obscured. Therefore, the rule as proposed would limit the 
information contained in the Notice to the information required by the 
rule.\343\ The Notice also could not be incorporated into or combined 
with another document,\344\ nor could it be sent along with other 
shareholder communications (with the exception of the fund's current 
summary prospectus, prospectus, statement of additional information, or 
Notice of Internet Availability of Proxy Materials under rule 14a-16 
under the Exchange Act).\345\
---------------------------------------------------------------------------

    \343\ See proposed rule 30e-3(d)(3).
    \344\ See proposed rule 30e-3(d)(2).
    \345\ See proposed rule 30e-3(d)(4).
---------------------------------------------------------------------------

    Similar to the Commission's rules on householding prospectuses, 
shareholder reports, and proxy statements and information 
statements,\346\ proposed rule 30e-3 also would allow funds to send one 
Notice to shareholders who share an address so long as the fund 
addresses the Notice to the shareholders individually or as a 
group.\347\ In addition, the proposed rule would require funds to file 
a form of the Notice with the Commission not later than 10 days after 
the Notice is sent to shareholders.\348\ This filing would occur on a 
new EDGAR submission type which would be created by the Commission. We 
believe the Notice filing requirement would assist us in overseeing 
compliance with the rule.
---------------------------------------------------------------------------

    \346\ See, e.g., rule 154 under the Securities Act (permitting 
householding of prospectuses); rules 30e-1 and 30e-2 under the 
Investment Company Act (permitting householding of fund shareholder 
reports); rules 14a-3 and 14c-3 under the Exchange Act (permitting 
householding of proxy statements and information statements).
    \347\ See proposed rule 30e-3(d)(5).
    \348\ See proposed rule 30e-3(d)(6).
---------------------------------------------------------------------------

d. Delivery Upon Request
    Proposed rule 30e-3 would also require, as a condition to reliance 
on the rule to transmit shareholder reports electronically, that the 
fund (or a financial intermediary through which shares of the fund may 
be purchased or sold) must send, at no cost to the requestor and by 
U.S. first class mail or other reasonably prompt means, a paper copy of 
any of the materials discussed above--viz., the fund's most recent 
annual and semiannual reports, and the fund's portfolio holdings as of 
its most recent first and third fiscal quarters--to any person 
requesting such a copy within three business days after receiving a 
request for a paper copy.\349\ This requirement is intended to allow 
for investors to receive shareholder reports and portfolio information 
in print format, if they so prefer, even if they have consented to 
electronic transmission without revoking the consent.\350\
---------------------------------------------------------------------------

    \349\ Proposed rule 30e-3(f).
    \350\ See, e.g., 1995 Release, supra note 289 (stating the 
Commission's belief that ``as a matter of policy, where a person has 
a right to receive a document under the federal securities laws and 
chooses to receive it electronically, that person should be provided 
with a paper version of the document if any consent to receive 
documents electronically were revoked or the person specifically 
requests a paper copy (regardless of whether any previously provided 
consent was revoked.'').
---------------------------------------------------------------------------

e. Prospectuses and Statements of Additional Information Transmitted 
Under Rule 30e-1(d)
    Rule 30e-1(d) under the Investment Company Act permits an open-end 
management investment company to transmit a copy of its prospectus or 
statement of additional information in place of its shareholder report, 
if it includes all of the information that would otherwise be required 
to be contained in the shareholder report.\351\ We recognize that the 
nature and purpose of the fund prospectus is different from that of 
fund shareholder reports. Accordingly, at this time, we are not 
proposing to permit a similar regime for fund prospectus delivery 
obligations under the Securities Act. As a result, we do not believe 
that it would be appropriate to permit the transmission of statutory 
prospectuses in the manner provided under the proposed rule. Therefore, 
the proposed rule would not be available to a fund seeking to transmit 
a copy of its currently effective statutory prospectus or statement of 
additional, or both, as permitted by paragraph (d) of rule 30e-1.\352\

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

    \351\ See rule 30e-1(d).
    \352\ Proposed rule 30e-3(g).
---------------------------------------------------------------------------

4. Use of Summary Schedule of Investments
    Under the current rules, in lieu of providing a complete schedule 
of portfolio investments as part of the financial statements included 
in its shareholder report, a fund may provide a summary schedule of 
portfolio investments (``Summary Schedule'').\353\ Pursuant to Rule 12-
12C of Regulation S-X, the Summary Schedule generally must list 
separately the 50 largest issues and any other issue the value of which

[[Page 33631]]

exceeded one percent of the net asset value of the fund at the close of 
the period.\354\
---------------------------------------------------------------------------

    \353\ See, e.g., Instruction 1 to Item 27(b)(1) of Form N-1A 
(permitting the inclusion of Schedule VI--Summary schedule of 
investments in securities of unaffiliated issuers under Rule 12-12C 
of Regulation S-X in lieu of Schedule 1 -- Investments of securities 
of unaffiliated issuers under Rule 12-12 of Regulation S-X.
    \354\ See rule 12-12C, n.3 Regulation S-X [17 CFR 210.12-12C].
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    We believe that use of the summary schedule may be 
unnecessary,\355\ and in particular, may be potentially confusing or 
cumbersome to investors seeking to access the fund's complete portfolio 
holdings.\356\ For these reasons, we are proposing amendments to our 
registration forms that would restrict funds relying on proposed rule 
30e-3 from providing a Summary Schedule in their shareholder reports in 
lieu of a complete schedule.\357\
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    \355\ For example, a fund using the summary schedule for 
considerations relating to printing and mailing costs would likely 
have fewer such concerns if the report is posted on its Web site in 
reliance on the proposed rule.
    \356\ For example, a shareholder consenting to electronic 
transmission that wishes to view the complete portfolio holdings 
would, pursuant to the rule as proposed, first receive a notice of 
the availability of the report, then take the step to access the 
report on the fund's Web site, only to have to take a subsequent 
step to request or otherwise access the full schedule.
    \357\ See proposed amendments to Item 27(b) of Form N-1A; Item 
24, Instruction 7 of Form N-2; and Item 28(a), Instruction 7(i) of 
Form N-3.
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5. Related Disclosure Amendments
    We are also proposing some related amendments to certain of our 
rules and forms. First, we are proposing to amend rule 498 under the 
Securities Act, which concerns the use of a summary prospectus,\358\ to 
require funds relying on proposed rule 30e-3 to include as part of the 
legend on the cover page of the fund's summary prospectus the Web site 
address required to be included in the Notice.\359\ As proposed, the 
Web site address that leads to shareholder report information could be 
the same as the Web site address that leads to prospectus information, 
provided that the other conditions of each rule are met, but funds 
would also be permitted to use different Web site addresses for each 
type of material and provide both addresses in the legend.\360\ This 
requirement is intended to provide investors an additional reminder of 
the availability of shareholder report and related portfolio holdings 
information on the fund's Web site.
---------------------------------------------------------------------------

    \358\ See rule 498 under the Securities Act [17 CFR 230.498].
    \359\ See rule 498(b)(1)(v)(A) under the Securities Act.
    \360\ See id.
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    Second, we are proposing to amend rule 498 under the Securities Act 
and rule 14a-16 under the Exchange Act to include an Initial Statement 
or Notice that would be required by proposed rule 30e-3 among the 
materials that are permitted to accompany and have equal or greater 
prominence than the summary prospectus prepared in reliance on rule 498 
and a notice of Internet availability of proxy materials.\361\ These 
amendments are intended to permit a fund's Initial Statement and Notice 
to be sent with its summary prospectus or notice of Internet 
availability of proxy materials if the fund wishes to send them in that 
manner.\362\
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    \361\ See proposed rules 498(f)(2) under the Securities Act and 
14a-16(f)(2)(iii) under the Exchange Act.
    \362\ See proposed rule 30e-3(d)(4).
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6. Requests for Comment
    We request comments on our proposal that would permit electronic 
transmission of shareholder reports.
     To what extent are funds currently relying on the 
Commission's guidance on the use of electronic media to deliver or 
transmit disclosure documents and other information to shareholders? To 
what extent have shareholders elected to receive disclosure documents 
and other information in general, and shareholder reports in 
particular, through electronic means? In the case of shareholders who 
have elected electronic delivery of disclosure documents in general, 
and delivery of shareholder reports in particular, to what extent are 
those shareholders accessing those materials online? Please provide 
supportive data to the extent available.
     If proposed rule 30e-3 is adopted, to what extent would 
funds (i) choose to rely on the rule, and (ii) continue to rely on 
guidance concerning electronic transmission that we have already 
issued?
     Would availability of the rule change in any way current 
industry practices on transmitting shareholder reports electronically? 
For example, we expect that funds would continue to rely on the 
Commission's guidance to electronically transmit reports to 
shareholders who have elected to receive reports electronically, and 
rely on the rule with respect to shareholders who have not so elected. 
For administrative or other purposes, would funds discontinue their 
reliance on the Commission's guidance and instead rely on the rule to 
transmit reports electronically with respect to their entire 
shareholder base? If so, why? What impact, if any, would the proposed 
rule have on the transmission of reports to shareholders of UITs 
required to transmit reports pursuant to rule 30e-2 under the 
Investment Company Act? What impact, if any, would the proposed rule 
have on the transmission of reports to shareholders holding fund shares 
through financial intermediaries or other omnibus type arrangements? 
Should we permit funds that rely on rule 30e-3 to continue to rely on 
prior electronic transmission guidance for certain of their 
shareholders? Why or why not?
     If rule 30e-3 is adopted as proposed, in the case of funds 
relying on the rule to transmit reports electronically to one or more 
shareholders, would funds nonetheless seek shareholder consent to 
transmit reports to those shareholders pursuant to the Commission's 
electronic guidance in lieu of the rule? Why or why not?
     Should we, as we have proposed, allow funds to transmit 
reports to shareholders electronically by making them accessible on a 
Web site? Would investors prefer that these materials be transmitted in 
this manner? What would be the effect of proposed rule 30e-3 on the 
ability of investors to access shareholder reports? Would the 
shareholder report information be more useful or less useful if 
transmitted in the manner proposed? Would investors be more aware or 
less aware of the availability of the information if transmitted in 
reliance on the proposed rule?
     Would any positive or negative effect of the proposed rule 
on investors be disproportionately greater for certain investors than 
for others? If so, which investors would be disproportionately 
affected, to what extent, and how would such effects manifest? What, if 
any, additional measures could help mitigate any such disproportionate 
effects? Please provide supportive data to the extent available.
     Rule 30e-3 as proposed contains a number of conditions to 
be satisfied for reliance on the rule. Are the proposed conditions 
appropriate? Are there conditions that should be added or are any of 
the proposed conditions inappropriate? If so, state the conditions and 
the reasons why.
     The rule as proposed would require that the materials 
required to be accessible online be publicly accessible, free of 
charge, at the Web site specified in the Notice, and does not expressly 
require that the Web site be the fund's Web site. Should the rule 
require that the materials be accessible at the fund's Web site? Why or 
why not?
     What materials should be required to be accessible in 
order for a fund to rely on the rule? For example, we have proposed 
that a fund relying on the rule would be required to make accessible 
the shareholder report, the shareholder report for the prior period, 
and in the case of a fund that is a management

[[Page 33632]]

company other than a money market fund or an SBIC, the complete 
portfolio holdings for the most recent first and third fiscal quarters. 
Is it appropriate to require funds to post holdings information 
covering a full year? Should we require information be posted covering 
a longer period or a shorter period? If so, why? Should money market 
funds and SBICs relying on the rule be required to post complete 
portfolio holdings for the first and third quarters? Why or why not?
     The rule as proposed would require that the materials made 
accessible on the Web site be presented in a format or formats that are 
convenient for both reading online and printing on paper. Is the 
proposed format requirement appropriate? Are there liability or other 
concerns that would arise in connection with meeting a fund's 
obligation to transmit shareholder reports under Section 30(e) and the 
rules thereunder? Should we instead require that the materials be 
presented in a format or formats that are human-readable and capable of 
being printed on paper in human-readable format? Why or why not?
     How soon should each of the materials be required to be 
accessible, and how long should each be required to remain accessible?
     The proposed rule would contain a safe harbor for 
instances in which the materials required to be made accessible are not 
available for a temporary period of time. Is the safe harbor as 
proposed appropriate, or should it be modified? For example, should the 
rule be more proscriptive as to the period of time in which action must 
be taken to resolve any issues?
     Should we require the Web site on which the proposed 
rule's required materials are made accessible to incorporate safeguards 
to protect the anonymity of its visitors? For example, should we 
require similar conditions to those provided in rule 14a-16 under the 
Exchange Act relating to Internet availability of proxy materials? Why 
or why not? If so, what specific requirements should we consider?
     Should the proposed rule require that a shareholder 
consent to electronic transmission of shareholder reports before a fund 
begins to rely on the rule? Should we permit funds to obtain implied 
consent, as proposed, or should we require funds to receive express 
consent? Are there certain circumstances in which funds should not be 
permitted to obtain implied consent? For example, if an investor upon 
opening a new account does not opt-in to electronic delivery of 
documents, should the fund be permitted nonetheless to seek to rely on 
the proposed rule as to that shareholder? Why or why not?
     Under the proposed rule, each series of a registrant 
offering multiple series would need to obtain separate consent as to a 
shareholder, regardless of whether consent was obtained from that 
shareholder by other series offered by that registrant. If a fund has 
obtained implied consent from a shareholder as to a particular series, 
and subsequently the shareholder invests in one or more other series 
offered by the fund, should the fund be required to obtain consent as 
to those other series, or should the fund be permitted to infer consent 
as to all series offered by the fund? Why or why not? Should the fund 
be permitted to infer consent as to only other series offered by the 
registered investment company, or should the fund be permitted to infer 
consent as to other funds within the fund complex? What, if any, are 
the special considerations relating to investors who invest through 
intermediaries?
     Under the proposed rule, to obtain implied consent as to a 
shareholder, the fund would be required to transmit to the shareholder 
an Initial Statement, at least 60 days before it begins to rely on the 
rule. Are the proposed disclosures for the Initial Statement 
appropriate? Should a fund be required to provide to a shareholder 
other disclosures before inferring consent to electronic transmission?
     Should the rule require funds to provide multiple written 
statements (i.e., in addition to the Initial Statement) prior to 
inferring consent to electronic transmission? If so, how many 
additional statements and how long after the Initial Statement should 
they be provided? What period of time after a fund transmits the 
Initial Statement should we permit the fund to infer consent? Is 60 
days an appropriate time? Why or why not?
     What methods should shareholders be permitted to use to 
deny or revoke consent to electronic transmission?
     Should we permit the Initial Statement to be incorporated 
into, or combined with, one or more other documents? If so, which 
documents should we permit the Initial Statement to be incorporated 
into or combined with?
     The rule as proposed would require that the Initial 
Statement must be sent separately from other types of communications 
and may not accompany any other document or materials except the fund's 
current summary prospectus, statutory prospectus, statement of 
additional information, or Notice of Internet Availability of Proxy 
Materials. Is this requirement appropriate? Should we permit the 
Initial Statement to accompany one or more other documents? If so, 
which documents?
     Should we, as we have proposed for the Notice, permit the 
Initial Statement to be sent in a ``householded'' manner?
     Should we require that the Initial Statement not contain 
any additional information other than that specified in the rule? Why 
or why not? Absent any requirement specified by rule, what other 
information would funds generally include in the Initial Statement? For 
example, would funds provide information on how shareholders could 
elect to receive the shareholder report and other documents and 
information electronically by satisfying the conditions contained in 
the Commission's guidance on use of electronic media relating to 
notice, access, and evidence of delivery?
     Should the rule permit funds to obtain implied consent 
from shareholders who have previously revoked consent? If so, should 
the rule prescribe a minimum period of time after consent was revoked 
before re-attempting to obtain implied consent from a shareholder? What 
period should that be and why?
     Should each fund be required to send a shareholder a 
Notice each time it transmits a shareholder report electronically under 
the proposed rule? Why or why not?
     We anticipate that the Notice would be sent in paper and 
mailed to shareholders. Should we permit the Notice to be sent by email 
if the shareholder has provided an email address? Why or why not? For 
example, are there any concerns that under such an approach, while a 
shareholder may have provided an email address (e.g., as part of 
opening an account), the shareholder may nonetheless neither prefer nor 
expect to receive documents or other information through that medium? 
To what extent are funds and intermediaries, pursuant to regulatory 
requirements or otherwise, maintaining up-to-date email addresses for 
investors? Would an investor be more likely to view a Notice delivered 
by one method versus another (i.e., print versus electronically)? Would 
an investor be more likely to access the related shareholder report and 
other required materials when notified by one method or the other?
     Are the proposed disclosures for the Notice appropriate? 
Should we require that the disclosure in the Notice concerning a 
shareholder's ability to indicate a preference for paper transmission 
in the future be preceded

[[Page 33633]]

by an additional bold-face legend or otherwise made more prominent?
     Should we permit the Notice to be incorporated into, or 
combined with, one or more other documents? If so, which documents 
should we permit the Notice to be incorporated into or combined with?
     The rule as proposed would require that the Notice must be 
sent separately from other types of communications and may not 
accompany any other document or materials except the fund's current 
summary prospectus, statutory prospectus, statement of additional 
information, or Notice of Internet Availability of Proxy Materials. Is 
this requirement appropriate? Should we permit the Notice to accompany 
one or more other documents? If so, which documents? For example, in 
the case of a Notice sent to a shareholder for the first time, should 
we permit or require the Notice to be accompanied with materials 
explaining the new transmission regime? Why or why not?
     Should we, as proposed, permit funds to either send 
separate Notices for each fund or send combined Notices for more than 
one fund held by a particular shareholder, or should the rule require 
one or the other of those approaches?
     Should we require that the Notice not contain any 
additional information other than that specified in the rule? Why or 
why not? Absent any restriction by rule, what other information would 
funds generally include in the Notice? For example, would funds provide 
information on how shareholders could elect to receive the shareholder 
report and other documents and information electronically by satisfying 
the conditions contained in the Commission's guidance on use of 
electronic media relating to notice, access, and evidence of delivery?
     In the case of management companies that are not SBICs, 
should we require such funds to send a notice each time the fund makes 
accessible its complete portfolio holdings for the first or third 
fiscal quarters? Why or why not?
     Should we, as proposed, permit the Notice to be sent in a 
``householded'' manner?
     We are proposing that funds would file a form of the 
Notice with the Commission not later than 10 days after it is sent to 
shareholders. Is 10 days sufficient to meet this proposed filing 
requirement, or should some other filing period be required? If so, 
what time period and why?
     We anticipate that the form of Notice would be filed with 
the Commission on EDGAR pursuant to a separate EDGAR submission type. 
Should we instead require that the form of Notice be filed as an 
exhibit to a report filed with the Commission? For example, should we 
require that the form of Notice be filed as part of the fund's report 
on Form N-CSR or Form N-CEN? Why or why not?
     Should we require, as proposed, that funds send a paper 
copy of a shareholder report upon request? If so, how soon should a 
fund be required to send the report after receiving a request?
     Should we restrict funds relying on the proposed rule from 
using the summary schedule of investments? Why or why not? Are there 
considerations relating to the use of the summary schedule of 
investments other than those relating to printing and mailing costs 
that would make the summary schedule an important option for funds to 
provide portfolio holdings disclosures? Should we restrict funds from 
using the summary schedule only in reports transmitted pursuant to the 
rule, and permit funds to use the summary schedule in printed reports 
that are mailed to shareholders? Would funds prefer this additional 
flexibility? Why or why not?
     Are the proposed amendments to rule 498 and the 
registration forms regarding Web site availability of documents 
appropriate? Should we also, for example, specifically require funds 
relying on the rule to disclose on the cover page or elsewhere in the 
summary prospectus or statutory prospectus its reliance on the rule and 
what specific documents are made available on the Web site?
     To what extent would the proposed rule reduce burdens such 
as printing and mailing costs borne by funds? Would these burden 
reductions ultimately accrue to fund shareholders in the form of lower 
total fund operating expenses? For example, would these reductions 
ultimately accrue to shareholders in funds with arrangements that 
permit or limit payments to service providers or intermediaries such as 
broker-dealers in connection with the printing and mailing of 
shareholder reports? Please provide supportive data to the extent 
available.
     In addition to allowing funds to electronically transmit 
reports to shareholders, should we also consider options for permitting 
similar delivery of summary or statutory prospectuses? Why or why not?

E. Form N-CEN and Rescission of Form N-SAR

1. Overview
    We are proposing to amend the framework by which registered 
investment companies report census-type information to the Commission 
by rescinding Form N-SAR and replacing it with a new form--Form N-
CEN.\363\ Form N-SAR was adopted by the Commission in 1985 and requires 
that funds report a wide variety of census information to the 
Commission, including information relating to a fund's organization, 
service providers, fees and expenses, portfolio strategies and 
investments, portfolio transactions, and share transactions. Funds 
generally must file reports on Form N-SAR semi-annually, except for 
UITs, which file annually.\364\ By contrast, as discussed further 
below, we are proposing to have all funds file reports on Form N-CEN 
annually.\365\
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    \363\ We are proposing to rescind Form N-SAR and replace it with 
a new census reporting form, Form N-CEN, rather than to amend Form 
N-SAR in order to avoid technical difficulties that could arise with 
filing reports on an amended Form N-SAR (e.g., difficulties related 
to changes to filing format and form specifications).
    \364\ See rules 30b1-1 and 30a-1.
    \365\ See proposed amendments to rule 30a-1.
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    In recent years, Commission staff has found that the utility of the 
information reported on Form N-SAR has become increasingly limited. We 
believe there are two primary reasons for this limited utility. First, 
in the past two decades, we have not substantively updated the 
information reported on the form to reflect new market developments, 
products, investment practices, or risks. Second, the technology by 
which funds file reports on Form N-SAR has not been updated and limits 
the Commission staff's ability to extract and analyze the data 
reported. Accordingly, we believe that by updating the content and 
format requirements for census reporting, as discussed below, the 
Commission will be better able to carry out its regulatory functions, 
while at the same time reducing burdens on filers.
    Proposed Form N-CEN would gather similar census information about 
the fund industry that funds currently report on Form N-SAR, which 
could be aggregated and analyzed by Commission staff to better 
understand industry trends, inform policy, and assist with the 
Commission's examination program. However, in order to improve the 
quality and utility of information reported, proposed Form N-CEN would 
streamline and update information reported to the Commission to reflect 
current Commission staff information

[[Page 33634]]

needs and developments in the industry.\366\ Additionally, where 
possible, we have endeavored to exclude items from proposed Form N-CEN 
that are disclosed or reported pursuant to other Commission forms, or 
are otherwise available; however, in some limited cases, we are 
proposing to collect information that may be similarly disclosed or 
reported elsewhere, but that the staff would benefit from collecting in 
a structured format.
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    \366\ We are proposing to streamline our data collection, in 
part, through the use of yes/no questions in order to flag certain 
information for follow-up, if necessary, by Commission staff. See, 
e.g., Item 11 and Item 30.a of proposed form N-CEN. For example, 
staff of our Office of Compliance Inspections and Examinations may 
rely on responses to flag questions in Form N-CEN to indicate areas 
for follow-up discussion or to request additional information.
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    In order to improve the utility of the information reported to the 
Commission, we are also proposing that reports on Form N-CEN be 
structured in an XML format.\367\ By requiring reports on Form N-CEN to 
be filed in XML format, filers will no longer be required to use 
outdated technology for census reporting. Additionally, requiring 
reports on Form N-CEN to be filed in an updated structured format will 
allow reported information to be more efficiently and effectively 
validated, retrieved, searched, and analyzed through automated means 
and, therefore, more useful to end users.\368\
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    \367\ The Commission has adopted a number of other forms that 
are structured in an XML format, including Form N-MFP. Reports on 
Form N-SAR, by contrast, are filed with an outdated filing 
application.
    \368\ See supra Part II.A.3 (discussing benefits to the use of 
XML for reports on Form N-PORT).
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2. Who Must File Reports on Form N-CEN
    We are proposing to require that all registered investment 
companies, except face amount certificate companies,\369\ file reports 
on Form N-CEN.\370\ Funds offering multiple series would be required to 
report information in Part C of the form as to each series separately, 
even if some information is the same for two or more series.\371\
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    \369\ Face-amount certificate companies are investment companies 
which are engaged or propose to engage in the business of issuing 
face-amount certificates of the installment type, or which have been 
engaged in in such businesses and have any such certificates 
outstanding. See section 4(1) of the Investment Company Act [15 
U.S.C. 80a-4(1)]. Face amount certificate companies are not 
currently required to file reports on Form N-SAR. See General 
Instruction A to Form N-SAR. Face amount certificate companies would 
continue to file periodic reports pursuant to section 13 or section 
15(d) of the Exchange Act.
    \370\ See proposed amendments to rule 30a-1. Consistent with 
Form N-SAR, BDCs, which are not registered investment companies, 
would not be required to file reports on Form N-CEN.
    \371\ Proposed General Instruction A. Unlike Form N-PORT where 
separate reports would be filed for each series, registrants would 
file one report on Form N-CEN covering all series (as is currently 
done with reports on Form N-SAR). We are proposing this framework 
for Form N-CEN to help minimize reporting burdens, as much of the 
information that would be required by Form N-CEN (for example, the 
information reported pursuant to Parts A and B) would be the same 
across a fund's various series. We note that Form N-SAR's approach 
to series information is slightly different than that of proposed 
Form N-CEN, in that Form N-SAR allows registrants to indicate 
instances where the information is the same across all series, 
rather than requiring repetitive information. See General 
Instruction D(8) of Form N-SAR. Unlike Form N-SAR, however, we have 
sought to organize the information requested in proposed Form N-CEN 
so that information that is the same for all series is reported in 
Parts A and B of the form, with Part C, the part of the form that 
requires each series to respond separately, requesting information 
that is more likely to differ between series. Accordingly, we 
anticipate the need to report repetitive information should be 
limited.
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    Like Form N-SAR, the sections of Form N-CEN that a fund is required 
to complete would depend on the type of registrant in order to better 
tailor the disclosure requirements.\372\ All funds would be required to 
complete Parts A and B, and file any attachments required under Part G. 
In addition, funds would complete the following Parts as applicable:
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    \372\ See General Instruction A (Rule as to Use of Form N-CEN) 
to proposed Form N-CEN. As reflected in General Instruction A, 
registrants would be required to respond to each item in their 
required sections. To the extent an item in a required section is 
inapplicable to a registrant, the registrant would respond ``N/A'' 
to that item. Registrants would not, however, have to provide 
responses to items in sections they are not required to fill out.
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     All management companies, other than SBICs, would complete 
Part C;
     closed-end funds and SBICs would complete Part D;
     ETFs (including those that are UITs) would complete Part 
E; \373\ and
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    \373\ Certain investment products known as ``exchange-traded 
managed funds'' would also be required to complete Part E: of 
proposed Form N-CEN.
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     UITs would complete Part F.\374\
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    \374\ Management companies that are registered on Form N-3 would 
also complete certain items in Part F as directed by Item 7.c.i of 
proposed Form N-CEN. See General A to proposed Form N-CEN.
---------------------------------------------------------------------------

    We request comment on who must file Form N-CEN.
     Should we require any other types of investment companies 
to file reports on Form N-CEN? For example, should face-amount 
certificate companies be required to file reports on Form N-CEN?
     Should funds offering multiple series be required to file 
a report for each series separately, rather than one report covering 
multiple series, as proposed?
3. Frequency of Reporting and Filing Deadline
    Management investment companies currently file reports on Form N-
SAR semi-annually,\375\ and UITs file such reports annually.\376\ To 
reduce reporting burdens, we are proposing that reports on Form N-CEN 
be filed annually, regardless of type of filer.\377\ Form N-CEN would 
require census-type information, which in our experience does not 
change as frequently as, for example, portfolio holdings information. 
Accordingly, we believe that an annual filing requirement would be 
sufficient for purposes of review by Commission staff, as well as 
investors and other market participants that might use this 
information.\378\
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    \375\ See rule 30b1-1.
    \376\ See rule 30a-1.
    \377\ See proposed amendments to rule 30a-1.
    \378\ As discussed above, certain items that are currently 
reported on Form N-SAR that would be helpful to have updated on a 
more frequent basis would be moved to proposed Form N-PORT. For 
example, item 28 of Form N-SAR requires the fund to provide its 
monthly sales and repurchases of the Registrant's/Series' shares. In 
order to increase the timeliness of the information reported to the 
staff for funds flows, certain information relating to monthly flows 
would be reported on item B.6 of proposed Form N-PORT, if adopted.
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    We are proposing a filing period of 60 days after the end of the 
fiscal year for funds to file reports on Form N-CEN.\379\ This is the 
same filing period that management companies currently have to file 
reports on Form N-SAR.\380\ As with Form N-SAR, and having considered 
the amount and nature of the information that would be requested in 
proposed Form N-CEN, we continue to believe that a sixty-day filing 
period would appropriately balance the staff's need for timely 
information against the time necessary for a fund to collect, verify, 
and report the required information to the Commission.
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    \379\ Management companies are currently required to file Form 
N-SAR reports no more than 60 days after the close of their fiscal 
year and fiscal second quarter. See rule 30b1-1 under the Investment 
Company Act [17 CFR 270.30b1-1]. Accordingly, we anticipate that 
management companies, which would constitute the largest number of 
funds filing reports on proposed Form N-CEN, generally will already 
have processes in place for reporting census-type information at the 
end of their fiscal years. Thus, we believe requiring reports on 
proposed Form N-CEN after the close of a fund's fiscal year, rather 
than calendar year, would be the least burdensome approach for most 
funds.
    \380\ See rule 30b1-1 under the Investment Company Act [17 CFR 
270.30b1-1]; but see rule 30a-1 under the Investment Company Act [17 
CFR 270.30a-1] (requiring UITs to file annual reports on Form N-SAR 
no more 60 days after the close of the calendar year).
---------------------------------------------------------------------------

    Rule 30b1-3 under the Investment Company Act currently requires a 
fund to file a transition report on Form N-SAR when a fund's fiscal 
year

[[Page 33635]]

changes.\381\ Because reports on Form N-CEN would be filed annually 
rather semi-annually, we believe that a rule outlining the requirements 
for a transition report would no longer be necessary as transition 
report filing requirements for fiscal year changes involve less 
complexity in the case of reports required to be filed once a year 
rather than twice a year. Consequently, we are proposing to rescind 
rule 30b1-3. We are, however, proposing to require that reports on Form 
N-CEN not cover a period of more than 12 months.\382\ Thus, if a fund 
changes its fiscal year, a report filed on Form N-CEN may cover a 
period shorter than 12 months, but would not be permitted to cover a 
period longer than 12 months or a period that overlaps with a period 
covered by a previously filed report.\383\
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    \381\ See rule 30b1-3.
    \382\ See General Instruction C of proposed Form N-CEN.
    \383\ Id.
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    In addition, a fund would be able to file an amendment to a 
previously filed report on proposed Form N-CEN at any time, including 
an amendment to correct a mistake or error in a previously filed 
report.\384\ A fund that files an amendment to a previously filed 
report on the form would provide information in response to all items 
of Form N-CEN, regardless of why the amendment is filed.\385\
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    \384\ See General Instruction E of proposed Form N-CEN. Pursuant 
to section 34(b) of the Investment Company Act, we expect that funds 
would correct a material mistake in a Form N-CEN report by filing an 
amendment to that report.
    \385\ Id.
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    We request comment on the proposed frequency of reporting and 
proposed reporting deadline:
     Should reports on Form N-CEN be filed more frequently than 
annually, as proposed? Should we require management companies to file 
reports on Form N-CEN semi-annually and UITs to file reports annually, 
as is currently required by Form N-SAR? Are certain information items 
on Form N-CEN of a nature that they may change frequently or such that 
more frequent information about them should be reported to the 
Commission? If so, should any information items in proposed Form N-CEN 
be reported on proposed Form N-PORT or another form instead? If so, 
what items and on which forms?
     Consistent with the treatment of Form N-SAR filings for 
management companies, we are proposing that reports be filed 60 days 
after the end of the fund's fiscal year. Should we require a different 
filing period? If so, what period should we require and why? How long 
would it take funds to collect, verify, and file reports covering the 
information required by proposed Form N-CEN? Would the burdens 
associated with reports on proposed Form N-CEN be greater or less than 
those associated with reports on Form N-SAR?
     We have proposed that reports on Form N-CEN be filed as of 
the end of the fund's fiscal year. We understand that funds have other 
filing requirements that are tied to their fiscal-year end. Should we 
require some other period end date, such as end of calendar year? 
Should UITs be required to file reports as of the end of their fiscal 
year, as proposed, or should they file reports as of the end of their 
calendar year as they currently do with reports on Form N-SAR?
     We are proposing to eliminate rule 30b1-3 under the 
Investment Company Act. Should we instead retain the rule? Are the 
general instructions to Form N-CEN, as proposed, sufficiently clear as 
to the filing requirements when a fund changes its fiscal year end? If 
not, how should the general instructions be revised, or in the 
alternative, should a transition period rule be provided in connection 
with Form N-CEN? If so, how should a transition period be defined and 
what deadlines or timeframes should such a rule address?
     Should a fund be required to file an amendment to its Form 
N-CEN report or file a current report within a certain period of time 
if previously reported information changes? If so, what types of 
changes should trigger an amendment requirement? What filing period 
should be required for such an amendment requirement?
4. Information Required on Form N-CEN
a. Part A--General Information
    Part A of Form N-CEN, which would be completed by all funds, would 
collect information about the reporting period covered by the report. 
It would require funds to report the fiscal-year end date and indicate 
if the report covers a period of less than 12 months.\386\
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    \386\ Item 1 of proposed Form N-CEN.
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    We request comment on the information items proposed to be reported 
in Part A.
b. Part B--Information About The Registrant
    Part B of Form N-CEN, which would also be completed by all funds, 
would require certain background and other identifying information 
about the fund. In the case of funds offering multiple series, if the 
response to an item in Part B of the form differs between series, the 
fund would be instructed to provide a response for each series, as 
applicable, and label the response with the name and series 
identification number of the series to which a response relates.\387\ 
This background information would allow the staff to quickly categorize 
filers by fund type and will assist with our oversight of funds.
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    \387\ See Instruction to Part B: of proposed Form N-CEN.
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    Included in this background information would be the fund's 
name,\388\ Investment Company Act filing number,\389\ and other 
identifying information, such as its CIK \390\ and LEI.\391\ In 
addition, the form would require the fund's address, telephone number, 
and public Web site (if any),\392\ and the location of the fund's books 
and records.\393\ While the fund's name, address, and filing number are 
currently required by Form N-SAR,\394\ some of the additional 
information, such as the fund's CIK, LEI, public Web site and location 
of books and records would be new. As discussed in the Form N-PORT 
section above, information such as the CIK and LEI would assist the 
Commission with organizing the data received by the Commission and 
allow the staff to cross-reference the data reported on Form N-CEN with 
data received from other sources.\395\ For tracking purposes, the 
proposed form would require information relating to whether the filing 
was the initial or final filing.\396\
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    \388\ Item 2.a of proposed Form N-CEN.
    \389\ Item 2.b of proposed Form N-CEN.
    \390\ Item 2.c of proposed Form N-CEN.
    \391\ Item 2.d of proposed Form N-CEN; see also supra note 43 
(discussing comment letters received on the FSOC Notice supporting 
the use of LEIs).
    \392\ Item 3 of proposed Form N-CEN.
    \393\ Item 4 of proposed Form N-CEN.; see also infra notes 397-
399 and accompanying text.
    \394\ Items 1 and 2 of Form N-SAR.
    \395\ See supra Part II.A.2.a. As discussed above, commenters to 
the FSOC Notice expressed support for the regulatory acceptance of 
LEI identifiers. See supra note 43.
    \396\ Item 5 of proposed Form N-CEN.
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    As discussed above, funds would be required to include the location 
of their books and records in reports on proposed Form N-CEN. We note 
that books and records information is currently required by fund 
registration forms; \397\ however, this information is not filed with 
us in a structured format. We believe that having books and records 
information in a structured format would increase our efficiency in 
preparing for exams as well as our ability to identify current industry 
trends and practices and, thus, we are

[[Page 33636]]

proposing to include this information in proposed Form N-CEN.\398\ In 
addition, so as not to create unnecessary burdens, we are proposing to 
amend Forms N-1A, N-2, N-3, N-4, and N-6 to exempt funds from those 
forms' respective books and records disclosure requirements if the 
information is provided in a fund's most recent report on proposed Form 
N-CEN.\399\
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    \397\ See Item 33 of Form N-1A, Item 32 of Form N-2, Item 36 of 
Form N-3, Item 30 of Form N-4, and Item 31 of Form N-6.
    \398\ Additionally, by including books and records information 
in Form N-CEN, we may receive more frequently updated books and 
records information from closed-end funds. Closed-end funds do not 
update their registration statements as regularly as open-end funds 
and, thus, the information regarding their books and records may not 
always be up-to-date.
    \399\ Funds that have not yet filed a report on proposed Form N-
CEN would have to continue to include this information in their 
registration statement filings.
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    Similar to Form N-SAR,\400\ Form N-CEN would require information 
regarding whether the fund is part of a ``family of investment 
companies.'' The form, which would include a substantially similar 
definition as Form N-SAR,\401\ would define a ``family of investment 
companies'' to mean, except with respect to insurance company separate 
accounts, any two or more registered investment companies that (i) 
share the same investment adviser or principal underwriter; and (ii) 
hold themselves out to investors as related companies for purposes of 
investment and investor services.\402\ This item would assist 
Commission staff with analyzing multiple funds across the same family 
of investment companies.
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    \400\ Items 19, 94 and 116 of Form N-SAR; see also General 
Instruction H of Form N-SAR (defining ``family of investment 
companies'').
    \401\ See id.; see also instruction 1 to Item 17 of Form N-1A.
    \402\ Instruction to Item 6 of proposed Form N-CEN. The 
instruction, like the definition of ``family of investment 
companies'' in Form N-SAR, would also clarify that insurance company 
separate accounts that may not hold themselves out to investors as 
related companies (products) for purposes of investment and investor 
services should consider themselves part of the same family if the 
operational or accounting or control systems under which these 
entities function are substantially similar. See General Instruction 
H to Form N-SAR.
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    Similar to Form N-SAR, proposed Form N-CEN would also require the 
fund to provide its classification (e.g., open-end fund, closed-end 
fund).\403\ In addition, unlike Form N-SAR, the proposed form would 
specifically ask whether the fund issues a class of securities 
registered under the Securities Act.\404\ These questions are intended 
to elicit background information on the fund, which will assist us in 
our monitoring and oversight functions (for example, identifying those 
funds that have not issued securities registered under the Securities 
Act).
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    \403\ Item 7 of proposed Form N-CEN; see also Items 5, 6, 27, 
58, 59 and 117 of Form N-SAR. If the registrant is an open-end fund, 
proposed Form N-CEN would also require information on the total 
number of series of the registrant and, if a series of the 
registrant was terminated during the reporting period, information 
regarding that series. Item 7.a.i-Item 7.a.ii of proposed Form N-
CEN. In addition, registrants that indicate they are management 
companies registered on Form N-3 are directed by Item 7 to respond 
to certain additional items in Part F of the form that relate to 
insurance company separate accounts. Item 7.c.i of proposed Form N-
CEN.
    \404\ Item 8 of proposed Form N-CEN.
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    Under proposed Form N-CEN, a management company would report 
information about its directors, including each director's name, 
whether they are an ``interested person'' (as defined by section 
2(a)(19) of the Investment Company Act), and the Investment Company Act 
file number of any other registered investment company for which they 
serve as a director.\405\ Although this information is reported in a 
management company's Statement of Additional Information and provided 
in annual reports to shareholders, providing this information to the 
Commission in a structured format will allow the Commission and other 
potential users to sort and analyze the data more efficiently.\406\ In 
addition, the fund would be required to provide the chief compliance 
officer's (``CCO's'') name, CRD number (if any), address, and phone 
number,\407\ as well as indicate if the CCO has changed since the last 
filing.\408\ If the fund's CCO is compensated or employed by any person 
other than the fund, or an affiliated person of the fund, for providing 
CCO services, the fund would also be required to report the name and 
Employer Identification Number of the person providing such 
compensation.\409\ Although some funds provide information relating to 
their CCO in their registration statements, not all funds do.\410\ This 
new requirement would provide staff with information on all fund CCOs 
and would allow the staff to contact a fund's CCO directly.
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    \405\ Item 9 of proposed Form N-CEN.
    \406\ See, e.g., Items 17 and 27(b)(5) of Form N-1A.
    \407\ Because we expect that funds will provide the CCO's direct 
phone number in response to this information request, the CCO's 
phone number would be a non-public field in all Form N-CEN filings.
    \408\ Item 10 of proposed Form N-CEN.
    \409\ Item 10.j of proposed Form N-CEN.
    \410\ See, e.g., Item 17 of Form N-1A (requesting information 
regarding fund officers). For example, Form N-1A defines the term 
``officer'' to mean ``the president, vice-president, secretary, 
treasurer, controller, or any other officer who performs policy-
making functions.'' It is our understanding that in some fund 
complexes, the CCO does not fit within the category of officers 
covered by this definition (i.e., the CCO does not perform a policy-
making function), and therefore, information as to their CCO is not 
provided pursuant to the item.
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    Part B would also include an item regarding matters that have been 
submitted to a vote of security holders during the relevant 
period.\411\ Information regarding submissions of matters to a vote of 
securities holders is currently reported in Form N-SAR by management 
companies in the form of an attachment with multiple reporting 
requirements.\412\ In order to alleviate the burden on filers, we are 
proposing to reduce the information to be reported regarding votes of 
security holders to a yes/no question that is primarily meant to allow 
staff to quickly identify funds with such votes, so that they can 
follow up as appropriate, such as by reviewing more detailed 
information required by other filings.\413\ Like Form N-SAR, the 
proposed form would also include an item relating to material legal 
proceedings during the reporting period.\414\
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    \411\ See Item 11 of proposed Form N-CEN.
    \412\ See Item 77.C of Form N-SAR; see also Instruction to 
Specific Items for Item 77C.
    \413\ This information request would apply to UITs as well as 
management companies. The Form N-SAR requirement applies only to 
management companies. See id. We believe it is important for the 
Commission to have information for all registered investment 
companies on matters submitted for security holder vote in order to 
assist us in our oversight and examination functions.
    \414\ Item 12 of proposed Form N-CEN. As in Form N-SAR Item 
77.E, if there were any material legal proceedings, or if a 
proceeding previously reported had been terminated, the registrant 
would file an attachment as required by Part G: Of proposed Form N-
CEN. See Item 79.a.i of proposed Form N-CEN. We note that Form N-
CEN, unlike Form N-SAR, would require UITs to respond to the 
information request related to material legal proceedings. For the 
same reasons discussed above with respect to matters submitted for 
security holder vote, we believe it is important to have information 
on material legal proceedings of all registered investment 
companies. See supra n.413.
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    Form N-SAR currently requires management companies to report a 
number of data points relating to fidelity bond and errors and 
omissions insurance policy coverage.\415\ In order to limit the number 
of items to those most useful to the Commission staff and reduce 
burdens on filers, we are proposing to limit this request to two 
separate items in Form N-CEN. One item would ask if any claims were 
filed under the management company's fidelity bond and the aggregate 
dollar amount of any such claims.\416\ The other item would ask if the 
management company's officers or directors are covered under any 
directors and officers/errors and omissions insurance policy and, if 
so, whether any claims were filed under the policy during the

[[Page 33637]]

reporting period with respect to the registrant.\417\ These questions 
will help alert Commission staff to insurance claims made by the fund 
or its officers and directors as a result of legal issues related to 
the fund.\418\
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    \415\ Form N-SAR Items 80-85 and 105-110.
    \416\ Item 13 of proposed Form N-CEN; cf. Item 83 of Form N-SAR.
    \417\ Item 14 of proposed Form N-CEN; cf. Item 85 of Form N-SAR.
    \418\ For example, a fund is required to provide and maintain a 
fidelity bond against larceny and embezzlement, which in general 
covers each officer and employee of the fund who has access to 
securities or funds. See rule 17g-1(a) under the Investment Company 
Act [17 CFR 270.17g-1].
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    In order to better understand instances when funds receive 
financial support from an affiliated entity, our proposal would also 
require new information regarding the provision of such financial 
support.\419\ We recently adopted disclosure requirements relating to 
fund sponsors' support of money market funds as part of our money 
market reform amendments in 2014, including a new requirement that 
money market funds file reports on Form N-CR disclosing, among other 
things, the receipt of financial support.\420\ As with money market 
funds, we believe that it is important that the Commission understand 
the nature and extent that a fund's sponsor provides financial support 
to a fund, and are therefore proposing to extend this requirement to 
all funds that would file reports on Form N-CEN. Although we believe it 
is an infrequent practice, based on staff experience, non-money market 
funds have received sponsor support in the past and we believe this 
item would allow Commission staff to readily identify any funds that 
have received such support for further analysis and review, as 
appropriate. For consistency, Form N-CEN would include a substantially 
similar definition of ``financial support'' as provided by Form N-
CR.\421\ In addition, the definition in Form N-CEN would also 
explicitly exclude certain routine transactions from the definition of 
financial support, as is the case for money market funds.\422\ If the 
fund received financial support, it would also be required to provide 
more detailed information in the form of an attachment as required by 
Part G of Form N-CEN.\423\
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    \419\ Item 15 of proposed Form N-CEN.
    \420\ See Money Market Fund Reform 2014 Release, supra note 13.
    \421\ See Instruction to Item 15 of proposed Form N-CEN; see 
also Part C of Form N-CR.
    \422\ See id.
    \423\ Item 79.a.ii of proposed Form N-CEN. This requirement 
would not apply to money market funds, as money market funds 
currently provide this information through reports on Form N-CR.
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    In addition, Form N-CEN would include a new item requiring 
reporting as to whether the fund relied on orders from the Commission 
granting the fund an exemption from one or more provisions of the 
Investment Company Act, Securities Act or Securities Exchange Act 
during the reporting period.\424\ Funds would identify any such order 
by release number.\425\ We are proposing to collect this information in 
a structured format to better monitor fund reliance on exemptive 
orders, which will assist us with our oversight functions.
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    \424\ Item 16 of proposed Form pN-CEN. Form N-SAR currently 
requires funds to attach information required to be reported on Form 
N-1Q pursuant to an existing exemptive order. See Instructions to 
Specific Items 77P and 102O of Form N-SAR. Form N-CEN would require 
the fund to file as an attachment any information required to be 
filed pursuant to exemptive orders issued by the Commission and 
relied on by the fund. Instruction to Item 79.a.vi of proposed Form 
N-CEN.
    \425\ See Item 16.a.i of proposed Form N-CEN.
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    As with Form N-SAR,\426\ proposed Form N-CEN would require 
identifying information for the fund's principal underwriters \427\ and 
independent public accountants,\428\ including, as applicable, name, 
SEC file number, CRD number, PCAOB number, LEI (if any), state or 
foreign country, and whether a principal underwriter was hired or 
terminated or if the independent public accountant changed since the 
last filing.\429\ If the independent public accountant changed since 
the last filing, the fund would have to provide a detailed narrative 
attachment to Form N-CEN.\430\
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    \426\ Items 11, 13, 77.K, 91, 102.J, 114, 115 of Form N-SAR.
    \427\ Item 17 of proposed Form N-CEN.
    \428\ Item 18 of proposed Form N-CEN.
    \429\ Item 17 and Item 18 of proposed Form N-CEN.
    \430\ Item 79.a.iii of proposed Form N-CEN.
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    We are proposing to include for all funds several other accounting 
and valuation related items that are currently required for management 
companies by Form N-SAR, and that provide important information to the 
Commission regarding possible accounting and valuation issues related 
to a fund. These items include a question relating to material changes 
in the method of valuation of the fund's assets.\431\ However, unlike 
reports on Form N-SAR, proposed Form N-CEN would not require a separate 
attachment detailing the circumstances surrounding a change in 
valuation methods.\432\ Instead, to facilitate review of this 
information in a structured format, our proposal would include specific 
items in the form itself, including the date of change, explanation of 
change, type of investment, statutory or regulatory basis for the 
change, and the fund(s) involved.\433\ We would also carry over to 
proposed Form N-CEN the requirement from Form N-SAR \434\ that the fund 
identify whether there have been any changes in accounting principles 
or practices, and, if any, to provide more detailed information in a 
narrative attachment to the form.\435\
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    \431\ Item 21 of proposed Form N-CEN. Valuation methodologies 
are approved by fund directors for use by funds to determine, in 
good faith, the fair value of portfolio securities (and other 
assets) for which market quotations are not readily available. For 
example, valuation methodology changes may include, but are not 
limited to, changing from use of bid price to mid price for fixed 
income securities or changes in the trigger threshold for use of 
fair value factors on international equity securities.
    \432\ See Item 77.J and Item 102.I of Form N-SAR. Also unlike 
Form N-SAR, this requirement would apply to UITs as well as 
management investment companies. We believe it is important for the 
Commission to have information on accounting and valuation for all 
registered investment companies in order to assist us in our 
oversight and examination functions.
    \433\ Compare Item 77.J of Form N-SAR with Item 21 of proposed 
Form N-CEN. An instruction to Item 21 of proposed Form N-CEN would 
clarify that we do not expect responses to this item to include 
changes to valuation techniques used for individual securities 
(e.g., changing from market approach to income approach for a 
private equity security). Form N-SAR does not elaborate on the type 
of information it is seeking by asking for changes in the method of 
valuation of the registrant's assets. We are proposing to include 
this instruction to provide clarity for filers and because we 
believe that responding to Item 21 of proposed Form N-CEN for 
individual securities may be overly burdensome for filers.
    \434\ See Item 77.L and Item 102.K of Form N-SAR.
    \435\ Item 22 and Item 79.a.v of proposed Form N-CEN. Like the 
information requested regarding changes in valuation methods, Form 
N-SAR only requests information from management companies regarding 
changes in accounting principles and practices. Unlike Form N-SAR, 
Form N-CEN would require this information from UITs as well, for the 
same reasons as discussed above with respect to changes in valuation 
methods. See supra n.432
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    Form N-CEN would also require, like Form N-SAR, that management 
companies, other than SBICs, file a copy of their independent public 
accountant's report on internal control as an attachment to their 
reports on the form.\436\ However, Form N-CEN would also include a new 
question that asks whether the report on internal control found any 
material weaknesses.\437\ Form N-CEN would also contain a new 
requirement that the fund disclose if the certifying accountant issued 
an opinion other than an unqualified opinion with respect to its audit 
of the fund's

[[Page 33638]]

financial statements.\438\ These questions will elicit information on 
potential accounting issues identified by a fund's accountant.
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    \436\ See Item 77.B of Form N-SAR; Item 79.a.iv of proposed Form 
N-CEN. As noted above, management companies (other than SBICs) are 
currently required to file a copy of the independent public 
accountant's report on internal control with their reports on Form 
N-SAR. We continue to believe that a copy of the management 
company's report on internal control should be filed with the 
Commission and thus are proposing to carry over the filing 
requirement to Form N-CEN.
    \437\ Item 19 of proposed Form N-CEN.
    \438\ Item 20 of proposed Form N-CEN.
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    Unlike Form N-SAR, proposed Form N-CEN would also include an item 
relating to whether, during the reporting period, an open-end fund made 
any payments to shareholders or reprocessed shareholder accounts as a 
result of an NAV error.\439\ Proposed Form N-CEN would also require 
information from management companies regarding payments of dividends 
or distributions that required a written statement pursuant to section 
19(a) of the Investment Company Act and rule 19a-1 thereunder.\440\ 
These questions will assist the staff in monitoring valuation of fund 
assets and the calculation of the fund's NAV, as well as compliance 
with distribution requirements under section 19(a) and rule 19a-1.
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    \439\ Item 23 of proposed Form N-CEN.
    \440\ Item 24 of proposed Form N-CEN. Section 19(a) of the 
Investment Company Act generally prohibits a fund from making a 
distribution from any source other than the fund's net income, 
unless that payment is accompanied by a written statement that 
adequately discloses the source or sources of the payment. See 15 
U.S.C. 80a-19(a). Rule 19a-1 under the Investment Company Act 
specifies the information required to be disclosed in the written 
statement. See 17 CFR 270.19a-1; see also 2013-11 IM Guidance 
Update, supra note 289.
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    We request comment on the proposed information items to be reported 
in Part B:
     Should any additional information regarding the fund be 
requested? Should any of the information that would be requested by 
proposed Form N-CEN be excluded? Should any of the information 
requested for all Registrants be limited to only certain Registrants?
     Should any other identifying number other than file number 
and LEI be requested?
     Should another definition or term be used to capture 
affiliations across related funds rather than ``family of investment 
companies''? Should a broader term, such as ``fund complex'' as defined 
by instruction 1(b) to Item 17 of Form N-1A, be used instead? If so, 
why would a broader definition be better?
     Should Form N-CEN request any additional information 
concerning the board of directors or individual directors? For example, 
should Form N-CEN request information about the length of service of 
directors?
     Should Form N-CEN request information regarding a fund's 
CCO, as proposed? Should we, as proposed, make the CCO's phone number a 
non-public data field on all Form N-CEN filings? Are there any privacy 
concerns with the other information that would be requested? Would 
these concerns still exist if the information is reported in a non-
public data field? Are there any other concerns with the information 
that would be requested? Is there other information we should request 
in lieu of information that presents such concerns?
     The current proposal eliminates Form N-SAR's attachment 
regarding matters submitted to a vote of security holders. Should we 
retain this requirement in Form N-CEN? Why or why not? Are there any 
costs to eliminating Form N-SAR's attachment in Item 77C in favor of 
yes/no type questions? Should the item regarding votes submitted to 
security holders apply to UITs?
     We request comment on Item 12 of proposed Form N-CEN. 
Should this item apply to UITs? Should ``legal proceedings'' be 
defined? Should it include administrative, mediated, or arbitrated 
matters? Are there any other litigation matters that should be deemed 
inherently material besides those enumerated in the instructions to the 
item? Is there any additional information that should be requested 
regarding material legal proceeding matters?
     Should Form N-CEN request information about the fidelity 
bond beyond what has been proposed (e.g., bond amount, the cost of the 
bond, or the number of insured persons)? Should any additional 
information regarding claims filed or that could have been filed under 
the fidelity bond be requested? For example, should dates of claims 
filed or that could have been filed be requested? Should the nature of 
the claim be disclosed?
     Is the term ``errors and omissions insurance'' clear or 
should the form include a definition? In addition to requesting 
information on whether any errors and omissions insurance claim was 
made as proposed, should dates of insurance claims and amounts of 
claims be requested? Should Form N-CEN permit funds to exclude the 
advancement of expenses under a policy from disclosure as a claim?
     The definition of ``financial support'' in proposed Form 
N-CEN would include a non-exclusive list of examples of actions that 
would (and would not) be deemed ``financial support.'' Money market 
funds currently report this information in reports on Form N-CR. Should 
the definition in proposed Form N-CEN be further expanded or limited 
from our definition in Form N-CR, and if so, how and why? For example, 
should we include a requirement to report information relating to 
inter-fund lending? Should we require non-money market funds to report 
receipt of financial support on a more timely basis? For example, 
should we require non-money market funds to file reports on Form N-CR 
or a similar form if they receive financial support?
     Should any additional information concerning exemptive or 
other orders be requested?
     We also considered whether to require funds to disclose 
reliance on no-action letters. If we were to require this information, 
should we limit it to certain no-action letters and, if so, which ones?
     Should we request additional information regarding fund 
accounting and valuation? If so, what information? Should the items 
relating to changes in valuation methods and changes in accounting 
principles and practices apply to UITs, as proposed?
     We request comment on Items 23 and 24 of proposed Form N-
CEN. Should we request information regarding NAV errors and/or dividend 
and distribution payments that required a written statement pursuant to 
section 19(a) and rule 19a-1? Why or why not? Is there additional 
information we should request?
c. Part C--Items Relating to Management Investment Companies
i. Background and Classification of Funds
    Part C of Form N-CEN would be completed by management investment 
companies other than SBICs. For management companies offering multiple 
series, this information would be completed separately as to each 
series.\441\ The proposed information requirements in this section are 
intended to provide the Commission and its staff with background 
information on the fund industry and to assist us in meeting our legal 
and regulatory requirements, such as requirements under the Paperwork 
Reduction Act. Additionally, certain demographic information would 
allow the Commission to better identify particular types of management 
companies for monitoring and analysis if, for example, an issue arose 
with respect to a particular fund type.
---------------------------------------------------------------------------

    \441\ General Instruction A to proposed Form N-CEN.
---------------------------------------------------------------------------

    Similar to Form N-SAR, proposed Form N-CEN would include general 
identifying information on management companies and any series thereof, 
including the full name of the fund, the fund's series identification 
number and LEI, and whether it is the fund's first

[[Page 33639]]

time filing the form.\442\ Unlike Form N-SAR, we are proposing to 
request specific information on the classes of open-end management 
companies, including information relating to the number of classes 
authorized, added, and terminated during the relevant period.\443\ Form 
N-CEN would also include a new requirement to specifically provide 
identifying information for each share class outstanding, including the 
name of the class, the class identification number, and ticker 
symbol.\444\
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    \442\ Item 25 of proposed Form N-CEN; see also supra n.43 
(discussing comment letters received on the FSOC Notice supporting 
the use of LEIs). The proposed requirements relating to the name of 
the fund and if this is the first filing with respect to the fund 
are currently required by Form N-SAR. See Items 3 and 7.C of Form N-
SAR.
    \443\ Item 26.a-Item 26.c of proposed Form N-CEN.
    \444\ Item 26.d of proposed Form N-CEN.
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    Pursuant to proposed Form N-CEN, a management company also would be 
required to identify if it is any of the following types of funds: 
\445\ ETF or exchange-traded managed fund (``ETMF''); \446\ index fund; 
\447\ fund seeking to achieve performance results that are a multiple 
of a benchmark, the inverse of a benchmark, or a multiple of the 
inverse of a benchmark; interval fund; \448\ fund of funds; \449\ 
master-feeder fund; \450\ money market fund; target date fund; \451\ 
and underlying fund to a variable annuity or variable life insurance 
contract. ETFs and ETMFs, index funds and master-feeder funds would 
also be required to provide the additional information discussed 
below.\452\
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    \445\ Item 27 of proposed Form N-CEN. As discussed herein, many 
of the types of funds listed in Item 27 are defined in proposed Form 
N-CEN. With the exception of ``index fund'' and ``money market 
fund,'' these terms are not currently defined in Form N-SAR. See 
General Instruction H and Item 69 of Form N-SAR.
    \446\ For purposes of reporting on proposed Form N-CEN, we 
propose to define ``exchange-traded fund'' as an open-end management 
investment company (or series or class thereof) or UIT, the shares 
of which are listed and traded on a national securities exchange at 
market prices, and that has formed and operates under an exemptive 
order under the Investment Company Act granted by the Commission or 
in reliance on an exemptive rule under the Act adopted by the 
Commission. We also propose to defined ``exchange-traded managed 
fund'' as an open-end management investment company (or series or 
class thereof) or UIT, the shares of which are listed and traded on 
a national securities exchange at NAV-based prices, and that has 
formed and operates under an exemptive order under the Investment 
Company Act granted by the Commission or in reliance on an exemptive 
rule under the Act adopted by the Commission. General Instruction F 
of proposed Form N-CEN. We believe these are appropriate definitions 
as they are similar to the one used for determining the 
applicability of ETF registration statement disclosure requirements 
for open-end funds. See General Instruction A to Form N-1A. 
Currently, all ETFs and exchange-traded managed funds rely on relief 
from certain provisions of the Investment Company Act that is 
granted by Commission order. See ETF Proposing Release, supra note 
5; Eaton Vance Management, et al.; Notice of Application, Investment 
Company Act Release No. 31333 (Nov. 6, 2014) [79 FR 67471 (Nov. 13, 
2014)] (Notice); Eaton Vance Management, et al.; Order, Investment 
Company Act Release No. 31361 (Dec. 2, 2014) (Order). The Commission 
has, however, proposed to codify the exemptive relief previously 
granted to ETFs by order. See ETF Proposing Release, supra note 5 
(proposing rule 6c-11).
    \447\ For purposes of reporting on proposed Form N-CEN, we 
propose to define ``index fund'' as an investment company, including 
an ETF, which seeks to track the performance of a specified index. 
See Instruction 2 of Item 27 of proposed Form N-CEN. We believe this 
is an appropriate definition as it is substantively similar to the 
definition of ``index fund'' in Form N-SAR, but also takes into 
account the emergence of ETFs. See Instruction to Item 69 of Form N-
SAR. Additionally, the proposed definition is largely similar to the 
definition of ``index fund'' in rule 2a19-3 under the Investment 
Company Act. See 17 CFR 270.2a19-3 (referring to an index fund for 
purposes of the rule as a fund that has ``an investment objective to 
replicate the performance of one or more broad-based securities 
indices. . . .'').
    \448\ For purposes of reporting on proposed Form N-CEN, we 
propose to define ``interval fund'' as a closed-end management 
company that makes periodic repurchases of its shares pursuant to 
rule 23c-3 under the Investment Company Act. See Instruction 3 of 
Item 27 of proposed Form N-CEN. We believe this is an appropriate 
definition because the term ``interval fund'' is commonly used to 
refer to funds that rely on rule 23c-3. See 17 CFR 270.23c-3.
    \449\ For purposes of reporting on proposed Form N-CEN, we 
propose to define ``fund of funds'' as a fund that acquires 
securities issued by another investment company in excess of the 
amounts permitted under section 12(d)(1)(A) of the Investment 
Company Act. See 15 U.S.C. 80a-12(d)(1)(A); Instruction 1 of Item 27 
of proposed Form N-CEN. We believe this is an appropriate definition 
because ``funds of funds'' is a term typically used to refer to 
funds that invest in other funds beyond the limits of the Investment 
Company Act. Additionally, the proposed definition of ``fund of 
funds'' largely tracks FINRA's definition of ``fund of funds'' in 
its rules. See FINRA Code of Conduct Rule 2830(b)(11) (defining 
``fund of funds'').
    \450\ For purposes of reporting on proposed Form N-CEN, we 
propose to define ``master-feeder fund'' as a two-tiered arrangement 
in which one or more funds holds shares of a single fund in 
accordance with section 12(d)(1)(E) of the Investment Company Act. 
See Instruction 4 of Item 27 of proposed Form N-CEN. We believe this 
is an appropriate definition as it is the same definition as used 
for purposes of Form N-1A. See General Instruction A to Form N-1A.
    \451\ For purposes of reporting on proposed Form N-CEN, we 
propose to define ``target date fund'' as an investment company that 
has an investment objective or strategy of providing varying degrees 
of long-term appreciation and capital preservation through a mix of 
equity and fixed income exposures that changes over time based on an 
investor's age, target retirement date, or life expectancy. See 
Instruction 5 of Item 27 of proposed Form N-CEN. We believe this is 
an appropriate definition as it is the same definition as proposed 
by the Commission in our 2010 proposing release relating to target 
date funds. See Investment Company Advertising Release, supra note 
6.
    \452\ See Item 27.a; Item 27.b; and Item 27.f of proposed Form 
N-CEN.
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    First, proposed Form N-CEN would require a management company to 
further indicate if it is an ETF or an ETMF.\453\ Second, index funds 
would be required to report certain standard industry calculations of 
relative performance. In particular, index funds would be required to 
report a measure of the difference between the index fund's total 
return during the reporting period \454\ and the index's return both 
before and after fees and expenses--commonly called the ``tracking 
difference''-- \455\ and also a measure of the volatility of the day-
to-day tracking difference over the course of the reporting period--
commonly called the fund's ``tracking error.'' \456\
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    \453\ See Item 27.a.i and Item 27.a.ii.
    \454\ With respect to index funds that are ETFs, we would expect 
a fund to use its NAV-based total return, rather than market-based 
total return, in responding to Items 27.b.i. and ii.
    \455\ Item 27.b.i of proposed Form N-CEN. The tracking 
difference is the return difference between the fund and the index 
it is following, annualized. Johnson, Ben, et al., On the Right 
Track: Measuring Tracking Efficiency in ETFs, Morningstar ETF 
Research, at 29 (Feb. 2013), available at http://media.morningstar.com/uk/MEDIA/Research_Paper/Morningstar_Report_Measuring_Tracking_Efficiency_in_ETFs_February_2013.pdf (``Morningstar Paper''), at 29. Thus, tracking difference = (1 
+ RNAV--RINDEX)1/N--1, where 
RNAV is the total return for the fund over the reporting 
period, RINDEX is the total return for the index for the 
reporting period, and N is the length of the reporting period in 
years. N will equal to 1 if the reporting period is the fiscal year. 
Id.
    \456\ See Item 27.b.ii of proposed Form N-CEN. Tracking error is 
commonly understood as the standard deviation of the daily 
difference in return between the fund and the index it is following, 
annualized. Morningstar Paper, supra note 455, at 29. Thus, tracking 
error = std (RNAV - RINDEX) x [radic]n, where 
RNAV is the daily return for the fund, RINDEX 
is the daily return for the index, std() represents the 
standard deviation function, and n is the number of trading days in 
the fiscal year. Id.
---------------------------------------------------------------------------

    Specifically, the proposed tracking difference data item would 
equal the annualized difference between the index fund's total return 
during the reporting period and the index's return during the reporting 
period, and the proposed tracking error data item would equal the 
annualized standard deviation of the daily difference between the index 
fund's total return and the index's return during the reporting 
period.\457\ Reporting of these measures will help data users, 
including the Commission, investors, and other potential users, 
evaluate the degree to which particular index funds replicate the 
performance of the target index.\458\ In addition, tracking difference 
and tracking error before fees and expenses \459\ would allow data 
users to better understand the effect of factors other than fees and 
expenses on the degree to which the

[[Page 33640]]

index fund replicates the performance of the target index.\460\
---------------------------------------------------------------------------

    \457\ See Morningstar Paper, supra note 455, at 29.
    \458\ See Morningstar Paper, supra note 455, at 5. We believe 
this information would help data users understand which funds are 
best tracking their target indices and could highlight outlier 
funds.
    \459\ See Item 27.b.i.1 and Item 27.b.ii.1 of proposed Form N-
CEN.
    \460\ See Morningstar Paper, supra note 455, at 9.
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    Finally, master funds would be required to provide identifying 
information with respect to each feeder fund, including information on 
unregistered feeder funds (i.e., feeder funds not registered as 
investment companies with the Commission), such as offshore feeder 
funds.\461\ Similarly, a feeder fund would provide identifying 
information of its master fund.\462\
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    \461\ Item 27.f.i of proposed Form N-CEN.
    \462\ Item 27.f.ii of proposed Form N-CEN.
---------------------------------------------------------------------------

    Proposed Form N-CEN would also require the management company to 
report if it seeks to operate as a non-diversified company, as defined 
in section 5(b)(2) of the Investment Company Act.\463\ Form N-SAR, 
however, asks if the management company was a diversified investment 
company at any time during the period or at the end of the reporting 
period.\464\ We are proposing to require reporting on the non-
diversified status of a management company, rather than the diversified 
status, because it is less common for funds to be non-diversified.\465\ 
Additionally, the question in proposed Form N-CEN is forward looking 
rather than backward looking as in Form N-SAR. This change is intended 
to include as part of the universe of non-diversified funds those funds 
that seek to operate as non-diversified companies even if they should 
happen to meet the definition of a ``diversified company'' as of the 
end of a particular reporting period.\466\ We believe this change will 
allow our staff to more accurately pinpoint the universe of non-
diversified funds and, thus, better able the staff to assist us in our 
analysis and inspection functions.
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    \463\ Item 28 of proposed Form N-CEN.
    \464\ See Item 60 of Form N-SAR.
    \465\ Based on Form N-SAR data between July 2014-December 2014, 
74% of funds were diversified during the reporting period.
    \466\ For example, if a fund generally operates as a non-
diversified fund, but as a result of market conditions or other 
reasons, happens to meet the definition of ``diversified fund'' as 
of the end of the reporting period, it would still be required to 
indicate that it was a non-diversified fund for purposes of this 
item.
---------------------------------------------------------------------------

    We request comment on the Part C questions relating to the fund's 
background and classification:
     Should additional identifying information be requested 
with regard to series or classes of management investment companies? 
Should any of the information proposed to be included in proposed Form 
N-CEN be excluded?
     We request comment on our list of types of fund. Are there 
any types of funds that we should add to or remove from the list? If 
so, which ones and why? Should we include additional categories based 
on investment strategy, as proposed? If so, which categories? Are the 
definitions in proposed Form N-CEN of the type of funds listed 
appropriate? Should any different definitions be used for types of 
funds? If so, what definitions and why? Are any terms that are not 
defined sufficiently clear or should we provide definitions? If so, 
what terms and what definitions?
     We request comment on the information to be required for 
index funds. Should we require the difference between the fund's total 
return during the reporting period and the index's return during the 
reporting period? Is this a meaningful methodology? Is there a better 
methodology for calculating tracking difference or tracking error?
     Should the form solicit information about the intent of a 
management company to operate as a non-diversified fund or should it 
request information about past operations during the reporting period?
ii. Investments in Certain Foreign Corporations
    We are also proposing to require a management company to identify 
if it invests in a controlled foreign corporation for the purpose of 
investing in certain types of instruments, such as commodities, 
including the name and LEI of such corporation, if any.\467\ As 
discussed supra Part II.A.2.b, some funds use CFCs for making certain 
investments, particularly in commodities and commodity-linked 
derivatives, often for tax purposes. Information regarding assets 
invested in a controlled foreign corporation for the purpose of 
investing in certain types of instruments would provide investors 
greater insight into special purpose entities, such as CFCs, that may 
have certain legal, tax, and country-specific risks associated with 
them. Combined with the information that we are proposing to collect in 
Form N-PORT, Commission staff would likewise benefit from this 
information by better understanding the use of CFCs and other similar 
entities, which could allow for more efficient collaboration with 
foreign regulatory authorities to the extent the Commission may need 
books and records or other information for specific funds or general 
inquiries related to CFCs.
---------------------------------------------------------------------------

    \467\ Item 29 of proposed Form N-CEN. An instruction to Item 29 
of proposed Form N-CEN would define ``controlled foreign 
corporation'' as having the meaning provided in section 957 of the 
Internal Revenue Code.
---------------------------------------------------------------------------

    We request comment on the Part C questions relating to the fund's 
investments in certain foreign corporations:
     Should we request additional information on whether the 
management company invested in a foreign corporation or subsidiary, 
including CFCs? For example, should we request information on the types 
of investing activities the CFCs engage in or certain balance sheet 
items from the CFC?
iii. Securities Lending
    As discussed above, we are proposing that funds provide certain 
securities lending information in reports on Form N-PORT to help inform 
the Commission, investors and other market participants about the scale 
of securities lending activity by funds and their collateral 
reinvestments.\468\ Additionally, we are proposing to require that 
funds include in their financial statements certain information 
concerning their income and expenses associated with securities lending 
activities in order to increase the transparency of this information to 
investors and other potential users.\469\ We believe, however, that 
some important information concerning securities lending activity by 
funds should be reported in a structured format, but on a less frequent 
basis than reports on proposed Form N-PORT. In this regard, we believe 
an annual reporting requirement on Form N-CEN may yield sufficiently 
timely data and may more appropriately balance the requirements' 
benefits with their associated costs than would additional monthly 
reporting requirements on Form N-PORT.
---------------------------------------------------------------------------

    \468\ See supra Parts II.A.2.d and II.A.2.g.v.
    \469\ See proposed rule 6-03(m) of Regulation S-X.; see also 
supra Parts II.C.3 and II.C.5.
---------------------------------------------------------------------------

    Accordingly, we propose to require that each management company 
report annually on new Form N-CEN, in addition to whether it is 
authorized to engage in securities lending transactions and whether it 
loaned securities during the reporting period,\470\ information about 
the fees associated with securities lending activity and information 
about the management company's relationship with certain securities-
lending-related service providers. First, we propose to require that 
management companies that loaned any securities during the reporting 
period disclose certain information that would illuminate the 
commonality of borrower default. Specifically, we propose to require 
that those management companies disclose annually whether any borrower 
of securities had defaulted on its

[[Page 33641]]

obligations to the management company to return loaned securities or 
return them on time in connection with a security on loan during that 
period.\471\
---------------------------------------------------------------------------

    \470\ Item 30.a-Item 30.b of proposed Form N-CEN.
    \471\ Item 30.b.i of proposed Form N-CEN.
---------------------------------------------------------------------------

    Under proposed Form N-CEN, management companies would also be 
required to disclose whether a securities lending agent or any other 
entity indemnifies the fund against borrower default on loans 
administered by the agent and certain identifying information about the 
entity providing indemnification if not the securities lending 
agent.\472\ Together, these reporting requirements would yield data 
that would allow the Commission, investors, and other potential users 
to assess the counterparty risks associated with borrower default in 
the securities lending market and the extent to which those risks are 
mitigated by--or concentrated in--third parties that provide 
indemnification against default.\473\
---------------------------------------------------------------------------

    \472\ Item 30.c.iv and Item 30.c.v.1-Item 30.c.v.2 of proposed 
Form N-CEN.
    \473\ As discussed above, commenters to the FSOC Notice 
suggested that enhanced securities lending disclosures could be 
beneficial to investors and counterparties. See supra note 71.
---------------------------------------------------------------------------

    Because management companies sometimes engage external service 
providers as securities lending agents or cash collateral managers, we 
believe that some of the risks associated with securities lending 
activities by management companies could be impacted by these service 
providers and the nature of their relationships with the management 
companies and one another. Accordingly, we propose to require that 
management companies report some basic identifying information about 
each securities lending agent and cash collateral manager.\474\ In 
addition, we propose to require that funds disclose whether each of 
these service providers is a first- or second-tier affiliated person of 
the management company,\475\ which data would highlight those funds 
that might be expected to rely on Commission exemptive relief with 
respect to those transactions.\476\ We also propose to require each 
management company to disclose whether it has made each of several 
specific types of payments, including a revenue sharing split, non-
revenue sharing split (other than an administrative fee), 
administrative fee, cash collateral reinvestment fee, and 
indemnification fee, to one or more securities lending agents or cash 
collateral managers during the reporting period.\477\ These disclosures 
will allow the Commission, investors and other management company 
boards of directors to understand better the type of fees a management 
company pays in connection with securities lending activities and 
whether, for example, the revenue sharing split that the company pays 
to a securities lending agent includes compensation for other services 
such as administration or cash collateral management.\478\ Finally, our 
proposed disclosure of whether the cash collateral manager is a first- 
or second-tier affiliate of the securities lending agent \479\ could 
alert the Commission, investors, and other market participants to 
potential conflicts of interest when an entity managing a cash 
collateral reinvestment portfolio is affiliated with a securities 
lending agent that is compensated with a share of revenue generated by 
the cash collateral reinvestment pool. Together, the data that these 
proposed requirements would yield would allow the Commission to monitor 
the interaction of these service providers with management companies. 
In addition to informing the Commission's risk analysis and, 
potentially, future policymaking concerning securities lending activity 
by management companies, we believe that this information could also 
help inform other data users about the use of, and possible risks 
associated with, the lending of portfolio securities by management 
companies.
---------------------------------------------------------------------------

    \474\ Item 30.c.i-Item 30.c.ii and Item 30.d.i-Item 30.d.ii of 
proposed Form N-CEN.
    \475\ Item 30.c.iii and Item 30.d.iv of proposed Form N-CEN.
    \476\ Section 17(d) of the Investment Company Act makes it 
unlawful for first- and second- tier affiliates, among others, 
acting as principal, to effect any transaction in which the fund, or 
a company it controls, is a joint or a joint and several participant 
in contravention of Commission rules. 15 U.S.C. 80a-17(d). Rule 17d-
1(a) prohibits first- and second-tier affiliates of a registered 
fund, among others, acting as principal from participating in or 
effecting any transaction in connection with any joint enterprise or 
other joint arrangement or profit-sharing plan in which the fund (or 
any company it controls) is a participant unless an application or 
arrangement or plan has been filed with the Commission and has been 
granted. 17 CFR 270.17d-1. These provisions would prohibit a fund 
from compensating a securities lending agent that is a first- or 
second-tier affiliate with a share of loan revenue or lending to a 
borrower that is a first- or second-tier affiliate without an 
exemptive order, and generally from investing cash collateral in a 
first- or second-tier affiliated liquidity pool unless the fund 
satisfies the conditions in rule 12d1-1 under the Investment Company 
Act, which provides exemptive relief for fund investments in an 
affiliated registered money market fund and pooled investment 
vehicle that would be an investment company but for sections 3(c)(1) 
and 3(c)(7) of the Investment Company Act and that operate in 
compliance with money market fund regulations subject to certain 
conditions. A management company that has a service agreement with 
an affiliated securities lending agent, under which compensation is 
not based on a share of loan revenue generated by the lending 
agent's efforts, generally is not a joint enterprise or other joint 
arrangement or profit-sharing plan and, thus, does not need an 
exemptive order. See Norwest Bank Minnesota, N.A., SEC Staff No-
action Letter (pub. avail. May 25, 1995) available at http://www.sec.gov/divisions/investment/noaction/1995/norwest052595.pdf.
    \477\ Item 30.e of proposed Form N-CEN. Management companies 
that report that other payments were made to one or more securities 
lending agents or cash collateral managers during the reporting 
period would also be required to describe the type or types of other 
payments. Item 30.e.vi of proposed Form N-CEN.
    \478\ In evaluating the fees and services of any securities 
lending agent, the board of directors of a management company that 
engages in securities lending may be assisted by reviewing and 
comparing information on securities lending agent fee arrangements 
of other management companies. See, e.g., SIFE Trust Fund, SEC No-
action Letter (publ. avail. Feb. 17, 1982) (management company's 
board of directors determines that the securities lending agent's 
fee is reasonable and based solely on the services rendered); 
Neuberger Berman Equity Funds, et al., Investment Company Act 
Release No. 25880 (Jan. 2, 2003) (notice), Investment Company Act 
Release No. 25916 (Jan. 28, 2003) (order) (management company's 
board of directors, including a majority of independent directors, 
will determine initially and review annually, among other things, 
that (i) the services to be performed by the affiliated securities 
lending agent are appropriate for the lending fund, (ii) the nature 
and quality of the services to be provided by the agent are at least 
equal to those provided by others offering the same or similar 
services; and (iii) the fees for the agent's services are fair and 
reasonable in light of the usual and customary charges imposed by 
others for services of the same nature and quality).
    \479\ Item 30.d.iii of proposed Form N-CEN.
---------------------------------------------------------------------------

    We request comment on the Part C questions relating to the 
management company's securities lending activities:
     Should management companies be required to report any or 
all of the proposed information concerning securities lending activity? 
If not, which items should not be required, and why? Should we collect 
any additional information?
     Should we require, as proposed, that management companies 
disclose annually whether any borrower of securities defaulted on its 
obligations to the management company? Why or why not? Should we 
instead, or additionally, require management companies to report 
monthly on Form N-PORT whether any borrower of securities defaulted on 
its obligations to the management company?
     Should we require, as proposed, that management companies 
report certain information about each securities lending agent and each 
cash collateral manager? Why or why not? Should we require that these 
funds disclose whether each of these external service providers is a 
first- or second-tier affiliate of the fund?
     In addition to requiring management companies to report 
whether they made each of the proposed types of payments associated 
with securities lending, should the Commission also require disclosure 
of

[[Page 33642]]

specific rates and/or amounts paid during the reporting period of each 
enumerated type of compensation, similar to the disclosures we are 
proposing to require in the financial statements concerning the terms 
governing the compensation of the securities lending agent and 
collateral manager? Would that additional information be useful in 
proposed Form N-CEN in a structured format for risk monitoring and use 
by investors or other market participants, including other management 
company boards of directors that are evaluating securities lending 
agent services?
     Would the proposed reporting requirements regarding 
securities lending yield beneficial information? If not, what 
information should the Commission collect instead to conduct 
appropriate risk monitoring of securities lending activity by 
management companies? How should this information be collected?
     Would the proposed reporting requirements concerning 
securities lending activity be burdensome?
     Should proposed Form N-CEN include a specific definition 
for ``securities lending agent''? Why or why not? If so, how should the 
term be defined? Should the form include a specific definition for 
``cash collateral manager''? Why or why not? If so, how should the term 
be defined?
     Are there other reporting requirements that the Commission 
should adopt for securities lending activity? If so, would these 
additional reporting requirements assist with Commission risk 
monitoring, inform the public, or both?
iv. Reliance on Certain Rules
    Like Form N-SAR, proposed Form N-CEN would include a requirement 
that management companies report whether they relied on certain rules 
under the Investment Company Act during the reporting period.\480\ 
However, proposed Form N-CEN would require this information with 
respect to additional rules not currently covered by Form N-SAR.\481\ 
We are proposing to collect information on these additional rules to 
better monitor reliance on exemptive rules and to assist us with our 
accounting, auditing and oversight functions, including, for some 
rules, compliance with the Paperwork Reduction Act. For example, 
reporting of reliance on rules 15a-4 and 17a-8 under the Investment 
Company Act will allow the staff to monitor significant events relating 
to interim investment advisory agreements and affiliated mergers, 
respectively.
---------------------------------------------------------------------------

    \480\ Item 31 of proposed Form N-CEN.
    \481\ Compare id. (requiring management companies to identify if 
they relied upon any of the following rules: rule 10f-3 (exemption 
for the acquisition of securities during the existence of an 
underwriting or selling syndicate), rule 12d1-1 (exemptions for 
investments in money market funds), rule 15a-4 (temporary exemption 
for certain investment advisers), rule 17a-6 (exemption for 
transactions with portfolio affiliates), rule 17a-7 (exemption of 
certain purchase or sale transactions between an investment company 
and certain affiliated persons thereof), rule 17a-8 (mergers of 
affiliated companies), rule 17e-1 (brokerage transactions on a 
securities exchange), rule 22d-1 (exemption from section 22(d) to 
permit sales of redeemable securities at prices which reflect sales 
loads set pursuant to a schedule), rule 23c-1 (repurchase of 
securities by closed-end companies), rule 32a-4 (independent audit 
committees)) with Items 40, 77.N, 77.O, 102.M, 102.N of Form N-SAR 
(requiring information regarding rules 2a-7 (money market funds), 
10f-3 (see above for description) and 12b-1 (distribution of shares 
by registered open-end management investment company).
---------------------------------------------------------------------------

    In addition, we are proposing to amend rule 10f-3 to eliminate the 
requirement that funds provide the Commission with reports on Form N-
SAR regarding any transactions effected pursuant to the rule.\482\ Rule 
10f-3 currently requires funds to maintain and preserve certain 
information--the same information also required to be filed pursuant to 
Form N-SAR--in its records regarding rule 10f-3 transactions.\483\ Our 
proposed amendments to rule 10f-3 would eliminate the requirement to 
periodically report this information,\484\ but would not alter the 
requirement to maintain and preserve it. The Commission believes it is 
unnecessary for funds to continue to file this information because 
Commission staff can request the information in connection with staff 
inspections, examinations and other inquiries.\485\
---------------------------------------------------------------------------

    \482\ See proposed amendments to rule 10f-3.
    \483\ See rule 10f-3(c)(12) under the Investment Company Act [17 
CFR 270.10f-3(c)(12)].
    \484\ See rule 10f-3(c)(9).
    \485\ Similar exemptive rules take this approach and do not 
require filings with the Commission. See rule 17a-7 under the 
Investment Company Act [17 CFR 270.17a-7] and rule 17e-1 under the 
Investment Company Act [17 CFR 270.17e-1]. We note that we 
previously proposed deleting this filing requirement from rule 10f-3 
in 1996. See Exemption for the Acquisition of Securities During the 
Existence of an Underwriting Syndicate, Investment Company Act 
Release No. 21838 (Mar. 21, 1996) [61 FR 13620 (Mar. 27, 1996)]. We 
chose not to adopt it in light of the other amendments to the rule 
at that time, including the increase in the percentage limit on the 
principal amount of an offering that an affiliated fund could 
purchase. See Exemption for the Acquisition of Securities During the 
Existence of an Underwriting of Selling Syndicate, Investment 
Company Act Release No. 22775 (July 31, 1997) [62 FR 42401 (Aug. 7, 
1997].
---------------------------------------------------------------------------

    We request comment on the Part C questions relating to the 
management company's reliance on certain exemptive rules and orders:
     Should any additional information concerning exemptive or 
other rules be requested?
     We request comment on our proposal to eliminate the 
requirement under rule 10f-3 that funds provide the Commission with 
periodic reports on Form N-SAR. Should we eliminate this requirement or 
continue it under Form N-CEN? Why or why not? Are there any costs or 
benefits associated with eliminating this requirement?
v. Expense Limitations
    As in Form N-SAR,\486\ Form N-CEN would require information 
regarding expense limitations.\487\ The requirements in Form N-CEN, 
however, would be modified from Form N-SAR by requiring information on 
whether the management company had an expense limitation arrangement in 
place, whether any expenses of the fund were waived or reduced pursuant 
to the arrangement, whether the waived fees are subject to recoupment, 
and whether any expenses previously waived were recouped during the 
period.\488\ We believe that more specific questions relating to 
management company expense limitation arrangements would reduce burdens 
and limit uncertainty for management companies when responding to these 
items.
---------------------------------------------------------------------------

    \486\ See Items 53.A-C of Form N-SAR (requiring the fund to 
identify if expenses of the Registrant/Series were limited or 
reduced during the reporting period by agreement, and, if so, 
identify if the limitation was based upon assets or income).
    \487\ Item 32 of proposed Form N-CEN.
    \488\ Id. Proposed Form N-CEN would also include an instruction 
that filers should provide information in response to the item 
concerning any direct or indirect limitations, waivers or 
reductions, on the level of expenses incurred by the fund during the 
reporting period. The instructions would also provide an example of 
how an expense limit may be applied--when an adviser agrees to 
accept a reduced fee pursuant to a voluntary fee waiver or for a 
temporary period such as for a new fund in its start-up phase. See 
Instruction to Item 32 of proposed Form N-CEN.
---------------------------------------------------------------------------

    We request comment on the Part C questions relating to the 
management company's expense limitations and fee waivers:
     Are the proposed Form N-CEN items relating to expense 
limitations appropriate? Is there any additional information that we 
should request on the management company's expense limitations? If so, 
what items and why?
vi. Service Providers
    Similar to Form N-SAR,\489\ Form N-CEN would collect identifying 
information on the management company's service providers, including 
its advisers and sub-advisers,\490\ transfer agents,\491\ custodians 
(including sub-

[[Page 33643]]

custodians),\492\ shareholder servicing agents,\493\ third-party 
administrators,\494\ and affiliated broker-dealers.\495\ We are also 
proposing new requirements that the management company provide 
information on whether the service provider was hired or terminated 
during the reporting period and whether it is affiliated with the fund 
or its adviser(s).\496\ In addition, like Form N-SAR, Form N-CEN would 
ask custodians to indicate the type of custody, but would expand upon 
the types of custody listed.\497\ Together, these items would assist 
the Commission in analyzing the use of third-party service providers by 
management companies, as well as identify service providers that 
service large portions of the fund industry.
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    \489\ See Items 8 and 10-15 of Form N-SAR.
    \490\ Item 33 of proposed Form N-CEN.
    \491\ Item 34 of proposed Form N-CEN. Form N-SAR equates a 
``shareholder servicing agent'' with a ``transfer agent.'' See 
Instruction to Item 12 of Form N-SAR.
    \492\ Item 37 of proposed Form N-CEN.
    \493\ Item 38 of proposed Form N-CEN.
    \494\ Item 39 of proposed Form N-CEN.
    \495\ Item 40 of proposed Form N-CEN.
    \496\ See, e.g., Items 33.a.vii, b and c.vii; 34.a.vi and b of 
proposed Form N-CEN.
    \497\ Compare Items 15.E and 18 of Form N-SAR with Item 
37.a.vii.6-Item 37.a.vii.7 of proposed Form N-CEN.
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    Based on staff experience, management companies and their boards 
often rely on pricing agents to help price securities held by the fund. 
Therefore, we are proposing a new requirement that management companies 
provide identifying information on persons that provided pricing 
services during the reporting period,\498\ as well as persons that 
formerly provided pricing services to the management company during the 
current and immediately prior reporting period that no longer provide 
services to that company.\499\ This would assist the Commission in 
assessing the use of pricing services by the fund industry and the role 
they play in valuing fund investments.
---------------------------------------------------------------------------

    \498\ Item 35 of proposed Form N-CEN.
    \499\ Item 36 of proposed Form N-CEN.
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    Part C would also require identifying information on the ten 
entities that, during the reporting period, received the largest dollar 
amount of brokerage commissions from the management company \500\ and 
with which the management company did the largest dollar amount of 
principal transactions.\501\ Form N-SAR also requests identifying 
information on these entities \502\--information that is not available 
elsewhere in a structured format. Moreover, we continue to believe that 
brokerage commission and principal transaction information provides 
valuable information to Commission staff about management company 
brokerage practices, and would assist the staff in identifying the 
types of broker-dealers who service management company clients, 
monitoring for changes in business practices, and assessing the types 
of trading activities in which funds are engaged. Finally, similar to 
Form N-SAR, we are proposing to ask whether the management company paid 
commissions to broker-dealers for ``brokerage and research services'' 
within the meaning of section 28(e) of the Exchange Act.\503\
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    \500\ Item 41 of proposed Form N-CEN.
    \501\ Item 42 of proposed Form N-CEN.
    \502\ Items 20-23 of Form N-SAR. Form N-SAR includes an 
instruction designed to help filers distinguish between agency and 
principal transactions for purposes of reporting information 
regarding brokerage commissions and principal transactions. See 
Instruction to Items 20-23 of Form N-SAR. A substantially similar 
instruction would be included in Form N-CEN. See Instructions to 
Item 41-Item 42 of proposed Form N-CEN.
    \503\ Item 43 of proposed Form N-CEN; see also Item 26.B of Form 
N-SAR (requiring disclosure if the fund's receipt of investment 
research and statistical information from a broker or dealer was a 
consideration which affected the participation of brokers or dealers 
or other entities in commissions or other compensation paid on 
portfolio transactions of Registrant). Section 28(e) of the Exchange 
Act establishes a safe harbor that allows money managers to use 
client funds to purchase ``brokerage and research services'' for 
their managed accounts under certain circumstances without breaching 
their fiduciary duties to clients. See 15 U.S.C. 78bb(e); see also 
Commission Guidance Regarding Client Commission Practices Under 
Section 28(e) of the Securities Exchange Act of 1934, Release No. 
33-54165 (July 18, 2006) [71 FR 41978 (July 24, 2006)]. We continue 
to believe that an item indicating whether a fund uses soft dollars 
will assist our staff in their examinations and provide census data 
as to the number and type of funds that rely on the safe harbor 
provided by section 28(e).
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    We request comment on the Part C questions relating to the fund's 
service providers:
     Are the proposed Form N-CEN items relating to service 
providers appropriate? Should any of the service providers or 
information regarding the service providers included in proposed Form 
N-CEN be excluded from the form? Are there other service providers for 
which we should require information? For example, should we request 
information on index providers and, in particular, affiliated index 
providers?
     Are the service providers identified in proposed Form N-
CEN sufficiently clear or should we provide definitions for each 
provider? If so, what definitions should we use and why?
     Should additional information be requested regarding 
advisers or sub-advisers? Should the form provide a definition of the 
term sub-adviser?
     Should any additional specific service provider 
information be requested? Is there any proposed service provider 
information that should not be requested? Should proposed Form N-CEN 
request information on whether the service provider was hired or 
terminated, or on the affiliation of the service provider, as proposed?
     In addition to requesting service provider city and state 
or foreign country information as proposed, should street address, 
phone or email information be requested? Would inclusion of this 
additional information in proposed Form N-CEN raise any privacy or 
other concerns?
     Should the form request information regarding sub-transfer 
agents or other shareholder servicers?
     Should any additional information on service provider fees 
be requested? For example, should custodian, audit, or administrator 
fees be requested? Is certain service provider fee information 
unnecessary as redundant with financial statements?
     Is the use of the term ``pricing service'' appropriate as 
proposed? Should the form provide a definition of ``pricing service''?
     Should we, as proposed, include custody pursuant to rules 
17f-6 and 17f-7 under the Investment Company Act (types of custody not 
currently listed in Form N-SAR) on the list of types of custody in 
proposed Form N-CEN?
     Is there additional information regarding broker-dealers 
that should be requested? Should we use a different methodology other 
than largest amount of brokerage commissions or collect information for 
a larger or smaller number of brokers?
     Is there additional information regarding payments by the 
management companies to brokers or dealers for ``brokerage and research 
services'' that should be requested?
    We request comment on Part C, generally:
     Are there any additional questions regarding management 
companies that we should include in proposed Form N-CEN?
d. Part D--Closed-End Management Companies and Small Business 
Investment Companies
    Proposed Form N-CEN would, as Form N-SAR does, recognize that 
closed-end funds and SBICs have particular characteristics that warrant 
questions targeted specifically to them.\504\ Like Form N-SAR, Form N-
CEN would require additional

[[Page 33644]]

information to be reported by closed-end funds in Part D of the form 
and would also treat SBICs differently than other management investment 
companies, requiring them to complete Part D of the form in lieu of 
Part C.\505\ The information requested in Part D would provide us with 
information that is particular to closed-end funds and SBICs and, thus, 
would assist us in monitoring the activities of these funds and our 
examiners in their preparation for exams of these funds.
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    \504\ See Items 86-88 of Form N-SAR (relating specifically to 
closed-end funds) and Items 89-110 of Form N-SAR (relating 
specifically to SBICs).
    \505\ As discussed above, SBICs are unique investment companies 
that operate differently than other management investment companies. 
See supra note 35.
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    Similar to Form N-SAR, we are proposing to require in Part D of 
proposed Form N-CEN information on the securities that have been issued 
by the closed-end fund or SBIC, including the type of security issued 
(common stock, preferred stock, warrants, convertible securities, 
bonds, or any security considered ``other''), title of each class, 
exchange where listed, and ticker symbol.\506\ We are also proposing to 
require new information relating to rights offerings \507\ and 
secondary offerings by the closed-end fund or SBIC,\508\ including 
whether there was such an offering during the reporting period and if 
so, the type of security involved.\509\ Together, this information will 
allow the staff to quickly identify and track the securities and 
offerings of closed-end funds and SBICs when monitoring and examining 
these funds.
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    \506\ Item 44 of proposed Form N-CEN; cf. Items 87-88 and 96 of 
Form N-SAR (requesting information on the title and ticker of each 
class of securities issued on an exchange and information regarding 
certain specific types of securities). An instruction to Item 44 of 
proposed Form N-CEN would indicate that the fund should provide the 
ticker symbol for any security not listed on an exchange, but that 
has a ticker symbol.
    \507\ Item 45 of proposed Form N-CEN.
    \508\ Item 46 of proposed Form N-CEN.
    \509\ See Item 45 and Item 46 of proposed Form N-CEN. Item 45.c 
of proposed Form N-CEN would also ask for the percentage of 
participation in a primary rights offering and an accompanying 
instruction to this item would address the method of calculating 
such percentage.
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    Like Form N-SAR,\510\ we are also proposing to require that each 
closed-end fund or SBIC report information on repurchases of its 
securities during the reporting period.\511\ However, unlike Form N-
SAR, which requires information on the number of shares or principal 
amount of debt and net consideration received or paid for sales and 
repurchases for common stock, preferred stock, and debt securities, 
Form N-CEN would only require the closed-end fund or SBIC to indicate 
if it repurchased any outstanding securities issued by the closed-end 
fund or SBIC during the reporting period and indicate which type of 
security.\512\
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    \510\ See Items 86 and 95 of Form N-SAR.
    \511\ Item 47 of proposed Form N-CEN.
    \512\ We note that, with respect to closed-end funds, financial 
information relating to monthly sales and repurchases of shares 
would be reported monthly on proposed Form N-PORT. See Item B.6 of 
proposed Form N-PORT (requiring the aggregate dollar amounts for 
sales and redemptions/repurchases of fund shares during each of the 
last three months).
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    We are also proposing to carry over Form N-SAR's requirements \513\ 
relating to default on long-term debt \514\ and dividends in 
arrears.\515\ However, unlike Form N-SAR, which requires an attachment 
stating detailed information on defaults and arrears on senior 
securities,\516\ we are proposing that Form N-CEN only require a yes/no 
question and text-based responses directly in the form.\517\ We are 
similarly proposing to carry over the Form N-SAR requirement \518\ 
regarding modifications to the constituent's instruments defining the 
rights of holders.\519\ Similar to Form N-SAR, if a closed-end fund or 
SBIC made modifications to such an instrument, it would also be 
required to file an attachment in Part G of Form N-CEN with a more 
detailed description of the modification.\520\ This item provides the 
Commission with information on and copies of documents reflecting 
changes to shareholders' rights.
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    \513\ See Items 77.G and 102.F of Form N-SAR.
    \514\ Item 48 of proposed Form N-CEN.
    \515\ Item 49 of proposed Form N-CEN.
    \516\ Items 77.G and 102.F of Form N-SAR.
    \517\ Item 48 of proposed Form N-CEN would require, with respect 
to any default on long-term debt, the nature of the default, the 
date of the default, the amount of the default per $1000 face 
amount, and the total amount of default. An instruction to this item 
would define ``long-term debt'' to mean a debt with a period of time 
from date of initial issuance to maturity of one year or greater. 
Item 49 of proposed Form N-CEN would require, with respect to any 
dividends in arrears, the title of the issue and the amount per 
share in arrears. This item would define ``dividends in arrears'' to 
mean dividends that have not been declared by the board of directors 
or other governing body of the fund at the end of each relevant 
dividend period set forth in the constituent instruments 
establishing the rights of the stockholders.
    \518\ Items 77.I and 102.H of Form N-SAR.
    \519\ Item 50 of proposed Form N-CEN.
    \520\ Item 79.b.ii of proposed Form N-CEN.
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    Part G of proposed Form N-CEN would also require closed-end funds 
or SBICs to file attachments regarding material amendments to 
organizational documents,\521\ new or amended investment advisory 
contracts,\522\ information called for by Item 405 of Regulation S-
K,\523\ and, for SBICs only, senior officer codes of ethics.\524\ Where 
possible, we sought to eliminate the need to file attachments with the 
census reporting form in order to simplify the filing process and 
maximize the amount of information we receive in a data tagged format. 
However, the attachments proposed to be required with reports on Form 
N-CEN, provide us with information that is not otherwise updated or 
filed with the Commission and, thus, we believe they should continue to 
be filed in attachment form. All of the attachments in proposed Form N-
CEN that are specific to closed-end funds and SBICs are also currently 
required by Form N-SAR.\525\
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    \521\ Item 79.b.i of proposed Form N-CEN.
    \522\ Item 79.b.iii of proposed Form N-CEN.
    \523\ Item 79.b.iv of proposed Form N-CEN.
    \524\ Item 79.b.v of proposed Form N-CEN. This item applies only 
to SBICs because other management investment companies, including 
closed-end funds, provide this information in filings on Form N-CSR. 
See Items 2 and 3 of Form N-CSR; see also rule 30d-1 under the 
Investment Company Act [17 CFR 270.30d-1].
    \525\ Compare Item 79.b of proposed Form N-CEN with Items 
77.Q.1, 77.Q.2, 102.P.1, 102.P.2, and 102.P.3 of Form N-SAR; see 
also Instructions to Specific Items 77Q1(a), 77Q1(e), 77Q2, 
102P1(a), 102P1(e), 102P2, and 102P3 of Form N-SAR.
---------------------------------------------------------------------------

    Similar to Form N-SAR, we are proposing to require other census-
type information relating to management fees and net operating 
expenses. Closed-end funds would be required to report the fund's 
advisory fee as of the end of the reporting period as a percentage of 
net assets.\526\ Additionally, closed-end funds and SBICs would both be 
required to report the fund's net annual operating expenses as of the 
end of the reporting period (net of any waivers or reimbursements) as a 
percentage of net assets.\527\ Unlike open-end funds, which provide 
management fee and net expense information to the Commission in a 
structured format,\528\ such information is not reported to or updated 
with the Commission in a structured format by closed-end funds or 
SBICs. This information would allow the Commission to track industry 
trends relating to fees. Like Form N-SAR, proposed Form N-CEN also 
would

[[Page 33645]]

require, for the end of the reporting period, the market price per 
share \529\ and NAV per share \530\ of the fund's common stock.
---------------------------------------------------------------------------

    \526\ Item 51 of proposed Form N-CEN; cf. Items 47-52 and 72.F 
of Form N-SAR (requesting advisory fee information for management 
companies, including closed-end funds). Whereas Form N-SAR requests 
information regarding the advisory fee rate and the dollar amount of 
gross advisory fees, an instruction to Item 51 of proposed Form N-
CEN would explain that the management fee reported should be based 
on the percentage of amounts incurred during the reporting period.
    \527\ Item 52 of proposed Form N-CEN; cf. Items 72.X and 97.X of 
Form N-SAR (requesting total expenses in dollars for closed-end 
funds and SBICs).
    \528\ Management fee information for open-end funds is currently 
tagged in XBRL format in the fund's risk return summary and is 
therefore not required by proposed Form N-CEN. See General 
Instruction C.3.G of Form N-1A.
    \529\ Item 53 of proposed Form N-CEN; see Items 76 and 101 of 
Form N-SAR.
    \530\ Item 54 of proposed Form N-CEN; see Items 74.V.1 and 99.V 
of Form N-SAR.
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    Finally, like Form N-SAR, proposed Form N-CEN would require 
information regarding an SBIC's investment advisers, transfer agents, 
and custodians.\531\ This information is the same as what would be 
reported by open-end and closed-end funds in Part C of proposed Form N-
CEN, but SBICs would not be required to fill out Part C of the proposed 
form. As noted above, proposed Form N-CEN, like Form N-SAR, would 
recognize that SBICs have particular characteristics that warrant 
questions targeted specifically to them. The majority of questions in 
Part C of proposed Form N-CEN would be inapplicable to SBICs or 
otherwise request information that would not be helpful to us in 
carrying out our regulatory functions with respect to SBICs. 
Accordingly, we propose to except SBICs from filling out Part C of the 
form and instead would include certain service provider questions from 
Part C in Part D of the form as response items for SBICs.
---------------------------------------------------------------------------

    \531\ Item 55-Item 57 of proposed Form N-CEN.
---------------------------------------------------------------------------

    We request comment on the following information requirements 
relating to closed-end funds and SBICs:
     Are the proposed Form N-CEN items relating to closed-end 
funds and SBICs appropriate? Are there other information items relating 
to closed-end funds and SBICs that we should require? If so, what 
information and why? Are there any items relating to closed-end funds 
and SBICs in proposed Form N-CEN that should be excluded from the form?
     Is there additional information regarding trading in 
closed-end fund or SBIC securities that should be requested?
     Is there additional information regarding repurchases that 
should be requested?
     Should the form provide specific instructions on the 
calculation of management fees?
     Should net annual operating expenses be defined? Should 
they include amortization and depreciation expenses?
     Should the management fee for closed-end funds be 
requested as proposed or should other information such as the absolute 
amount of fees be requested?
    Should we request this information for SBICs? Should the form 
request information on what the fee is based upon, such as a percentage 
of income or performance? Should breakpoints used in calculating the 
management fee be reported at each breakpoint level or should an 
average management fee be provided? Should the management fee 
information requested be forward-looking or should it be backward 
looking, as proposed, providing a management fee based on fees charged 
during the reporting period and, if so, which NAV (e.g., year-end or 
average) should be used?
     If a closed-end fund or SBIC pays a performance fee, 
should the form provide instructions regarding how they should 
calculate the fees to be disclosed?
     In connection with defaults, is reference to a $1,000 face 
amount appropriate? Would this requirement appropriately provide 
meaningful information not only on the amount of principal default but 
default on interest payments? Should the form also require information 
on the amount of debt outstanding to provide additional context and 
information related to the default?
     Regarding dividends in arrears, should the form request 
per share amounts as proposed or should it request the aggregate amount 
in arrears?
e. Part E--Exchange-Traded Funds and Exchange-Traded Managed Funds
    We are proposing to include a section in Form N-CEN related 
specifically to ETFs--Part E--which ETFs would complete in addition to 
Parts A, B, and G, and either Part C (for open-end funds) or Part F 
(for UITs). For purposes of Form N-CEN, an ETF is a special type of 
investment company that is registered under the Investment Company Act 
as either an open-end fund or a UIT. Unlike other open-end funds and 
UITs, an ETF does not sell or redeem its shares except in large blocks 
(or ``creation units'') and with broker-dealers that have contractual 
arrangements with the ETF (called ``authorized participants'').\532\ 
However, national securities exchanges list ETF shares for trading, 
which allows investors to purchase and sell individual shares 
throughout the day in the secondary market. Thus, ETFs possess 
characteristics of traditional open-end funds and UITs, which issue 
redeemable shares, and of closed-end funds, which generally issue 
shares that trade at negotiated prices on national securities exchanges 
and that are not redeemable.\533\
---------------------------------------------------------------------------

    \532\ For purposes of Form N-CEN, ``creation unit'' is defined 
as ``a specified number of Exchange-Traded Fund or Exchange-Traded 
Managed Fund shares that the fund will issue to (or redeem from) an 
authorized participant in exchange for the deposit (or delivery) of 
specified securities, cash, and other assets.'' Instruction 8 to 
Item 60 of proposed Form N-CEN. For purposes of Form N-CEN, 
``authorized participant'' is defined as ``a broker-dealer that is 
also a member of a clearing agency registered with the Commission, 
and which has a written agreement with the Exchange-Traded Fund or 
Exchange-Traded Managed Fund or one of its designated service 
providers that allows it to place orders to purchase or redeem 
creation units of the Exchange-Traded Fund or Exchange-Traded 
Managed Fund.'' Instruction to Item 59 of proposed Form N-CEN.
    \533\ See generally Actively Managed Exchange-Traded Funds, 
Investment Company Act Release No. 25258 (Nov. 8, 2001) [66 FR 57614 
(Nov. 15, 2001)]; ETF Proposing Release, supra note 446.
---------------------------------------------------------------------------

    Currently, ETFs are subject to the same comprehensive information 
reporting requirements on Form N-SAR as are other open-end funds or 
UITs, and they are not required to report additional, more specialized 
information because Form N-SAR predates the introduction of ETFs to the 
market and has not been amended to address ETFs' distinct 
characteristics. In 2009, the Commission amended its registration 
statement disclosure requirements for ETFs \534\ that are open-end 
funds to better meet the needs of investors who purchase those ETF 
shares in secondary market transactions.\535\ We believe that it is 
appropriate--and accordingly propose--to similarly tailor some of the 
comprehensive information reporting requirements in proposed new Form 
N-CEN to the special characteristics of ETFs. Funds and UITs meeting 
the definition of ``exchange-traded fund'' in Form N-CEN would be 
required to disclose information pursuant to the items in Part E of the 
form, as would certain similar investment products known as ``exchange-
traded managed funds.'' \536\
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    \534\ See General Instruction A to Form N-1A (defining 
``exchange-traded fund'').
    \535\ See Enhanced Disclosure and New Prospectus Delivery Option 
for Registered Open-End Management Investment Companies, Securities 
Act Release No. 8998 (Jan. 13, 2009) [74 FR 4546, 4558 (Jan. 26, 
2009)].
    \536\ General Instruction A to proposed Form N-CEN; see also 
supra note 446.
---------------------------------------------------------------------------

    Some of the new reporting requirements for ETFs that we are 
proposing today as part of Form N-CEN relate to an ETF's (or its 
service provider's) interaction with authorized participants. These 
entities have an important role to play in the orderly distribution and 
trading of ETF shares and are significant to the ETF marketplace.\537\
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    \537\ See ETF Proposing Release, supra note 446, at 14620-21.
---------------------------------------------------------------------------

    Because of the importance of authorized participants, we are 
proposing new reporting requirements

[[Page 33646]]

concerning these entities. Currently, the information we have regarding 
reliance by ETFs on particular authorized participants is limited, and 
we believe that collecting information concerning these entities on an 
annual basis would allow us to understand and better assess the size, 
capacity, and concentration of the authorized participant framework and 
also inform the public about certain characteristics of the ETF primary 
markets. Accordingly, we propose to require each ETF to report 
identifying information about its authorized participants \538\ and the 
dollar value of the ETF shares the authorized participant purchased and 
redeemed from the ETF during the reporting period.\539\ More 
specifically, proposed Form N-CEN would require an ETF to report the 
name of each of its authorized participants (even if the authorized 
participant did not purchase or redeem any ETF shares during the 
reporting period),\540\ certain other identifying information,\541\ the 
dollar value of the ETF's shares that the authorized participant 
purchased from the ETF during the reporting period,\542\ and the dollar 
value of the ETF's shares that the authorized participant redeemed 
during the reporting period.\543\ Collection of this additional 
information may allow the Commission staff to monitor how ETF purchase 
and redemption activity is distributed across authorized participants 
and, for example, the extent to which a particular ETF--or ETFs as a 
group--may be reliant on one or more particular authorized 
participants.
---------------------------------------------------------------------------

    \538\ Item 59.a-Item 59.d of proposed Form N-CEN.
    \539\ Item 59.e-Item 59.f of proposed Form N-CEN.
    \540\ Item 59.a of proposed Form N-CEN.
    \541\ Item 59.b-Item 59.d of proposed Form N-CEN.
    \542\ Item 59.e of proposed Form N-CEN.
    \543\ Item 59.f of proposed Form N-CEN.
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    Other proposed new reporting requirements relate to certain 
characteristics of ETF creation units--the large blocks of shares that 
authorized participants may purchase from or redeem to the ETF. In the 
primary market, ETF shares, bundled in creation units, are sold or 
redeemed either primarily ``in kind''--i.e., in the form of the ETF's 
constituent portfolio securities--or primarily in cash. When 
transacting in kind or in cash, the particular authorized participant 
wishing to purchase (or redeem) shares typically bears, in the form of 
a fixed fee, the transactional costs associated with assembling (or 
disassembling) creation units. Those costs, therefore, are not 
mutualized to non-transacting shareholders. When an authorized 
participant purchases (or redeems) ETF shares all or partly in cash, 
absent a countervailing effect, the ETF would experience additional 
costs (e.g., brokerage, taxes) involved with buying the securities with 
cash or selling portfolio securities to satisfy a cash redemption. 
Therefore, in order to ensure that the purchasing or redeeming party 
bears these costs rather than the non-transacting shareholders, the ETF 
may charge a ``variable'' fee, so called because it is often computed 
as a percentage of the value of the creation unit. We understand that 
such variable fees also can take the form of a dollar amount.
    In order to better understand the capital markets implications of 
different creation unit requirements, primary market transaction 
methods, and transaction fees, we are proposing to require that ETFs 
annually report summary information about these characteristics of 
creation units and primary market transactions. ETFs are not currently 
required to report the information discussed below in a structured 
format, and public availability of many of the proposed data items is 
limited and indeterminable. To better understand the commonality of 
different transaction methods and the degree to which it varies across 
ETFs and over time, we propose to require that ETFs report the total 
value (i) of creation units that were purchased by authorized 
participants primarily in exchange for portfolio securities on an in-
kind basis; \544\ (ii) of those that were redeemed primarily on an in-
kind basis; \545\ (iii) of those purchased by authorized participants 
primarily in exchange for cash; \546\ and (iv) of those that were 
redeemed primarily on a cash basis.\547\ For purposes of these proposed 
reporting requirements concerning transaction methods and transaction 
fees, ``primarily'' would mean greater than 50% of the value of the 
creation unit.\548\ To better understand the effects of primary market 
transaction fees on ETF pricing and trading and to better inform the 
public about such fees, we also propose to require that ETFs report 
applicable transactional fees--including each of ``fixed'' and 
``variable'' fees--applicable to the last creation unit purchased and 
the last creation unit redeemed during the reporting period of which 
some or all of the creation unit was transacted on a cash basis, as 
well as the same figures for the last creation unit purchased and the 
last creation unit redeemed during the reporting period of which some 
or all of the creation unit was transacted on an in-kind basis.\549\
---------------------------------------------------------------------------

    \544\ Item 60.a of proposed Form N-CEN.
    \545\ Item 60.c of proposed Form N-CEN.
    \546\ Item 60.b of proposed Form N-CEN.
    \547\ Item 60.d of proposed Form N-CEN.
    \548\ Instruction 9 to Item 60 of proposed Form N-CEN.
    \549\ Item 60.e-Item 60.h of proposed Form N-CEN.
---------------------------------------------------------------------------

    We also propose to require ETFs to report the number of ETF shares 
required to form a creation unit as of the last business day of the 
reporting period,\550\ which we believe would also allow the Commission 
and other data users to better analyze any effects that ETFs' creation 
unit size requirements may have on ETF pricing and trading. We are 
proposing that this information be as of the last business day of the 
reporting period because we understand that these fees sometimes vary 
over the course of the reporting period, and the fee level information 
is likely to be most current if provided as of the last business day of 
the period. In addition to information about authorized participants 
and creation units, we propose to require that ETFs, like closed-end 
funds, disclose the exchange on which the ETF is listed so that 
Commission staff may be better able to quickly gather information as to 
which ETFs may be effected should an idiosyncratic risk or market event 
arise in connection with a particular exchange.\551\
---------------------------------------------------------------------------

    \550\ Item 60 of proposed Form N-CEN.
    \551\ Item 58 of proposed Form N-CEN.
---------------------------------------------------------------------------

    Finally, with respect to ETFs that are UITs, we ask for information 
regarding tracking difference and tracking error.\552\ This information 
is requested of open-end index funds in Item 27(b) and, for the same 
reasons discussed in Part II.E.4.c.i of this release, the proposed form 
would request this information of ETFs that are UITs.
---------------------------------------------------------------------------

    \552\ Item 61 of proposed Form N-CEN.
---------------------------------------------------------------------------

    Taken together, we believe that, in addition to informing the 
Commission's risk analysis and, potentially, future policymaking 
concerning ETFs, the information these proposed requirements would 
yield could also help inform the interested public about the operation 
of, and possible risks associated with, these funds.
    We request comment on the proposed reporting requirements for ETFs 
and ETMFs:
     Should ETFs be required to report the proposed additional 
information in Part E of proposed Form N-CEN that other funds would not 
be required to report?
     Should ETFs that are UITs and ETFs that are open-end funds 
be subject to the same special reporting requirements, or should the 
requirements be different from one

[[Page 33647]]

another? If so, how? Should ETFs and ETMFs be subject to the same 
special reporting requirements, or should the requirements be different 
from one another? If so, how and why?
     Should the proposed items concerning authorized 
participants be required? Why or why not? Should we require additional 
information about authorized participants? For example, should we 
require funds to report the volume of shares purchased and redeemed in 
each month of the reporting period by each authorized participant, in 
order to better understand how primary market transactions are 
distributed across authorized participants and over the course of the 
reporting period? Should we require funds to report information on 
purchases and redemptions by each authorized participant on days when 
the most primary or secondary market activity is observed, which could 
be used to better understand how primary market activity responds to 
periods of unusual activity? Why or why not? If so, what specific 
information should be required?
     Should the proposed items concerning creation unit 
characteristics and primary market transactions be required? Why or why 
not?
     Should the ETFs and ETMFs that are subject to the proposed 
special reporting requirements be defined as proposed? If not, how 
should the group be defined? Are there certain entities that are not 
included in the proposed definitions that should be? Are there certain 
entities that are included in the proposed definitions that should not 
be?
     Would the proposed reporting requirements yield beneficial 
information? If not, what information should the Commission collect 
instead to conduct appropriate risk monitoring of ETFs? How should this 
information be collected?
     Would any of the proposed reporting requirements conflict 
with agreements between private parties, such as ETFs and authorized 
participants, to keep information confidential? If so, should the 
information nonetheless be required to be disclosed?
     How might the proposed reporting requirements concerning 
ETF primary market transaction fees be used by others outside the 
Commission, if at all? Are the proposed fee categories (viz., fixed 
fees and variable fees) appropriate, or would alternative categories be 
more suitable? If so, what should those categories be?
     How costly would the proposed reporting requirements for 
ETFs be? In addition to reporting and recordkeeping costs, are there 
competitive or other costs that should be considered in connection with 
these proposed requirements?
     Are there other reporting requirements that the Commission 
should adopt for ETFs? If so, would these additional reporting 
requirements assist with Commission risk monitoring, inform the public, 
or both?
f. Part F--Unit Investment Trusts
    Part F of Form N-CEN would require information specific to UITs. 
Like Form N-SAR, proposed Form N-CEN would recognize that UITs have 
particular characteristics that warrant questions targeted specifically 
to them.\553\ The information requested in Part F would inform us 
further about the scope and composition of the UIT industry and, thus, 
would assist us in monitoring the activities of UITs and our examiners 
in their preparation for exams of UITs. Accordingly, similar to Form N-
SAR,\554\ proposed Form N-CEN would require certain identifying 
information relating to a UIT's service providers and entities involved 
in the formation and governance of UITs, including its depositor,\555\ 
sponsor,\556\ trustee,\557\ and third party administrator.\558\
---------------------------------------------------------------------------

    \553\ See Items 111-133 of Form N-SAR (relating specifically to 
UITs).
    \554\ See Items 111 (depositor information), 112 (sponsor 
information), 113 (trustee information), and 114 (principal 
underwriter information) of Form N-SAR.
    \555\ Item 62 of proposed Form N-CEN.
    \556\ Item 65 of proposed Form N-CEN (only applies to UITs that 
are not insurance company separate accounts).
    \557\ Item 66 of proposed Form N-CEN (only applies to UITs that 
are not insurance company separate accounts).
    \558\ Item 63 of proposed Form N-CEN. Form N-SAR does not 
request information about a UIT's third-party administrator.
---------------------------------------------------------------------------

    Proposed Form N-CEN would also ask whether a UIT is a separate 
account of an insurance company.\559\ Depending on a UIT's response to 
this item, it would proceed to answer certain additional questions in 
Part F.\560\ While Form N-SAR generally does not differentiate between 
UITs that are and are not separate accounts of insurance companies, 
proposed Form N-CEN would make this distinction. We believe that by 
distinguishing between these different types of UITs, the form will 
allow us to better target the information requests in the form 
appropriate to the type of UIT. We also believe this new approach will 
allow filers to better understand the information being requested of 
them because it will be more reflective of their operations and should 
thus improve the consistency of the information reported.
---------------------------------------------------------------------------

    \559\ Item 64 of proposed Form N-CEN; see Item 117.A of Form N-
SAR.
    \560\ If a UIT answers ``yes'' to this item, it would proceed to 
answer Items 73 through 78 of the form. However, if a UIT answers 
``no'' to this item, it would proceed to Items 65 through 72, and 
78. Id.
---------------------------------------------------------------------------

    Accordingly, similar to Form N-SAR,\561\ a UIT that is not a 
separate account of an insurance company would provide the number of 
series existing at the end of the reporting period that had securities 
registered under the Securities Act \562\ and, for new series, the 
number of series for which registration statements under the Securities 
Act became effective during the reporting period \563\ and the total 
value of the portfolio securities on the date of deposit.\564\ Proposed 
Form N-CEN would also carry over from Form N-SAR \565\ requirements 
relating to the number of series with a current prospectus,\566\ the 
number of existing series (and total value) for which additional units 
were registered under the Securities Act,\567\ and the value of units 
placed in portfolios of subsequent series.\568\ Our proposal would also 
require that a UIT that is not a separate account of an insurance 
company provide the total assets of all series combined as of the 
reporting period,\569\ which is also currently required by Form N-
SAR.\570\
---------------------------------------------------------------------------

    \561\ See Items 118-120 of Form N-SAR (all UITs are required to 
complete these items).
    \562\ Item 67 of proposed Form N-CEN.
    \563\ Item 68.a of proposed Form N-CEN.
    \564\ Item 68.b of proposed Form N-CEN.
    \565\ See Items 121-124 of Form N-SAR (all UITs are required to 
complete these items).
    \566\ Item 69 of proposed Form N-CEN.
    \567\ Item 70 of proposed Form N-CEN.
    \568\ Item 71 of proposed Form N-CEN.
    \569\ Item 72 of proposed Form N-CEN.
    \570\ See Item 127.L of Form N-SAR (all UITs are required to 
complete this item). Proposed Form N-CEN would not require UITs to 
report certain assets held by a UIT as required by Item 127 of Form 
N-SAR. See Items 127.A-K of Form N-SAR.
---------------------------------------------------------------------------

    As proposed, Form N-CEN would also require certain new information 
to be reported by separate accounts offering variable annuity and 
variable life insurance contracts. Specifically, if the UIT is a 
separate account of an insurance company, proposed Form N-CEN would 
require disclosure of its series identification number \571\ and, for 
each security that has a contract identification number assigned 
pursuant to rule 313 of Regulation S-T, the number of individual 
contracts that are in force at the end of the reporting period.\572\
---------------------------------------------------------------------------

    \571\ Item 73 of proposed Form N-CEN.
    \572\ Item 74 of proposed Form N-CEN.
---------------------------------------------------------------------------

    With respect to insurance company separate accounts, our proposal 
would also require new identifying and census information for each 
security issued

[[Page 33648]]

through the separate account.\573\ This requirement would include the 
name of the security,\574\ contract identification number,\575\ total 
assets attributable to the security,\576\ number of contracts 
sold,\577\ gross premiums received,\578\ and amount of contract value 
redeemed.\579\ This item would also require additional information 
relating to section 1035 exchanges, including gross premiums received 
pursuant to section 1035 exchanges,\580\ number of contracts affected 
in connection with such premiums,\581\ amount of contract value 
redeemed pursuant to section 1035 redemptions \582\ and the number of 
contracts affected by such redemptions.\583\ In addition, insurance 
company separate accounts would be required to provide information on 
whether they relied on rules 6c-7 \584\ and 11a-2 \585\ under the 
Investment Company Act. This information, which is specific to UITs 
that are separate accounts of insurance companies and is either not 
otherwise filed with the Commission or is not filed in a structured 
format, will further assist the Commission in its oversight of UITs, 
including monitoring trends in the variable annuity and variable life 
insurance markets.
---------------------------------------------------------------------------

    \573\ Item 75 of proposed Form N-CEN.
    \574\ Item 75.a of proposed Form N-CEN.
    \575\ Item 75.b of proposed Form N-CEN.
    \576\ Item 75.c of proposed Form N-CEN.
    \577\ Item 75.d of proposed Form N-CEN.
    \578\ Item 75.e of proposed Form N-CEN.
    \579\ Item 75.h of proposed Form N-CEN.
    \580\ Item 75.f of proposed Form N-CEN.
    \581\ Item 75.g of proposed Form N-CEN.
    \582\ Item 75.i of proposed Form N-CEN.
    \583\ Item 75.j of proposed Form N-CEN.
    \584\ Item 76 of proposed Form N-CEN. Rule 6c-7 under the 
Investment Company Act provides exemptions from certain provisions 
of sections 22(e) and 27 of the Act for registered separate accounts 
offering variable annuity contracts to participants in the Texas 
Optional Retirement Program. See 17 CFR 270.6c-7.
    \585\ Item 77 of proposed Form N-CEN. Rule 11a-2 under the 
Investment Company Act relates to offers of exchange by certain 
registered separate accounts or others, the terms of which do not 
require prior Commission approval. See 17 CFR 270.11a-2.
---------------------------------------------------------------------------

    Finally, Form N-CEN would carry over the Form N-SAR \586\ 
requirement that a UIT provide certain information relating to 
divestments under section 13(c) of the Investment Company Act.\587\ 
Thus, if a UIT intends to avail itself of the safe harbor provided by 
section 13(c) with respect to its divestment of certain securities, it 
will continue to make the following disclosures on Form N-CEN: 
Identifying information for the issuer, total number of shares or 
principal amount divested, date that the securities were divested, and 
the name of the statute that added the provisions of section 13(c) in 
accordance with which the securities were divested.\588\ If the UIT 
holds any securities of the issuer on the date of the filing, it would 
also provide the ticker symbol, CUSIP number, and total number of 
shares or, for debt securities, the principal amount held on the date 
of the filing.\589\
---------------------------------------------------------------------------

    \586\ Item 133 of Form N-SAR. Section 13(c) of the Investment 
Company Act provides a safe harbor for registered investment 
companies and its employees, officers, directors and investment 
advisers, based solely upon the investment company divesting from, 
or avoiding investing in, securities issued by persons that the 
investment company determines, using credible information that is 
available to the public, engage in certain investment activities in 
Iran or Sudan. The safe harbor, however, provides that this 
limitation on actions does not apply unless the investment company 
makes disclosures about the divestments in accordance with 
regulations prescribe by the Commission. See 15 U.S.C. 80a-
13(c)(2)(B). Management investment companies are required to provide 
the disclosure on Form N-CSR, pursuant to Item 6(b) of the form, and 
UITs are required to provide the disclosure on Form N-SAR, pursuant 
to Item 133 of the form. See Technical Amendments to Forms N-CSR and 
N-SAR in Connection With the Comprehensive Iran Sanctions, 
Accountability, and Divestment Act of 2010, Exchange Act Release No. 
34-63087 (Oct. 13, 2010) [75 FR 64120 (Oct. 19, 2010)].
    \587\ Item 78 of proposed Form N-CEN.
    \588\ Item 78.a of proposed Form N-CEN.
    \589\ Item 78.b of proposed Form N-CEN. An instruction to Item 
78 would address when the UIT should report divestments pursuant to 
this item.
---------------------------------------------------------------------------

    We request comment on the following information requirements 
relating to UITs:
     Is there any additional information regarding series of 
UITs that should be requested? For example, are there other special UIT 
account types that should also be included in the form? Is there any 
information regarding UITs that is included in proposed Form N-CEN that 
should be excluded from the form?
     Is there any additional information regarding those 
involved in the formation and governance of the UIT and service 
providers to the UIT that should be requested? Should the form provide 
instructions or a definition regarding depositor or sponsor?
     Is there any additional information regarding the number 
of series that should be requested?
     We request comment on the requirement to provide asset 
information for the UIT. Is there any other information regarding the 
series' assets that should be provided? Form N-SAR item 127 contains a 
detailed list of asset types held by the UIT. The requirement in Form 
N-CEN is limited to total assets. Should we require more granular asset 
information in Form N-CEN, as we did in Form N-SAR item 127? If so 
which items should we include?
     We request comment on our items relating specifically to 
insurance company separate accounts. Should we include items relating 
solely to insurance company separate accounts? Are there any UIT items 
that insurance company separate accounts should be subject to that they 
would not be subject to under our proposal? Is there any other 
information that we should require for insurance company separate 
accounts?
g. Part G--Attachments
    Like Form N-SAR,\590\ we are proposing that Part G of Form N-CEN 
require some descriptive attachments to the filing in order to provide 
the staff with more granular information regarding certain key 
issues.\591\ Where possible, we sought to eliminate the need to file 
attachments with the census reporting form in order to simplify the 
filing process and maximize the amount of information we receive in a 
data tagged format.\592\ Accordingly, we have attempted to limit the 
number of attachments to the form to those that are most useful to the 
staff, either because of investor protection issues or because the 
information is not available elsewhere. Moreover, all except one of the 
proposed attachments to Form N-CEN are current requirements in Form N-
SAR.\593\
---------------------------------------------------------------------------

    \590\ See Items 77.E, 77.I, 77.K, 77.L, 77.N, 77.P, 77.Q.1, 
77.Q.2, 102.D, 102.H, 102.J, 102.K, 102.M, 102.O, 102.P.1, 102.P.2, 
and 102.P.3 of Form N-SAR.
    \591\ Form N-SAR requires only management companies to file 
attachments to reports on the form, whereas proposed Form N-CEN 
would require certain attachments for all Registrants.
    \592\ With respect to certain attachments currently in Form N-
SAR, we propose to integrate the data requirements into the form 
itself, rather than keep the attachment requirements. See, e.g., 
Items 77.G and 102.F of Form N-SAR; Item 48 and Item 49 of proposed 
Form N-CEN. However, not all of the attachments currently required 
by Form N-SAR lend themselves to integration into the form, either 
because of the amount of information reported in the attachment or 
because the attachment is a standalone document (e.g., the 
accountant's report on internal control).
    \593\ But see supra note 591.
---------------------------------------------------------------------------

    Thus, all funds that would be required to file Form N-CEN would, 
where applicable, be required to file attachments regarding legal 
proceedings,\594\ provision of financial support,\595\ changes in the 
fund's independent public accountant,\596\ independent public 
accountant's report on internal control,\597\ and changes in accounting 
principles and practices.\598\ In addition, all funds would be

[[Page 33649]]

required, where applicable, to provide attachments relating to 
information required to be filed pursuant to exemptive orders,\599\ and 
other information required to be included as an attachment pursuant to 
Commission rules and regulations.\600\ Moreover, closed-end funds and 
SBICs would also be required, where applicable, to provide attachments 
relating to material amendments to organizational documents,\601\ 
instruments defining the rights of the holders of any new or amended 
class of securities,\602\ new or amended investment advisory 
contracts,\603\ information called for by Item 405 of Regulation S-
K,\604\ and, for SBICs only, senior officer codes of ethics.\605\ Each 
attachment proposed to be required by Form N-CEN includes instructions 
describing the information that should be provided in the 
attachment.\606\
---------------------------------------------------------------------------

    \594\ Item 79.a.i of proposed Form N-CEN.
    \595\ Item 79.a.ii of proposed Form N-CEN.
    \596\ Item 79.a.iii of proposed Form N-CEN.
    \597\ Item 79.a.iv of proposed Form N-CEN. As noted in Item 
79.a.iv, this item would only apply to management companies, other 
than SBICs.
    \598\ Item 79.a.v of proposed Form N-CEN.
    \599\ Item 79.a.vi of proposed Form N-CEN.
    \600\ Item 79.a.vii of proposed Form N-CEN.
    \601\ Item 79.b.i of proposed Form N-CEN. Unlike open-end funds, 
closed-end funds and SBICs do not otherwise update or file the 
information requested by this item with the Commission and, thus, we 
believe the information should continue to be filed as an attachment 
to the census reporting form.
    \602\ Item 79.b.ii of proposed Form N-CEN.
    \603\ Item 79.b.iii of proposed Form N-CEN. Unlike open-end 
funds, closed-end funds and SBICs do not otherwise update or file 
the information requested by this item with the Commission and, 
thus, we believe the information should continue to be filed as an 
attachment to the census reporting form.
    \604\ Item 79.b.iv of proposed Form N-CEN.
    \605\ Item 79.b.v of proposed Form N-CEN.
    \606\ For example, the instructions to Item 79.b.v require SBICs 
to attach detailed information regarding the senior officer code of 
ethics and certain information regarding the audit committee. The 
instructions also require SBICs to meet certain requirements 
regarding the availability of their senior office code of ethics.
---------------------------------------------------------------------------

    As noted earlier, all of the attachments, except one, are currently 
required by Form N-SAR.\607\ The new attachment relates to the 
provision of financial support and would be filed by a fund if an 
affiliate, promoter or principal underwriter of the fund, or affiliate 
of such person, provided financial support to the fund during the 
reporting period. As discussed in Part II.E.4.b, we are proposing to 
include this requirement in Form N-CEN because we believe that it is 
important that the Commission understand the nature and extent that a 
fund's sponsor provides financial support to a fund.
---------------------------------------------------------------------------

    \607\ See supra note 593 and accompanying text.
---------------------------------------------------------------------------

    We request comment on the following information requirements 
relating to attachments to the Form:
     Should any additional attachments be required to be 
attached to Form N-CEN? Are any proposed attachments unnecessary and, 
if so, why? Should any of the attachments requested for all Registrants 
be limited to only certain Registrants?
     Should we require that the information be reported as 
attachments to the form or in narrative text-boxes embedded in the 
form?
     Should attachment requirements concerning copies of all 
constituent instruments defining the rights of the holders of any new 
class of securities and of any amendments to constituent instruments be 
limited to closed-end funds and SBICs as proposed? Should such 
requirements apply to all funds?
     Should the attachments regarding material amendments to 
organizational documents and new or amended advisory contracts apply 
only to closed-end funds and SBICs as proposed? Should these 
requirements apply to all funds? Should the advisory contract 
requirement apply only to advisory contracts to which the fund is a 
party or should it include all advisory contracts, including 
subadvisory contracts?
     Should any of the attachment filing requirements without 
materiality qualifiers be limited by materiality qualifiers?
     With Form N-CEN, we are proposing to eliminate a number of 
attachments currently required by items 77 and 102 of Form N-SAR. Are 
there any attachments to Form N-SAR, that are proposed to be 
eliminated, that should be included in Form N-CEN? Which attachments 
and why? Are there any costs associated with eliminating these 
attachments?
5. Items Required by Form N-SAR That Would Be Eliminated by Form N-CEN
    As we discussed above, with proposed Form N-CEN, we seek to improve 
the information that we collect in order to reflect changes in the fund 
industry since Form N-SAR's adoption in 1985. With that in mind, we are 
proposing to eliminate certain items from Form N-SAR that we believe 
are no longer needed by Commission staff or are outdated in their 
current form. For example, we are proposing not to include Form N-SAR's 
requirement relating to considerations which affected the participation 
of brokers or dealers or other entities in commissions or other 
compensation paid on portfolio transactions.\608\
---------------------------------------------------------------------------

    \608\ Item 26 of Form N-SAR. Proposed Form N-CEN does, however, 
contain information relating to funds that paid commissions to 
brokers and dealers for research services. See Item 43 of proposed 
Form N-CEN.
---------------------------------------------------------------------------

    Form N-CEN would similarly eliminate a number of Form N-SAR items 
where the information is (or would be, under our proposed reforms) 
reported elsewhere--for example, items relating to fees and expenses, 
including front-end and deferred/contingent sales loads, redemption and 
account maintenance fees, rule 12b-1 fees, and advisory fees.\609\ Many 
of the fee and expense items required by Form N-SAR are already 
disclosed, in a structured format, in the risk-return summary required 
by Form N-1A for open-end funds, as well as in an unstructured format 
in other places in fund registration statements.\610\ For other fee and 
expense items, the information is either not frequently used by 
Commission staff or we believe that the benefit of having such 
information is minimal while the burden to funds of reporting such 
information is costly.\611\ For similar reasons as above, we are also 
proposing not to require other information in proposed Form N-CEN, 
including information relating to adjustments to shares outstanding by 
stock split or stock dividend, minimum initial investments, investment 
practices, portfolio turnover, number of shares outstanding, number of 
shareholder accounts, average net assets, and certain other condensed 
balance sheet data items.\612\
---------------------------------------------------------------------------

    \609\ See generally Items 29-44, 47-52 of Form N-SAR. Proposed 
Form N-CEN does, however, contain items relating to information 
regarding expense limitations, reductions, and waivers. See Item 32 
of proposed Form N-CEN. As discussed above, proposed Form N-CEN 
would also require information on management fees and net operating 
expenses for closed-end funds, as that information is not available 
elsewhere in a structured format. See Item 51 and Item 52 of 
proposed Form N-CEN; see also supra Part II.E.4.d.
    \610\ See General Instruction C.3.G of Form N-1A; see generally 
Form N-1A, Form N-2, Form N-4, Form N-5, Form N-6.
    \611\ We acknowledge that some of the information reported in 
reports on Form N-SAR related to loads paid to captive or 
unaffiliated broker-dealers has been used by interested third-
parties, including researchers. See, e.g., Susan E. K. 
Christoffersen, Richard Evans, and David K. Musto, 2013. What do 
Consumers' Fund Flows Maximize? Evidence from Their Brokers' 
Incentives. The Journal of Finance, Vol. 68(1), 201-235 (2013). 
While this is evidence of a discrete instance where such information 
has been useful to a third party, based on staff experience with 
this information and Form N-SAR information generally, we believe 
that no longer requiring funds to gather and report this information 
appropriately balances the burden on funds of providing this 
information and the overall utility of the information to the 
Commission, investors and third parties. As noted below, we request 
comment generally on whether any information items not currently 
being proposed to be carried over from Form N-SAR should be included 
on Form N-CEN.
    \612\ See generally Items 57, 61, and 70-75 of Form N-SAR.
---------------------------------------------------------------------------

    We are also proposing to eliminate certain information requirements 
specifically relating to SBICs and UITs that we no longer believe are 
necessary to collect on a census form because, much like the items 
discussed above, the benefit of having such information

[[Page 33650]]

is minimal to the Commission's oversight and examination functions 
while the burdens to these funds of reporting such information is 
costly.\613\ Additionally, with respect to the Form N-SAR \614\ item 
relating to closed-end fund monthly sales and repurchases of shares, 
this information would be reported on proposed Form N-PORT,\615\ rather 
than proposed Form N-CEN.
---------------------------------------------------------------------------

    \613\ See Items 86, 93, 95, 97-100, 103-104, 109, 125-132 of 
Form N-SAR.
    \614\ See Item 86 (closed-end funds) of Form N-SAR; see also 
Item 28 (management investment companies generally) of Form N-SAR.
    \615\ See Item B.6 of proposed Form N-PORT.
---------------------------------------------------------------------------

    The full list of items from Form N-SAR that would be included in 
Form N-CEN, as proposed, or would be eliminated is listed in Figure 2 
below.

                            Inclusion of Form N-SAR Data Items in Proposed Form N-CEN
----------------------------------------------------------------------------------------------------------------
                                                                                  Similar data
                                                                                    would be        No longer
  Form N-SAR Item No.        Description          Included       Included but      available      required to be
                                               without change      modified      through other   reported by all
                                                                                   sources *          funds
----------------------------------------------------------------------------------------------------------------
1.....................  Registrant                   [check]   ...............  ...............  ...............
                         information.
2.....................  Registrant address..         [check]   ...............  ...............  ...............
3.....................  First filing........         [check]   ...............  ...............  ...............
4.....................  Final filing........         [check]   ...............  ...............  ...............
5.....................  SBIC identification.         [check]   ...............  ...............  ...............
6.....................  UIT information.....         [check]   ...............  ...............  ...............
7.....................  Series or multiple    ...............         [check]   ...............  ...............
                         portfolio company.
----------------------------------------------------------------------------------------------------------------
                                All Management Investment Companies Except SBICS
----------------------------------------------------------------------------------------------------------------
8.....................  Investment adviser..         [check]   ...............  ...............  ...............
10 **.................  Administrator.......         [check]   ...............  ...............  ...............
11....................  Principal                    [check]   ...............  ...............  ...............
                         underwriter.
12....................  Shareholder                  [check]   ...............  ...............  ...............
                         servicing agent.
13....................  Independent public           [check]   ...............  ...............  ...............
                         accountant.
14....................  Broker or dealer             [check]   ...............  ...............  ...............
                         which is an
                         affiliated person.
15....................  Custodian                    [check]   ...............  ...............  ...............
                         arrangements.
18 **.................  Central depository    ...............         [check]   ...............  ...............
                         or book-entry
                         system.
19....................  Family of investment  ...............         [check]   ...............  ...............
                         companies.
20....................  Brokerage             ...............         [check]   ...............  ...............
                         commissions paid on
                         portfolio
                         transactions.
21....................  Aggregate brokerage          [check]   ...............  ...............  ...............
                         commissions.
22....................  Portfolio             ...............         [check]   ...............  ...............
                         transactions with
                         entities acting as
                         principal.
23....................  Aggregate principal   ...............         [check]   ...............  ...............
                         purchase/sale
                         transactions.
24....................  Holding of            ...............  ...............         [check]   ...............
                         securities of
                         registrant's
                         regular brokers or
                         dealers.
25....................  Holding of            ...............  ...............         [check]   ...............
                         securities of
                         registrant's
                         regular brokers or
                         dealers.
26....................  Considerations        ...............  ...............  ...............         [check]
                         affecting
                         participation of
                         brokers or dealers.
27....................  Open-end investment          [check]   ...............  ...............  ...............
                         company.
28....................  Monthly sales and     ...............  ...............         [check]   ...............
                         repurchases of
                         registrant's/
                         series' shares.
29....................  Registrant/series     ...............  ...............         [check]   ...............
                         imposing a front-
                         end sales load.
30....................  Total front-end       ...............  ...............  ...............         [check]
                         sales load
                         collected by
                         underwriters and
                         sales load rates.
31....................  Net sales loads       ...............  ...............  ...............         [check]
                         retained and paid
                         out by underwriters.
32....................  Net amount paid to    ...............  ...............  ...............         [check]
                         unaffiliated
                         dealers.
33....................  Net amount paid to    ...............  ...............  ...............         [check]
                         retail sales force.
34....................  Deferred or           ...............  ...............         [check]   ...............
                         contingent deferred
                         sales loads.
35....................  Deferred or           ...............  ...............  ...............         [check]
                         contingent deferred
                         sales loads
                         collected.
36....................  Deferred or           ...............  ...............  ...............         [check]
                         contingent deferred
                         sales loads
                         retained.
37....................  Redemption fees.....  ...............  ...............         [check]   ...............
38....................  Redemption fees       ...............  ...............  ...............         [check]
                         collected.
39....................  Account maintenance   ...............  ...............         [check]   ...............
                         fees.
40....................  Registrant/series     ...............  ...............         [check]   ...............
                         using its assets
                         directly to make
                         payments under a
                         12b-1 plan.
41....................  Direct use of assets  ...............  ...............         [check]   ...............
                         under 12b-1 plan.
42....................  Percentage of         ...............  ...............         [check]   ...............
                         payments under the
                         12b-1 plan.
43....................  Payments under the    ...............  ...............         [check]   ...............
                         12b-1 plan.
44....................  Unreimbursed          ...............  ...............  ...............         [check]
                         payments under the
                         12b-1 plan.
45....................  Advisory contract...  ...............         [check]   ...............  ...............
46....................  More than one         ...............         [check]   ...............  ...............
                         investment adviser.
47....................  Advisory fee based    ...............  ...............         [check]   ...............
                         on percentage of
                         assets.
48....................  Contractual advisory  ...............  ...............         [check]   ...............
                         fee rate.
49....................  Advisory fee based    ...............  ...............         [check]   ...............
                         on percentage of
                         income.
50....................  Advisory fee based    ...............  ...............         [check]   ...............
                         on percentage of
                         income and assets.
51....................  Performance based     ...............  ...............         [check]   ...............
                         advisory fee.
52....................  Advisory fee based    ...............  ...............         [check]   ...............
                         on assets, income
                         or performance.
53....................  Expense limitations   ...............         [check]   ...............  ...............
                         or reductions.
54....................  Services supplied by  ...............  ...............  ...............         [check]
                         investment advisers
                         or administrators.

[[Page 33651]]

 
55....................  Overdrafts and bank   ...............  ...............  ...............         [check]
                         loans.
56....................  Advisory clients....  ...............  ...............         [check]   ...............
57....................  Stock splits or       ...............  ...............  ...............         [check]
                         stock dividends.
58....................  Fund classifications  ...............         [check]   ...............  ...............
59....................  Management            ...............         [check]   ...............  ...............
                         investment company.
60....................  Diversified           ...............         [check]   ...............  ...............
                         investment company.
61....................  Minimum required      ...............  ...............         [check]   ...............
                         investment.
62....................  Percentage of         ...............  ...............         [check]   ...............
                         portfolio in
                         various debt
                         securities.
63....................  Dollar weighted       ...............  ...............         [check]   ...............
                         average maturity.
64....................  Insured or            ...............  ...............  ...............         [check]
                         guaranteed
                         securities.
65....................  Insured or            ...............  ...............  ...............         [check]
                         guaranteed
                         securities
                         attributed to value
                         used in computing
                         NAV.
66....................  Classification of     ...............  ...............         [check]   ...............
                         funds investing in
                         equity securities.
67....................  Registrant/series     ...............  ...............         [check]   ...............
                         investing primarily
                         and regularly in a
                         balanced portfolio
                         of debt and equity
                         securities.
68....................  Investments in        ...............  ...............         [check]   ...............
                         issuers engaged in
                         production or
                         distribution of
                         precious metals or
                         located outside the
                         United States.
69....................  Registrant/series as         [check]   ...............  ...............  ...............
                         an index fund.
70....................  Investment policies   ...............  ...............         [check]   ...............
                         and practices.
71....................  Portfolio purchases,  ...............  ...............         [check]   ...............
                         sales, monthly
                         average value, and
                         turnover rate.
72....................  Income and expenses.  ...............  ...............         [check]   ...............
73....................  Dividends and         ...............  ...............         [check]   ...............
                         distributions.
74....................  Assets, liabilities,  ...............  ...............         [check]   ...............
                         net assets.
75....................  Computation of        ...............  ...............         [check]   ...............
                         average net assets.
76....................  Market price per             [check]   ...............  ...............  ...............
                         share for closed-
                         end investment
                         companies.
77....................  Attachments.........  ...............         [check]   ...............  ...............
78....................  Wholly-owned          ...............  ...............         [check]   ...............
                         subsidiaries
                         consolidated in
                         report.
79....................  ``811'' numbers for   ...............  ...............  ...............         [check]
                         wholly-owned
                         investment company
                         subsidiaries
                         consolidated in
                         report.
80....................  Fidelity bonds in     ...............  ...............         [check]   ...............
                         effect.
81....................  Joint fidelity bond.  ...............  ...............         [check]   ...............
82....................  Fidelity bond         ...............  ...............         [check]   ...............
                         deductible.
83....................  Fidelity bond claims         [check]   ...............  ...............  ...............
84....................  Losses that could     ...............  ...............  ...............         [check]
                         have been filed as
                         a claim under the
                         fidelity bond.
85....................  Errors and omissions         [check]   ...............  ...............  ...............
                         insurance policy.
----------------------------------------------------------------------------------------------------------------
                             Closed-End Management Investment Companies Except SBICs
----------------------------------------------------------------------------------------------------------------
86....................  Sales, repurchases,   ...............         [check]   ...............  ...............
                         and redemptions of
                         securities.
87....................  Securities of         ...............         [check]   ...............  ...............
                         registrant
                         registered on a
                         national securities
                         exchange or listed
                         on NASDAQ.
88....................  Senior securities...  ...............         [check]   ...............  ...............
----------------------------------------------------------------------------------------------------------------
                                                      SBICs
----------------------------------------------------------------------------------------------------------------
89....................  Investment adviser..  ...............         [check]   ...............  ...............
90....................  Transfer agent......         [check]   ...............  ...............  ...............
91....................  Independent public           [check]   ...............  ...............  ...............
                         accountant.
92....................  Custodian             ...............         [check]   ...............  ...............
                         arrangements.
93....................  Advisory clients      ...............  ...............         [check]   ...............
                         other than
                         investment
                         companies.
94....................  Family of investment  ...............         [check]   ...............  ...............
                         companies.
95....................  Sales, repurchases,   ...............         [check]   ...............  ...............
                         and redemptions of
                         securities.
96....................  Securities of         ...............         [check]   ...............  ...............
                         registrant
                         registered on a
                         national securities
                         exchange or listed
                         on NASDAQ.
97....................  Income and expenses.  ...............  ...............  ...............         [check]
98....................  Dividends and         ...............  ...............  ...............         [check]
                         distributions.
99....................  Assets, liabilities   ...............  ...............  ...............         [check]
                         and shareholders'
                         equity.
100...................  Computation of        ...............  ...............  ...............         [check]
                         average net assets.
101...................  Market price per             [check]   ...............  ...............  ...............
                         share.
102...................  Attachments.........  ...............         [check]   ...............  ...............
103...................  Wholly-owned          ...............  ...............  ...............         [check]
                         subsidiaries
                         consolidated in
                         report.
104...................  ``811'' numbers for   ...............  ...............  ...............         [check]
                         wholly-owned
                         investment company
                         subsidiaries
                         consolidated in
                         report.
105...................  Fidelity bonds in     ...............  ...............         [check]   ...............
                         effect.
106...................  Joint fidelity bond.  ...............  ...............         [check]   ...............
107...................  Fidelity bond         ...............  ...............         [check]   ...............
                         deductible.

[[Page 33652]]

 
108...................  Fidelity bond claims  ...............         [check]   ...............  ...............
109...................  Losses that could     ...............  ...............  ...............         [check]
                         have been filed as
                         a claim under the
                         fidelity bond.
110...................  Errors and omissions         [check]   ...............  ...............  ...............
                         insurance policy.
----------------------------------------------------------------------------------------------------------------
                                                      UITs
----------------------------------------------------------------------------------------------------------------
111...................  Depositor...........         [check]   ...............  ...............  ...............
112...................  Sponsor.............  ...............         [check]   ...............  ...............
113...................  Trustee.............  ...............         [check]   ...............  ...............
114...................  Principal                    [check]   ...............  ...............  ...............
                         underwriter.
115...................  Independent public           [check]   ...............  ...............  ...............
                         accountant.
116...................  Family of investment  ...............         [check]   ...............  ...............
                         companies.
117...................  Separate account of   ...............         [check]   ...............  ...............
                         an insurance
                         company.
118...................  Series having                [check]   ...............  ...............  ...............
                         effective
                         registration
                         statements.
119...................  New series having            [check]   ...............  ...............  ...............
                         effective
                         registration
                         statements.
120...................  Value of new series          [check]   ...............  ...............  ...............
                         that became
                         effective.
121...................  Series for which a           [check]   ...............  ...............  ...............
                         current prospectus
                         existed at the end
                         of the period.
122...................  New units of                 [check]   ...............  ...............  ...............
                         existing series.
123...................  Value of new                 [check]   ...............  ...............  ...............
                         securities
                         deposited in
                         existing series.
124...................  Value of units of            [check]   ...............  ...............  ...............
                         prior series placed
                         in portfolio of
                         subsequent series.
125...................  Amount of sales       ...............  ...............  ...............         [check]
                         loads collected.
126...................  Amount of sales       ...............  ...............  ...............         [check]
                         loads collected
                         from secondary
                         market operations.
127...................  Classification of     ...............  ...............         [check]   ...............
                         series and assets.
128...................  Insured or            ...............  ...............  ...............         [check]
                         guaranteed
                         securities.
129...................  Insured or            ...............  ...............  ...............         [check]
                         guaranteed
                         securities.
130...................  Insured or            ...............  ...............  ...............         [check]
                         guaranteed
                         securities.
131...................  Total expenses......  ...............  ...............         [check]   ...............
132...................  811 number of series  ...............  ...............         [check]   ...............
                         included in filing.
133...................  Divestment of                [check]   ...............  ...............  ...............
                         securities.
----------------------------------------------------------------------------------------------------------------
* While not available in proposed Form N-CEN, similar data is or would be available through other sources, such
  as proposed Form N-PORT or a fund's prospectus, statement of additional information, or financial statements.
** Items 9, 16, and 17 are reserved in Form N-SAR.

    We request comment on the information requirements relating to 
items required in Form N-SAR, but not required in proposed Form N-CEN, 
including the following:
     Should proposed Form N-CEN require more detailed 
information relating to the fund's 12b-1 plan, as required by items 40 
through 44 of Form N-SAR, considering detailed information regarding 
the fund's 12b-1 plan is otherwise disclosed in response to other 
reporting requirements?
     Should proposed Form N-CEN include financial information 
or balance sheet items, such as those required by item 72 of Form N-
SAR?
     Despite the fact that certain items relating to fee 
information are required by other forms, should we include fee 
information in proposed Form N-CEN? If so, what specific information 
and why?
     Should proposed Form N-CEN include information relating to 
number of shares outstanding, total number of shareholder accounts, or 
average net assets during the reporting period as required by Items 
74.U.1, 74.X, and 75 of Form N-SAR?
     Are there any other items currently in Form N-SAR that are 
proposed to be eliminated, which should be included in Form N-CEN? 
Which items and why? Are there any costs associated with eliminating 
these items?

F. Technical and Conforming Amendments

    We are also proposing technical and conforming amendments to 
various rules and forms. As discussed above, our proposal would rescind 
Form N-Q and create new Form N-PORT. In order to implement this 
proposed change, we propose to revise Forms N-1A, N-2, and N-3 to refer 
to the availability of portfolio holdings schedules attached to reports 
on Form N-PORT and posted on fund Web sites rather than on reports on 
Form N-Q.\616\ In addition, we propose to rescind 17 CFR 249.332 and 
revise the following rules to remove references to Form N-Q: 17 CFR 
232.401, 17 CFR 270.8b-33, 17 CFR 270.30a-2, 17 CFR 270.30a-3, and 17 
CFR 270.30d-1.
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    \616\ See Form N-1A, Item 16(f), Instruction 3(b) (we would 
remove references to Form N-Q) and Item 27(d), Instruction 4 (we 
would replace references to portfolio schedules reported on Form N-Q 
with references to portfolio schedules attached to reports on Form 
N-PORT or posted on fund Web sites); Form N-2, Item 24, Instruction 
6.b (same); Form N-3, Instruction 6(ii) to Item 28(a) (same).
---------------------------------------------------------------------------

    Our proposal would also rescind Form N-SAR and replace it with new 
Form N-CEN. In order to implement this proposed change, we propose to 
revise the following rules and sections to remove references to Form N-
SAR and replace them with references to Form N-CEN: 17 CFR 232.301, 17 
CFR 240.10A-1, 17 CFR 240.12b-25, 17 CFR 249.322, 17 CFR 249.330, 17 
CFR 270.8b-16, 270.30d-1, and 17 CFR 274.101.\617\
---------------------------------------------------------------------------

    \617\ Although we are proposing to delete references to Form N-
SAR in 17 CFR 232.301, we are not proposing to replace them with 
references to Form N-CEN because the references in that section 
relate to specific portions of the EDGAR Filer Manual that would not 
be relevant to Form N-CEN.

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[[Page 33653]]

    Currently, reports on Form N-SAR are filed semi-annually by 
management investment companies as required by 17 CFR 270.30b1-1, and 
annually by UITs as required by 17 CFR 270.30a-1. Because our proposal 
would require reports on Form N-CEN to be filed annually by all 
registered investment companies, we propose to rescind 17 CFR 270.30b1-
1 and revise 17 CFR 270.30a-1 to require all registered investment 
companies to file reports on Form N-CEN. We also propose to revise the 
following rules to remove references to 17 CFR 270.30b1-1 and add 
references to proposed rule 17 CFR 270.30a-1: 17 CFR 240.13a-10, 17 CFR 
240.13a-11, 17 CFR 240.13a-13, 17 CFR 240.13a-16, 17 CFR 240.15d-10, 17 
CFR 240.15d-11, 17 CFR 240.15d-13, and 17 CFR 240.15d-16.
    In addition, as a result of the proposed new annual reporting 
requirement that would apply to all registered investment companies, we 
propose to rescind 17 CFR 270.30b1-2--which currently permits wholly-
owned management investment company subsidiaries of management 
investment companies to not file Form N-SAR under certain 
circumstances--and propose new rule 17 CFR 270.30a-4--which would 
permit wholly-owned management investment company subsidiaries of 
management investment companies to not file Form N-CEN under those same 
circumstances. We also propose to amend 17 CFR 200.800 to display 
control numbers assigned to information collection requirements for 
Forms N-PORT and N-CEN by the Office of Management and Budget pursuant 
to the Paperwork Reduction Act. As discussed further below, an agency 
may not conduct or sponsor, and a person is not required to respond to 
a collection of information unless it displays a currently valid OMB 
control number.\618\
---------------------------------------------------------------------------

    \618\ See infra Part V.
---------------------------------------------------------------------------

    Our proposed amendments to Regulation S-X would, among other 
things, require management investment companies to report new schedules 
for certain derivatives holdings.\619\ To implement these changes, we 
propose to renumber the sections for schedules required to be reported 
by management investment companies and renumber the list of schedules 
provided in 17 CFR 210.6-10, which outlines the schedules to be 
reported by investment companies.\620\ We propose conforming changes to 
references to Regulation S-X in the following forms: Form N-1A, Form N-
2, Form N-3, and Form N-14.\621\
---------------------------------------------------------------------------

    \619\ Our proposal would require new schedules to be filed to 
report open futures contracts, open forward foreign currency 
contracts, and open swap contracts. See proposed new rules 12-13A, 
B, and C of Regulation S-X.
    \620\ Among other things, our proposed amendments would renumber 
the CFR for open option contracts and the summary schedule of 
investments in unaffiliated issuers from 17 CFR 210.12-12B and 17 
CFR 210.12-12C to 17 CFR 210.12-13 and 17 CFR 210.12-B, 
respectively. These amendments would group the schedule for open 
option contracts written together with the new schedules for open 
futures contracts, open forward foreign currency contracts, and open 
swap contracts, and would list the summary schedule sequentially 
after the investments in securities of unaffiliated issuers. We 
would also amend 17 CFR 210.6-10 to, among other things, add new 
schedules V, VI, and VII for open futures contracts, open forward 
foreign currency contracts, and open swap contracts, respectively, 
and renumber schedule II for investments other than securities and 
schedule VI for summary of investments in securities of unaffiliated 
issuers as schedules VIII and IX, respectively. See proposed rule 6-
10 of Regulation S-X (listing the schedules required to be filed by 
management investment companies, UITs, and face-amount certificate 
companies).
    \621\ See Form N-1A, Item 27(b)(1) (reference to Schedule VI 
would be changed to Schedule IX and reference to schedule I would be 
corrected to cite to the appropriate CFR section); Form N-2, 
Instruction 7 to Item 24 (we would update references to schedule 
VI); Form N-3, Instruction 7(i) and (ii) to Item 28(a) (we would 
update references to schedule VI).
---------------------------------------------------------------------------

    We also propose to amend Form N-CSR to delete instructions 
addressing how certifications as to changes in the registrant's 
internal control over financial reporting should be handled during the 
transition period when certifications were being implemented on Form N-
Q, because those instructions are no longer applicable.\622\
---------------------------------------------------------------------------

    \622\ Form N-CSR, Item 12 (the instruction to paragraph (a)(2) 
of that item would be removed).
---------------------------------------------------------------------------

    We also propose to remove paragraph (a) of 17 CFR 232.105, which 
currently requires electronic filers to submit Forms N-SAR and 13F in 
ASCII, and redesignate paragraphs (b) and (c) as (a) and (b), 
respectively. Our proposal would rescind Form N-SAR, and Form 13F has 
been submitted by electronic filers in XML, rather than ASCII, since 
2013.\623\
---------------------------------------------------------------------------

    \623\ See Notice to EDGAR Form13 Filers, available at http://www.sec.gov/divisions/investment/imannouncements/notice-form-13f-im.htm (requiring funds to file Form 13F according to EDGAR XML 
Technical Specifications beginning on April 29, 2013).
---------------------------------------------------------------------------

    We request comment on these technical and conforming amendments.

G. Compliance Dates

    Currently, we anticipate the following compliance dates for our 
proposed amendments, as set forth below.
1. Form N-PORT, Rescission of Form N-Q, and Amendments to the 
Certification Requirements of Form N-CSR
    Given the nature and frequency of filings on proposed Form N-PORT, 
if Form N-PORT is adopted, the Commission expects to provide for a 
tiered set of compliance dates based on asset size. Specifically, for 
larger entities--namely, funds that together with other investment 
companies in the same ``group of related investment companies'' \624\ 
have net assets of $1 billion or more as of the end of the most recent 
fiscal year--we are proposing a compliance date of 18 months after the 
effective date to comply with the new reporting requirements. For these 
larger entities, we expect that eighteen months would provide an 
adequate period of time for funds, intermediaries, and other service 
providers to conduct the requisite operational changes to their systems 
and to establish internal processes to prepare, validate, and file 
reports on proposed new Form N-PORT with the Commission.\625\
---------------------------------------------------------------------------

    \624\ For these purposes, we expect that the threshold would be 
based on the definition of ``group of related investment 
companies,'' as such term is defined in rule 0-10 under the 
Investment Company Act. Rule 0-10 defines the term as ``two or more 
management companies (including series thereof) that: (i) Hold 
themselves out to investors as related companies for purposes of 
investment and investor services; and (ii) Either: (A) Have a common 
investment adviser or have investment advisers that are affiliated 
persons of each other; or (B) Have a common administrator; and (2) 
In the case of a unit investment trust, the term group of related 
investment companies shall mean two or more unit investment trusts 
(including series thereof) that have a common sponsor.'' We believe 
that this broad definition would encompass most types of fund 
complexes and therefore is an appropriate definition for compliance 
date purposes.
    \625\ We believe that an eighteen month compliance period for 
larger groups of investment companies is an adequate amount of time 
for funds to implement proposed new Form N-PORT and make the 
necessary system and operational changes. We adopted a nine month 
compliance periods when we first required money market funds to 
report their portfolio holdings to the Commission on a monthly basis 
on Form N-MFP. Based upon our Form N-MFP compliance experience, and 
the larger number of non-money market fund filers, we believe that 
doubling the Form N-MFP compliance period to eighteen months for 
filing reports on Forms N-PORT is appropriate. See Money Market Fund 
Reform 2010 Release, supra note 13, at 10087.
---------------------------------------------------------------------------

    For smaller entities (i.e., funds that together with other 
investment companies in the same ``group of related investment 
companies'' have net assets of less than $1 billion as of the end of 
the most recent fiscal year),\626\ we are

[[Page 33654]]

proposing to provide for an extra 12 months (or 30 months after the 
effective date) to comply with the new reporting requirements. We 
believe that smaller groups would benefit from this extra time to 
comply with the filing requirements for Form N-PORT and would 
potentially benefit from the lessons learned by larger investment 
companies and groups of investment companies during the adoption period 
for Form N-PORT.\627\
---------------------------------------------------------------------------

    \626\ Based on staff analysis of data obtained from Morningstar 
Direct, as of March 31, 2015, we estimate that a $1 billion assets 
threshold would provide an extended compliance period to more than 
66% of the fund groups, but only 0.6% of all fund assets. We 
therefore believe that the $1 billion threshold would appropriately 
balance the need to provide smaller groups of investment companies 
with more time to prepare for the initial filing of reports on Form 
N-PORT, while still including the vast majority of fund assets in 
the initial compliance period.
    \627\ We likewise intend to rescind Form N-Q (referenced in 17 
CFR 274.130) and the amendments to the certification requirements of 
Form N-CSR (referenced in 17 CFR 274.128) with a timing that is 
consistent with this proposal.
---------------------------------------------------------------------------

2. Form N-CEN and Rescission of Form N-SAR
    If Form N-CEN and the related proposals are adopted, we are 
proposing a compliance date of 18 months after the effective date to 
comply with the new reporting requirements. We expect that eighteen 
months would provide an adequate period of time for funds, 
intermediaries, and other service providers to conduct the requisite 
operational changes to their systems and to establish internal 
processes to prepare, validate, and file reports on proposed Form N-CEN 
with the Commission. We are proposing the same compliance date for the 
related amendments to other rules and forms we are proposing 
today.\628\
---------------------------------------------------------------------------

    \628\ We similarly intend to rescind Form N-SAR (referenced in 
17 CFR 274.101) with a timing that is consistent with this proposal.
---------------------------------------------------------------------------

    Unlike Form N-PORT, we do not expect to provide for a tiered 
compliance date based on asset size. We believe that it is less likely 
that smaller fund complexes would need additional time to comply with 
the requirements to file Form N-CEN because the requirements are 
similar to the current requirements to file Form N-SAR, and we expect 
that filers will prefer the updated, more efficient filing format of 
Form N-CEN. We are therefore proposing to require all funds, regardless 
of size, to file reports on Form N-CEN with the same compliance period.
3. Option for Web Site Transmission of Shareholder Reports
    Proposed rule 30e-3, if adopted, would permit (but not require) a 
fund to satisfy requirements under the Act and rules thereunder to 
transmit reports to shareholders if the fund makes the reports and 
certain other materials accessible on its Web site. As reliance on the 
rule would be optional, we believe a compliance period would not be 
necessary. Therefore, we expect that funds would be able to rely on the 
rule immediately after the effective date.
4. Regulation S-X and Related Amendments
    As discussed above, our proposed amendments to Regulation S-X are 
largely consistent with existing fund disclosure practices. As such, we 
do not expect that fund, intermediaries, or service providers would 
require significant amounts of time to modify systems or establish 
internal processes to prepare financial statements in accordance with 
our proposed amendments to Regulation S-X. Accordingly, we are 
proposing a compliance date for our proposed amendments to Regulation 
S-X of eight months after the effective date. We expect the same 
compliance date would apply to conforming amendments related to our 
proposed amendments to Regulation S-X, including the related amendment 
we are proposing today.
5. Request for Comment
    We request comment on the compliance dates discussed above.
     How, if at all, should the proposed compliance dates be 
modified? What factors should we consider when setting the compliance 
dates for the proposed rules and forms?
     We request comment on our proposed tiered compliance dates 
for filings on Form N-PORT. Is a threshold of $1 billion based on the 
net assets of funds together with other investment companies in the 
same ``group of related investment companies'' as of the end of the 
most recent fiscal year appropriate? Should the threshold be higher or 
lower? \629\ Should the threshold include aggregation of net assets 
with other investment companies in the same ``group of related 
investment companies?'' Why or why not? In lieu of ``group of related 
investment companies,'' should aggregation be based on a different set 
of related companies? For example, should aggregate assets be based on 
``family of investment companies,'' as such term defined in instruction 
1(a) to Item 17 of Form N-1A or ``fund complex'' as defined in 
instruction 1(b) to Item 17 of Form N-1A? Should we require 
administrator-sponsored funds to aggregate assets for purposes of this 
threshold regardless of whether the individual funds (or series 
thereof) do not hold themselves out to investors as related companies 
for purposes of investment and investor services? Why or why not?
---------------------------------------------------------------------------

    \629\ Based on staff analysis of data obtained from Morningstar 
Direct, as of March 31, 2015, we estimate that a threshold of $100 
million would include 38% of fund firms and 0.1% of all fund assets. 
A threshold of less than $3 billion would include 76.9% of fund 
firms and 1.5% of fund assets.
---------------------------------------------------------------------------

     With respect to Form N-PORT, is our compliance date of 
eighteen months for larger filers appropriate? If not, what length of 
time would be appropriate for compliance with Form N-PORT? Would a 
shorter or longer compliance date be appropriate? For example, would a 
compliance date of 15 months be sufficient? Conversely, would funds 
need more time to comply, such as 20 months? Is our 12 month extension 
of the compliance period for smaller entities appropriate? If not, what 
length of time would be appropriate for compliance with Form N-PORT? 
Would a shorter or longer extension, such as 9 months or 15 months, be 
appropriate? How do we appropriately consider the benefits and costs to 
receiving the information more quickly and the potential costs and 
benefits associated with a shorter or longer compliance period?
     Should the Commission consider the implementation of 
reporting on Form N-PORT initially through a voluntary pilot program? 
If so, what length of time would be needed for funds and their service 
providers to appropriately test their reporting procedures?
     Is our eighteen-month compliance period for Form N-CEN 
appropriate? If not, what length of time would be appropriate? Would a 
shorter or longer compliance date be appropriate? For example, would a 
compliance date of 15 months be sufficient? Conversely, would funds 
need more time to comply, such as 20 months? Should the compliance 
period for Form N-CEN mirror that for Form N-PORT, or should we 
consider different compliance periods? Should we adopt a tiered 
compliance period for Form N-CEN? Why or why not?
     We are proposing to not have a compliance period for the 
option for Web site transmission of shareholder reports under proposed 
rule 30e-3. Is this appropriate?
     Is our eight-month compliance period for our proposed 
amendments to Regulation S-X adequate? If not, what length of time 
would be adequate and why?

III. General Request for Comment

    We request and encourage any interested person to submit comments

[[Page 33655]]

regarding the proposed rules and forms, specific issues discussed in 
this release, and other matters that may have an effect on the proposed 
rules and forms. With regard to any comments, we note that such 
comments are of particular assistance to our rulemaking initiative if 
accompanied by supporting data and analysis of the issues addressed in 
those comments.

IV. Economic Analysis

A. Introduction

    The Commission is sensitive to the economic effects, including the 
benefits and costs and the effects on efficiency, competition, and 
capital formation that will result from the proposed changes to the 
current reporting regime. Changes to the current reporting regime 
include proposed Form N-PORT, the rescission of Form N-Q, amendments to 
the certification requirements for Form N-CSR, amendments to Regulation 
S-X, the proposed rule governing electronic transmission of shareholder 
reports, proposed Form N-CEN, and the rescission of Form N-SAR. The 
economic effects of the proposed changes are discussed below.
    The Commission is proposing to modernize the content and format 
requirements of reports and disclosures by funds, and the manner in 
which information is filed with the Commission and disclosed to the 
public. The intent of the proposal is to enhance the Commission's 
ability to effectively oversee and monitor the activities of investment 
companies in order to better carry out its regulatory functions and to 
aid investors and other market participants to better assess the 
benefits, costs, and risks of investing in different fund products. In 
summary, and as discussed in greater detail in Part II above, the 
Commission is proposing the following changes to its rules and forms:
     We propose to require registered management investment 
companies and ETFs organized as UITs, other than money market funds or 
SBICs, to report monthly portfolio information in a structured data 
format on a proposed new form, Form N-PORT.
     Because we believe that monthly portfolio reports on Form 
N-PORT would render quarterly portfolio reports on current Form N-Q 
unnecessarily duplicative, we are proposing to rescind Form N-Q. We 
also propose to lengthen the look-back for Sarbanes-Oxley 
certifications on Form N-CSR to six months to cover the gap in 
certification coverage that would otherwise occur once Form N-Q is 
rescinded.
     We propose to revise Regulation S-X to require new, 
standardized enhanced disclosures regarding fund holdings in certain 
derivatives instruments; update the disclosures for other investments; 
and amend the rules regarding the general form and content of fund 
financial statements.
     We propose new rule 30e-3 under the Investment Company 
Act, which would allow funds to satisfy shareholder report transmission 
requirements by posting such reports on their own Web sites if they 
meet certain conditions, including posting quarterly portfolio holdings 
on their Web sites and notifying investors of its availability.
     We propose to rescind Form N-SAR, the form on which funds 
currently report census-type information on a semi-annual basis, and 
replace it with Form N-CEN, which would require the annual reporting of 
similar and additional information in an updated, structured format.
    The current disclosure of information by funds serves as the 
baseline against which the costs and benefits as well as the impact on 
efficiency, competition, and capital formation of this proposal are 
discussed. The baseline includes the current set of requirements for 
funds to file reports on Forms N-CSR, N-Q, and N-SAR with the 
Commission and the content of such reports, including Regulation S-X, 
and in particular, its schedule of investments. The baseline also 
includes guidance from Commission staff and other industry groups that 
has established industry practices for the disclosure of a fund's 
schedule of investments and financial statements, and includes 
Commission guidance that permits funds to transmit these materials 
electronically today provided that certain other conditions are met. 
Lastly, the baseline includes the current practice of some funds to 
voluntarily disclose additional information. For example, some funds 
disclose monthly or quarterly portfolio investment information on their 
Web sites or to third-party information providers, and disclose 
additional information (e.g., particular information on derivative 
positions) in fund financial statements that is not currently required 
under Regulation S-X. The parties that would be affected by the 
proposed amendments are funds that have registered or will register 
with the Commission; the Commission; and other current and future users 
of fund information including investors, third-party information 
providers, and other potential users; and other market participants 
that could be affected by the change in fund disclosures.
    We discuss separately below the economic effects of each part of 
the proposal: the introduction of Form N-PORT, rescission of Form N-Q, 
amendments to the certification requirements for Form N-CSR, amendments 
to Regulation S-X, the electronic transmission of shareholder reports, 
and the introduction of Form N-CEN and the rescission of Form N-SAR. We 
identify for each part of the proposal the baseline from which the 
economic effects will be discussed and the parties most likely to be 
affected.
    As noted above, the assets of registered investment companies 
exceeded $18 trillion at year-end 2014, having grown from about $4.7 
trillion at the end of 1997.\630\ In addition, approximately 90 million 
individuals own mutual funds, representing 53.2 million or 43.3% of 
U.S. households.\631\ Among investment companies, we estimate that, as 
of December 2014, there were 3,146 investment companies registered with 
the Commission, of which 1,636 were open-end funds, 780 were closed-end 
funds (including one SBIC), and 727 were UITs.\632\ We further estimate 
that those registered funds included 16,619 series thereof, of which 
1,411 were exchange-traded funds, 528 were money market funds, 5,381 
were UITs, and 9,299 were other funds.\633\ The following table 
summarizes the entities likely to be affected by the proposed forms, 
rescissions, and amendments.
---------------------------------------------------------------------------

    \630\ See supra note 4.
    \631\ See id.
    \632\ Based on data obtained from registrants' filings with the 
Commission on Form N-SAR.
    \633\ Based on data obtained from the Investment Company 
Institute. See http://www.ici.org/research/stats.

[[Page 33656]]



                                                               Figure 3--Affected Parties
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                             Funds                                      UITS
                                                                      -------------------------------------------------------------------------------------
                                                                         Money market
                                                                            funds            SBICs         Other funds          ETFs          Other UITs
----------------------------------------------------------------------------------------------------------------------------------------- -----------------
Current:
    Form N-SAR..........................  [check]....................         [check]          [check]          [check]          [check]
    Form N-CSR..........................  [check]....................         [check]          [check]
    Form N-Q............................  [check]....................  ...............         [check]   ...............  ...............
As proposed:
    Form N-PORT.........................  ...........................  ...............         [check]          [check]   ...............
    Form N-CEN..........................  [check]....................         [check]          [check]          [check]          [check]
    Form N-CSR..........................  [check]....................         [check]          [check]   ...............  ...............
                                         ---------------------------------------------------------------------------------------------------------------
    Form N-SAR..........................                                             Rescinded
                                         ---------------------------------------------------------------------------------------------------------------
Form N-Q................................                                             Rescinded
--------------------------------------------------------------------------------------------------------------------------------------------------------

Figure 3
    The Commission relies on information included in reports filed by 
funds to monitor trends, identify risks, inform policy and rulemaking, 
and assist Commission staff in examination and enforcement efforts of 
the asset management industry. An essential factor to the Commission's 
ability to carry out its regulatory functions is regular, timely 
information about portfolio holdings and general, census information 
about funds. In general, this proposal would modernize the fund 
reporting regime and, among other effects, would result in an increased 
transparency of fund portfolios and investment practices. The increased 
transparency would improve the ability of the Commission to fulfill its 
regulatory functions. These functions include the development of policy 
and guidance, the staff's review of fund registration statements and 
disclosures, and the Commission's examination and enforcement programs. 
The increased transparency would also improve the ability of investors 
to select funds for investment, and therefore improve their ability to 
allocate capital across funds and other investments to more closely 
reflect their investment risk preferences. Increased transparency would 
also enhance competition among funds to attract investors.
    At the outset, the Commission notes that, where possible, it has 
sought to quantify the costs, benefits, and effects on efficiency, 
competition, and capital formation expected to result from each part of 
the proposal and its reasonable alternatives. As discussed in further 
detail below, in many cases the Commission is unable to quantify the 
economic effects because it lacks the information necessary to provide 
a reasonable estimate.
    The economic effects of the proposal depend upon a number of 
factors that we cannot estimate or quantify, such as the extent to 
which investor protection would increase along with the ability of the 
Commission to oversee the fund industry; the amount of new information 
that would become available as a result of requiring such information 
in regulatory filings (as opposed to information that is provided 
voluntarily); the increase in the availability of the information to 
all investors, institutional and individual, as a result of the 
improved structured format of the information; and the extent to which 
investors are able to use the information to make more informed 
investment decisions either through direct use or through third-party 
service providers. Therefore, much of the discussion below is 
qualitative in nature although we try to describe where possible the 
direction of these effects.

B. Form N-PORT, Rescission of Form N-Q, and Amendments to Form N-CSR

a. Introduction and Economic Baseline
    Form N-PORT, as proposed, would require registered management 
investment companies and ETFs organized as UITs, other than money 
market funds or SBICs, to report portfolio investment information to 
the Commission on a monthly basis. As discussed, only information 
reported for the last month of each fiscal quarter would be made 
available to the public in order to minimize potential costs associated 
with making the information public, including front-running or reverse 
engineering of a fund's investment strategies. Reports would be filed 
in a structured format using XML to allow for easier aggregation and 
manipulation of the data. As discussed above, we are also proposing to 
rescind Form N-Q but require that funds attach their complete portfolio 
holdings to Form N-PORT for the first and third fiscal quarters in 
accordance to Regulation S-X. We are also proposing to amend the form 
of certification in Form N-CSR to require each certifying officer to 
state that he or she has disclosed in the report any change in the 
registrant's internal control over financial reporting that occurred 
during the most recent fiscal half-year to fill the gap in 
certification coverage that would otherwise occur once Form N-Q is 
rescinded.\634\
---------------------------------------------------------------------------

    \634\ Proposed Item 11(b) of Form N-CSR; proposed paragraph 5(b) 
of certification exhibit of Item 11(a)(2) of Form N-CSR.
---------------------------------------------------------------------------

    The current set of requirements under which registered management 
investment companies (other than money market funds and SBICs) and ETFs 
organized as UITs publicly report their complete portfolio investments 
to the Commission on a quarterly basis and certain other information on 
a semi-annual basis,\635\ as well as the current practice of some 
investment companies to voluntarily disclose portfolio investment 
information either on their Web sites or to third-party information 
providers on a more frequent basis, is the baseline from which we will 
discuss the economic effects of new Form N-PORT.\636\ The parties that 
could be affected by the introduction of Form N-PORT are registered 
management investment companies (other than money market funds and 
SBICs) and ETFs organized as UITs, that have registered or will 
register with the

[[Page 33657]]

Commission; the Commission; and other current and future users of 
investment company portfolio investment information including 
investors, third-party information providers, other interested 
potential users; and other market participants that could be affected 
by the change in fund disclosure of portfolio investment information.
---------------------------------------------------------------------------

    \635\ Form N-PORT would also require information that is 
currently being reported on Form N-SAR such as information on fund 
flows, assets, and liabilities. The current requirement to report 
this information as part of Form N-SAR is also part of this 
baseline. The baseline also includes the current obligation of Form 
N-Q filers to make certifications regarding (1) the accuracy of the 
portfolio holdings information reported on that form, and (2) the 
fund's disclosure controls and procedures and internal control over 
financial reporting.
    \636\ Additionally, many funds currently provide additional 
information concerning derivatives investments, based on industry 
guidance and practices. See discussion supra Part II.C.2.
---------------------------------------------------------------------------

    Currently, the Commission requires registered management investment 
companies (other than money market funds and SBICs) to report their 
complete portfolio investments to the Commission on a quarterly 
basis.\637\ These funds are required to provide this information in 
reports on Form N-Q as of the end of the first and third fiscal 
quarters of each year \638\ and in reports on Form N-CSR as of the end 
of the second and fourth fiscal quarters of each year.\639\ Both forms 
require that the reported schedule of portfolio investments conform to 
the requirements of Regulation S-X, and the schedule for the close of 
the fiscal year must be audited (but those schedules for the other 
three fiscal quarters need not be).\640\ These reports are generally 
required to be filed on the EDGAR system and are made publicly 
available upon receipt.\641\ Reports on Form N-CSR may be filed up to 
70 days after the end of the reporting period,\642\ and reports on Form 
N-Q may be filed up to 60 days after the end of the reporting period.
---------------------------------------------------------------------------

    \637\ See General Instruction A to Form N-CSR; Item 6 of Form N-
CSR; General Instruction A to Form N-Q; Quarterly Portfolio Holdings 
Adopting Release, supra note 19.
    \638\ Item 1 of Form N-Q.
    \639\ Item 6 of Form N-CSR.
    \640\ Instruction to Item 6(a) of Form N-CSR; Item 1 of Form N-
Q.
    \641\ See rule 101(a)(i) of Regulation S-T [17 CFR 
232.101(a)(i)].
    \642\ Form N-CSR must be filed within 10 days after the 
shareholder report is sent to shareholders, and the shareholder 
report must be sent within 60 days after the end of the reporting 
period. Rule 30b2-1(a); rule 30e-1(c).
---------------------------------------------------------------------------

    Forms N-CSR and N-Q are required to be filed in HTML or ASCII/SGML 
format.\643\ In order to prepare reports in HTML and ASCII/SGML, 
reporting persons generally need to reformat information from the way 
the information is stored for normal business use.\644\ The resulting 
format, when rendered in an end user's web browser, is comprehensible 
to a human reader, but it is not suitable for automated processing. 
These formats do not allow the Commission or other interested data 
users to combine information from more than one report in an automated 
way to, for example, construct a database of fund portfolio positions 
without additional formatting.
---------------------------------------------------------------------------

    \643\ See rule 301 of Regulation S-T; EDGAR Filer Manual (Volume 
II) version 27 (June 2014), at 5-1.
    \644\ In so doing, reporting persons typically strip out 
incompatible metadata (i.e., syntax that is not part of the HTML or 
ASCII/SGML specification) that their business systems use to ascribe 
meaning to the stored data items and to represent the relationships 
among different data items.
---------------------------------------------------------------------------

    The economic effects from the introduction of new Form N-PORT would 
largely result from the disclosure of portfolio investment information 
in a structured format, as well as the additional information that 
investment companies would report. The economic effects would depend on 
the extent to which the portfolios and investment practices of 
investment companies become more transparent as a result of the 
increase in the amount and availability of portfolio investment 
information, and the ability of Commission staff and all investors to 
utilize the structured data. The current reporting requirements for 
investment companies, however, reduce the ability of Commission staff 
to evaluate the potential economic effects. For example, the non-
structured format of reported portfolio investment information, the 
absence of information to identify securities, and reporting 
inconsistencies between investment companies all reduce the ability of 
Commission staff to aggregate information across the fund industry and 
to evaluate the economic effects of the proposal.
    The proposal would increase the amount of portfolio investment 
information available for some investment companies more so than 
others. For example, investment companies that utilize derivatives as 
part of their investment strategy, or that otherwise engage in 
alternative strategies, would have more information become available 
describing their businesses than other investment companies. 
Information from Form N-SAR provides some indication as to the current 
use of derivatives by investment companies. Form N-SAR requires 
investment companies to identify permitted investment policies, and if 
permitted, investment policies engaged in during the reporting period. 
As of the second half of 2014, on average 75.4% of investment companies 
reported as permitted investment policies involving the writing or 
investing in options or futures, and on average 5.2% of investment 
companies reported engaging in each one of these policies during the 
report period.\645\ In addition, the total net assets of alternative 
funds from which more information would become available were as of 
year-end 2014 approximately $200 billion or 1.2% of the total net 
assets of the mutual fund market.\646\ Although the percentage of net 
assets of alternative funds relative to the mutual fund market is 
currently small, the percentage of flows to alternative funds was 10.2% 
in 2013 and 4.3% in 2014.\647\
---------------------------------------------------------------------------

    \645\ See Item 70 of Form N-SAR for a list of permitted 
investment policies, and if permitted, the investment policies 
engaged in during the reporting period. The percentages are 
calculated from the percentage of funds that report affirmatively to 
either of the two parts for Items 70.B though 70.I. There is little 
difference in the proportion of investment companies that reported 
as permitted the investment practices relating to Items 70.B through 
70.I. The greatest proportion of funds reported engaging in writing 
or investing in stock index futures (13.1%) and engaging in writing 
or investing in interest rate futures (12.0%), and the smallest 
proportion of funds reported engaging in writing or investing in 
other commodity futures (1.7%) and engaging in writing or investing 
in options on stock index futures (0.9%). Aggregate condensed 
balance sheet information reported on Form N-SAR indicates that 
funds held $2.6 billion in options on equities and options on all 
futures (Items 74.G and 74.H) or 0.013% of net assets from the 
second half of 2014. Aggregate condensed balance sheet information 
reported on Form N-SAR from the second half of 2014 also indicates 
that funds had $55.9 billion in short sales (Item 74.R.(2)) and $4.2 
billion in written options (Item 74.R.(3)), or 0.285% and 0.021% of 
net assets, respectively. The estimates are approximate.
    \646\ See supra note 30. These statistics were obtained from 
staff analysis of Morningstar Direct data, and are based on fund 
categories as defined by Morningstar.
    \647\ See id.
---------------------------------------------------------------------------

b. Benefits
    As discussed, Form N-PORT would improve the information that 
registered management investment companies and ETFs organized as UITs 
(other than money market funds and SBICs) disclose to the Commission. 
The increase in the reporting frequency, the update to the structure of 
the information that reporting funds would disclose, and the additional 
information not currently disclosed, discussed in further detail below, 
would improve the ability of the Commission to understand, analyze, and 
monitor the fund industry. We believe that the information we receive 
on these reports would facilitate the oversight of funds and would 
assist the Commission, as the primary regulator of such funds, to 
better effectuate its mission to protect investors, maintain fair, 
orderly and efficient markets, and facilitate capital formation, 
through better informed policy decisions, more specific guidance and 
comments in the disclosure review process, and more targeted 
examination and enforcement efforts.
    To the extent that monthly portfolio investment information is not 
currently available, the requirement that all investment companies make 
available

[[Page 33658]]

portfolio investment information on a monthly basis to the Commission 
would improve the ability of the Commission to oversee investment 
companies by increasing the timeliness of the information available, 
and by providing a larger number of data points, would increase the 
ability of Commission staff to identify trends in investment strategies 
and fund products as well as industry outliers.\648\ As discussed 
above, the quarterly portfolio reports that the Commission currently 
receives on Forms N-Q and N-CSR could become stale due to the turnover 
of portfolio securities and fluctuations in the values of the 
portfolio's investments. Requiring monthly reports on Form N-PORT would 
decrease the delay between fund reports, so that the Commission would 
have more timely information than it has currently; portfolio 
investment information that is more timely would improve the ability of 
Commission staff to identify risks a fund is facing, particularly 
during times of market stress.
---------------------------------------------------------------------------

    \648\ See, e.g., supra text following note 169. Although likely 
not a significant effect, the increase in the frequency of portfolio 
investment disclosure to the Commission could also reduce the 
ability of investment companies to alter or ``window-dress'' 
portfolio investments in an attempt to disguise investment 
strategies and risk profiles that are not consistent with the 
disclosures in registration statements and shareholder reports. The 
incentives for managers to window-dress in an attempt to mislead 
investors would not change because the frequency of public 
disclosure of portfolio investment information would remain the 
same. See, e.g., Vikas Agarwal, Gerald D. Gay, and Leng Ling, Window 
Dressing in Mutual Funds, The Review of Financial Studies, Vol. 
27(11), 3133-3170 (2014).
---------------------------------------------------------------------------

    The ability of Commission staff to effectively use the information 
reported in Form N-PORT is dependent on the ability of staff to compile 
and aggregate information into a single database that can then be 
utilized to conduct industry-wide analyses. Otherwise, the information 
would only improve the ability of staff to analyze a single or a small 
number of funds at any one time. The structuring of the information in 
an XML format would improve the ability of the Commission to compile 
and aggregate information across all funds, and to analyze individual 
funds, a subset of funds, or the fund industry as a whole, and would 
increase the overall efficiency of staff to analyze the information. 
For example, the ability to compare portfolio investment information 
across reporting funds or for a single fund across report dates would 
improve the ability of the Commission to identify funds for examination 
and to identify trends in the fund industry.
    The structuring of portfolio investment information may also 
improve the quality of the information disclosed by imposing 
constraints on how the information would be provided. A feature of XML 
is a built-in validation framework that can provide precise constraints 
as to how the information could be provided. These data checks, which 
are not available in the current formats for Form N-CSR and Form N-Q, 
are important to ensure that the reports contain information that is 
accurate and consistent across filings, and therefore usable by 
Commission staff. An improved, structured format may also promote 
additional efficiency among investment companies to the extent that the 
new reporting requirements encourage an update and integration of 
systems, and standardized formats for the disclosure and transmission 
of filings.
    Form N-PORT would require information that is not currently 
required to be reported to the Commission, including portfolio and 
position level risk-sensitivity measures and additional information 
describing derivatives, securities lending activities, repurchase and 
reverse repurchase agreements, the pricing and liquidity of securities, 
and information regarding fund returns and flows. The information would 
increase the ability of Commission staff to understand the use of these 
products and activities as part of a fund's investment strategy, as 
well as the risks of a particular fund, a group of funds, and the fund 
industry.
    The proposed requirement to report portfolio- and position-level 
risk sensitivity measures would provide Commission staff with a set of 
estimates that summarizes the risk exposures of a fund. The risk 
sensitivity measures improve the ability of Commission staff to 
efficiently analyze information for all funds and identify those funds 
not only with specific risk exposures but also risk exposures that 
appear to be outliers among peer funds. An ability to efficiently 
identify funds based on exposure to certain risks would improve the 
Commission's ability to analyze fund industry trends, monitor funds, 
and, as appropriate, engage in further inquiry or timely outreach in 
case of a market or other event. Commission staff could also use these 
measures to determine whether additional guidance or policy measures 
are appropriate to improve disclosures.
    The calculation of portfolio- or position-level measures of risk 
for some derivatives, including derivatives with unique or complicated 
payoff structures, sometimes requires time-intensive computational 
methods or additional information that Form N-PORT would not require. 
As discussed above, based on staff experience and outreach, we 
understand that most funds calculate risk measures for such securities. 
Accordingly, we believe that requiring funds to provide these measures 
is more efficient than requiring funds to provide all of the 
information that might be necessary for the Commission, investors, or 
other potential users to calculate these measures. The requirement for 
investment companies to provide risk measures for derivatives, at the 
position-level and at the portfolio-level, would therefore improve the 
ability of staff to efficiently identify the risk exposures of funds 
regardless of the types of derivatives held or that could be introduced 
to the marketplace. In addition, the requirement for investment 
companies to provide portfolio-level measures of risk would also 
improve the ability of staff to efficiently identify interest rate and 
credit spread exposures at the fund level and conduct analyses without 
first aggregating position-level measures.
    Form N-PORT would require funds to provide the contractual terms 
for debt securities and many of the more common derivatives including 
options, futures, forwards, and swaps; the reference instrument for all 
convertible debt securities and derivatives, and information describing 
the size of the position. The information would provide Commission 
staff an ability to identify funds with interest rate risk exposure or 
exposure to other risks such as those pertaining to a company, 
industry, or region.
    As discussed, for securities lending activities and reverse 
repurchase agreements, Form N-PORT would require counterparty 
identification information, contractual terms, and information 
describing the collateral and reinvestment of the collateral. The 
additional information could improve the ability of Commission staff to 
assess fund compliance with the conditions that they must meet to 
engage in securities lending, as well as better analyze the extent to 
which funds are exposed to the creditworthiness of counterparties, the 
loss of principal of the reinvested collateral, and leverage creation 
through the reinvestment of collateral.
    Form N-PORT would also require additional identification 
information regarding the reporting fund, the issuers of fund 
investments, and the investments themselves, including the reference 
instruments for convertible debt securities and derivatives 
investments. The additional

[[Page 33659]]

identification information would benefit the Commission by improving 
the ability of staff to link the information from Form N-PORT with 
information from other sources, such as Form N-CEN, that also identify 
market participants and investments with these identifiers. The 
additional identification information would be especially important to 
identify the issuers of fund investments and the investments 
themselves. The information would improve the ability of Commission 
staff, from the current requirement to provide just the issuer name, to 
identify and compare funds that have exposures to particular 
investments or issuers regardless of the whether the exposure is direct 
or indirect such as through a derivative security.
    Investors, third-party information providers, and other potential 
users would also experience benefits from the introduction of Form N-
PORT. While the frequency of public disclosure of portfolio information 
would not change, we believe that the structured format of this 
information would allow investors and other potential users to more 
efficiently analyze portfolio information. Investors and other 
potential users would also have quarterly disclosure of additional 
information that is currently not included in the schedule of 
investments reported on Form N-Q and Form N-CSR. The additional 
information as well as the structure of the information would increase 
the transparency of funds' investment strategies and improve the 
ability of investors and other potential users to more efficiently 
identify the risk exposures of the fund.
    Form N-PORT would benefit investors, to the extent that they use 
the information, to better differentiate investment companies based on 
their investment strategies and other activities. For example, 
investors would be able to more efficiently identify funds that use 
derivatives and the extent to which they use derivatives as part of 
their investment strategies.\649\ In general, we expect that 
institutional investors and other market participants would directly 
use the information from Form N-PORT more so than individual investors. 
As discussed, the format of Form N-PORT is not designed to be human 
readable and the amount of information could result in reports that are 
voluminous. The Commission therefore has endeavored to mitigate the 
potential loss of information to individual investors from the 
rescission of From N-Q through the additional disclosure requirements 
for investment companies as part of this proposal, including the 
requirement for investment companies to attach to Form N-PORT complete 
portfolio holdings in accordance with Regulation S-X for the first and 
third fiscal quarters.\650\ Individual investors, however, could 
indirectly benefit from the information in Form N-PORT to the extent 
that third-party information providers and other interested parties are 
able to obtain, aggregate, provide, and report on the information. 
Individual investors could also indirectly benefit from the information 
in Form N-PORT to the extent that other entities, including investment 
advisers and broker-dealers, utilize the information to help investors 
make more informed investment decisions.
---------------------------------------------------------------------------

    \649\ Form N-PORT would also eliminate the reporting gap between 
money market funds, which report portfolio investment information in 
an XML format on Form N-MFP, and funds engaging in similar 
investment strategies such as ultra-short bond funds, which would be 
required to file reports on Form N-PORT.
    \650\ See discussion supra Part II.A.2.j.
---------------------------------------------------------------------------

    Portfolio investment information that investment companies report 
to the Commission is informative in describing the ongoing investment 
strategy of the fund,\651\ and investors could use the information to 
select funds based on security selection, industry focus, level of 
diversification, and the use of leverage and derivatives.\652\ An 
increase in the ability of investors to differentiate investment 
companies would allow investors to allocate capital across reporting 
funds more in line with their risk preferences and increase the 
competition among funds for investor capital. In addition, by improving 
the ability of investors to understand the risks of investments and 
hence their ability to allocate capital across funds and other 
investments more efficiently, the introduction of Form N-PORT could 
promote capital formation.
---------------------------------------------------------------------------

    \651\ Academic research indicates that the portfolio investment 
information funds provide to the Commission, such as on Form N-CSR 
and Form N-Q, has value even though the information is publicly 
available only after a time-lag. See infra notes 664-667. Just as 
investors can use the information to front-run or copycat/reverse 
engineer the investment strategy of a reporting fund, investors of 
funds can also use the information to identify funds for investment.
    \652\ Empirical research shows that fund flows are sensitive to 
many factors including past fund performance and investor search 
costs. See, e.g., Erik R. Sirri and Peter Tufano, Costly Search and 
Mutual Fund Flows, The Journal of Finance, Vol. 53(5), 1589-1622 
(1998); Zoran Ivkovi[cacute] and Scott Weisbenner, Individual 
Investor Mutual Fund Flows, Journal of Financial Economics, Vol. 92, 
223-237 (2009); George D Cashman, Convenience in the Mutual Fund 
Industry, Journal of Corporate Finance, Vol. 18, 1326-1336 (2012).
---------------------------------------------------------------------------

    Rescission of Form N-Q, along with its certifications of the 
accuracy of the portfolio schedules reported for each fund's first and 
third fiscal quarters, may result in some cost savings by funds in 
terms of administrative or filing costs. However, we expect any such 
savings, if any, to be minimal, because under our proposal each fund 
would still be required to file portfolio schedules prepared in 
accordance with Sec. Sec.  210.12-12 to 12-14 of Regulation S-X for the 
fund's first and third fiscal quarters, by attaching those schedules as 
attachments to its reports on Form N-PORT for those reporting periods.
c. Costs
    Form N-PORT, as proposed, would require registered management 
investment companies and ETFs organized as UITs, other than money 
market funds or SBICs, to incur one-time and ongoing costs to comply 
with the new filing requirements. Funds would incur additional ongoing 
costs to report portfolio investment information on a monthly basis on 
Form N-PORT instead of a quarterly basis as currently reported on Forms 
N-Q and N-CSR. Funds that voluntarily provide information to third-
party information providers and on its Web site, including monthly 
portfolio investments, and additional information in fund financial 
statements, including additional information regarding derivatives 
similar to the requirements that we are proposing today, would bear 
fewer costs as a result of the proposal than those that do not.\653\ 
The Commission is aware that these funds would nonetheless likely incur 
additional costs on reports on proposed Form N-PORT than on voluntary 
submissions, such as validation and signoff processes, given that 
reports on Form N-PORT would be a required regulatory filing and would 
possibly require different data than the funds are currently providing 
to third-party information providers. Over time, the filings could 
become highly automated and could involve fewer costs.\654\
---------------------------------------------------------------------------

    \653\ Monthly portfolio investment information is available for 
approximately 45% of funds covered by The CRSP Survivor-Bias-Free US 
Mutual Fund Database as of the third quarter of 2014. The database 
covers more than 9,000 open-ended mutual funds during this time 
period. This estimate suggests that a large proportion of funds 
already report monthly portfolio investment information, although it 
is unclear whether monthly information is reported following each 
month or if information relating to several months is periodically 
reported at a later date. Calculated based on data from The CRSP 
Survivor-Bias-Free US Mutual Fund Database (copyright) 2015 Center 
for Research in Security Prices (CRSP[supreg]), The University of 
Chicago Booth School of Business.
    \654\ Costs related to such processes are included in the 
estimate below of the paperwork costs related to Form N-PORT, 
discussed below.

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[[Page 33660]]

    Funds would also incur costs to file reports on Form N-PORT in a 
structured format. Based on staff experience with other XML filings, 
however, these costs are expected to be minimal given the technology 
that would be used to structure the data.\655\ XML is a widely used 
data format, and based on the Commission's understanding of current 
practices, most reporting persons and third party service providers 
have systems already in place to report schedules of investments and 
other information. Systems would be able to accommodate an alternative 
format such as XML without significant costs, and large-scale changes 
would likely not be necessary to output structured data files. In an 
effort to reduce some of the potential burdens on smaller entities, we 
are proposing to extend the compliance period to begin filing reports 
on Form N-PORT to thirty months after the effective date for groups of 
funds with assets under $1 billion.\656\ The additional time could 
increase the ability of these investment companies to comply with the 
filing requirements by providing more time for system and operation 
changes and from observing larger fund groups.
---------------------------------------------------------------------------

    \655\ See, e.g., Form PF Adopting Release, supra note 14, at 
text following n.357 (discussing the costs to advisers to private 
funds of filing Form PF in XML format); Money Market Fund Reform 
2010 Release, supra note 13, at nn.341-344 and accompanying text 
(discussing the costs to money market funds of filing reports on 
Form N-MFP in XML format).
    \656\ See supra Part II.G.1.
---------------------------------------------------------------------------

    Form N-PORT would also require the disclosure of certain 
information that is not currently required by the Commission. In some 
instances, such as in the case of increased disclosures regarding 
derivatives investments and information concerning the pricing and 
liquidity of investments, the Commission is proposing to require 
parallel disclosures in the fund's schedule of investments; 
accordingly, we expect funds would generally incur one set of costs to 
adhere to the reporting of new information on Form N-PORT and in its 
schedule of investments. For other information, such as the reporting 
of particular asset classifications, identification of investments and 
reference instruments, and risk measures, the information would be 
disclosed on Form N-PORT only.
    To the extent that our proposal would require information to be 
reported that is not currently contained in fund accounting or 
financial reporting systems, funds would bear one-time costs to update 
systems to adhere to the new filing requirements. The one-time costs 
would depend on the extent to which investment companies currently 
report the information required to be disclosed. The one-time costs 
would also depend on whether an investment company would need to 
implement new systems, such as to calculate and report risk-sensitivity 
measures, and to integrate information maintained in separate internal 
systems or by third parties to comply with the new requirements. Based 
on staff outreach to funds, we believe that, at a minimum, funds would 
incur systems or licensing costs to obtain a software solution or to 
retain a service provider in order to report data on risk metrics, as 
risk metrics are not required to be reported on the fund financial 
statements. Our experience with and outreach to funds indicates that 
the types of systems funds use for warehousing and aggregating data, 
including data on risk metrics, varies widely.
    To the extent possible, we have attempted to quantify these costs. 
As discussed below, we estimate that funds would incur certain annual 
paperwork costs associated with preparing, reviewing, and filing 
reports on Form N-PORT.\657\ Assuming that 35% of funds (3,749 funds) 
would choose to license a software solution to file reports on Form N-
PORT, we estimate an upper bound on the initial annual costs to funds 
choosing this option of $55,970 per fund \658\ with annual ongoing 
costs of $46,745 per fund.\659\ We further assume that 65% of funds 
(6,962 funds) would choose to retain a third-party service provider to 
provide data aggregation and validation services as part of the 
preparation and filing of reports on Form N-PORT, and we estimate an 
upper bound on the initial costs to funds choosing this option of 
$54,821 per fund \660\ with annual ongoing costs of $38,746 per 
fund.\661\ In total, we estimate that funds would incur initial annual 
costs of $515,537,918 and ongoing annual costs of $444,996,657.\662\
---------------------------------------------------------------------------

    \657\ See infra Part V.A.1.
    \658\ See infra notes 736-739, 749 and accompanying text. This 
estimate is based upon the following calculations: $55,970 = $4,805 
in external costs + $51,165 in internal costs ($51,165 = 15 hours x 
$303/hour for a senior programmer) + (39 hours x $312/hour for a 
senior database administrator) + (30 hours x $266/hour for a 
financial reporting manager) + (30 hours x $198/hour for a senior 
accountant) + (30 hours x $157/hour for an intermediate accountant) 
+ (30 hours x $301/hour for a senior portfolio manager) + (24 hours 
x $283/hour for a compliance manager)). The hourly wage figures in 
this and subsequent footnotes are from SIFMA's Management & 
Professional Earnings in the Securities Industry 2013, modified by 
Commission staff to account for an 1800-hour work-year and 
multiplied by 5.35 to account for bonuses, firm size, employee 
benefits, and overhead.
    \659\ See infra notes 740, 749 and accompanying text. This 
estimate is based upon the following calculations: $46,745 = $4,805 
in external costs + $41,940 in internal costs ($41,940 = (30 hours x 
$266/hour for a financial reporting manager) + (30 hours x $198/hour 
for a senior accountant) + (30 hours x $157/hour for an intermediate 
accountant) + (30 hours x $301/hour for a senior portfolio manager) 
+ (24 hours x $283/hour for a compliance manager) + (24 hours x 
$312/hour for a senior database administrator)).
    \660\ See infra notes 743-745, 750 and accompanying text. This 
estimate is based upon the following calculations: $54,821 = $11,440 
in external costs + $43,481 in internal costs ($43,481 = (30 hours x 
$303/hour for a senior programmer) + (46.5 hours x $312/hour for a 
senior database administrator) + (16.5 hours x $266/hour for a 
financial reporting manager) + (16.5 hours x $198/hour for a senior 
accountant) + (16.5 hours x $157/hour for an intermediate 
accountant) + (16.5 hours x $301/hour for a senior portfolio 
manager) + (16.5 hours x $283/hour for a compliance manager)).
    \661\ See infra notes 746, 750 and accompanying text. This 
estimate is based upon the following calculations: $38,746 = $11,440 
in external costs + $27,306 in internal costs ($27,306 = (18 hours x 
$266/hour for a financial reporting manager) + (18 hours x $198/hour 
for a senior accountant) + (18 hours x $157/hour for an intermediate 
accountant) + (18 hours x $301/hour for a senior portfolio manager) 
+ (18 hours x $283/hour for a compliance manager) + (18 hours x 
$312/hour for a senior database administrator)).
    \662\ These estimates are based upon the following calculations: 
$591,495,332 = (3,749 funds x $55,970 per fund) + (6,962 funds x 
$54,821 per fund). $444,996,657 = (3,749 funds x $46,745 per fund) + 
(6,962 funds x $38,746 per fund).
---------------------------------------------------------------------------

    Although under the proposal there would be no change to the 
frequency or time-lag for which investment company security position 
information is publicly disclosed, the increase in the amount of 
publicly available information and the greater ability to analyze the 
information as a result of its structure may facilitate activities such 
as ``front-running,'' ``predatory trading,'' and ``copycatting/reverse 
engineering of trading strategies'' by other investors. For example, 
Form N-PORT would result in the disclosure of additional information, 
such as pertaining to derivatives and securities lending activities, 
which could more clearly reveal the investment strategy of reporting 
funds and its risk exposures. The structured format of portfolio 
investments disclosure could also improve the ability of other 
investors to obtain and aggregate the data, and identify specific funds 
to front-run or predatory trade. These activities could reduce the 
profitability from developing new investment strategies, and therefore 
could reduce innovation and impact competition in the fund industry.
    Investors that trade ahead of funds could reduce the profitability 
of funds by increasing the price of fund purchases and by decreasing 
the price of fund sales. These activities can reduce the returns to 
shareholders who invest

[[Page 33661]]

in actively managed funds, making actively managed funds less 
attractive investment options.\663\ Portfolio investment information, 
along with flow information, can also create opportunities for other 
market participants to front-run the sales of funds that experience 
large outflows and the purchases of funds that experience large 
inflows,\664\ or create opportunities for other market participants to 
engage in predatory trading that could lead to further fund 
distress.\665\
---------------------------------------------------------------------------

    \663\ See, e.g.,
    \664\ See, e.g., Joshua Coval and Erik Stafford, Asset Fire 
Sales (and Purchases) in Equity Markets, Journal of Financial 
Economics, Vol. 86, 479-512 (2007).
    \665\ See, e.g., Markus K. Brunnermeier and Lasse Heje Pedersen, 
Predatory Trading, The Journal of Finance, Vol. 60(4), 1825-1864 
(2005).
---------------------------------------------------------------------------

    A trading strategy that follows the publicly reported holdings of 
actively managed funds can also earn similar if not higher after 
expense returns.\666\ An implication of this finding is that the public 
disclosure of portfolio investment information could induce free-riding 
by investors that use the information and reduce the potential benefit 
from developing new investment strategies and engaging in proprietary 
market research. The effect of free-riding would reduce the ability of 
an investment companies with longer investment horizons to benefit from 
researching investment opportunities and developing new strategies more 
so than investment companies with shorter investment horizons because 
of the increased likelihood that the disclosed portfolio investment 
information would reveal their long-term investment strategies.\667\
---------------------------------------------------------------------------

    \666\ See, e.g., Mary Margaret Frank, James M. Poterba, Douglas 
A. Shackelford, and John B. Shoven, Copycat Funds: Information 
Disclosure Regulation and the Returns to Active Management in the 
Mutual Fund Industry, The Journal of Law and Economics, Vol. 47(2), 
515-541 (2004).
    \667\ See, e.g., Vikas Agarwal, Kevin Andrew Mullaly, Yuehua 
Tang, and Baozhong Yang, Mandatory Portfolio Disclosure, Stock 
Liquidity, and Mutual Fund Performance, The Journal of Finance, 
(``Agarwal et al''), forthcoming (available at http://onlinelibrary.wiley.com/doi/10.1111/jofi.12245/pdf); Marno Verbeek 
and Yu Wang, Better than the Original? The Relative Success of 
Copycat Funds, Journal of Banking and Finance, Vol. 37, 3454-3471 
(2013) (``Verbeek and Wang'').
---------------------------------------------------------------------------

    A comparison can be made between the economic effects from the 
introduction of Form N-PORT and the economic effects from the 
introduction of Form N-Q in May 2004 which increased the reporting 
frequency of portfolio investment information to the Commission from 
semiannual to quarterly. The introduction of Form N-Q resulted in an 
increase in the amount of information that could have been acted upon 
by other investors. For example, evidence indicates that the ability of 
copycat funds to outperform actively managed funds increased after the 
introduction of Form N-Q,\668\ and additional evidence indicates that 
the performance of those funds with better previous performance or that 
invest in low-information stocks decreased following the introduction 
of Form N-Q.\669\ The increase in the frequency of portfolio investment 
information as a result of Form N-Q resulted in an increase in the 
amount of portfolio investment information available. Although Form N-
PORT would not increase the frequency of public disclosure, Form N-PORT 
would increase the amount of portfolio investment information 
available. In addition, Form N-PORT, unlike Form N-Q, would also 
increase the accessibility of the information as a result of its 
structured format.
---------------------------------------------------------------------------

    \668\ See Verbeek and Wang, supra note 667.
    \669\ See Agarwal et al., supra note 667. Low information stocks 
include stocks with smaller market capitalization, less liquidity, 
and less analyst coverage. The authors also find that the liquidity 
of stocks with higher fund ownership increased following the 
introduction of Form N-Q. Although the increase in liquidity would 
benefit investors by reducing trading costs, this benefit stems as a 
result of the costly disclosure of potential investment 
opportunities.
---------------------------------------------------------------------------

    We have endeavored to mitigate the potential for front-running, 
predatory trading, and copycatting/reverse engineering by other market 
participants by proposing to maintain the status quo for the frequency 
and timing of disclosure of publicly available portfolio information. 
In addition, much, though not all, of the information that Form N-PORT 
would require, is already disclosed by reporting funds on Form N-CSR 
and Form N-Q.\670\ The additional information and the structure of the 
information that would be required under Form N-PORT, however, would 
improve the ability of investors to obtain, aggregate, and analyze all 
fund investments. Thus, Form N-PORT could negatively affect actively 
managed funds by increasing the ability of other investors to copycat 
or front-run investment strategies, and in particular could negatively 
affect those funds that would have more additional information 
disclosed, such as funds that use derivatives as part of their 
investment strategies. The Commission has considered the needs of the 
Commission, investors, and other users of portfolio investment 
information and the potential that other investors may use the 
information to the detriment of the reporting funds.
---------------------------------------------------------------------------

    \670\ See supra note 27 and accompanying text.
---------------------------------------------------------------------------

    Form N-PORT would require the disclosure of information that is 
currently nonpublic that could result in additional costs to funds and 
market participants. For example, Form N-PORT would require a fund to 
report the identities and weights of each of the individual components 
comprising the reference instruments underlying the fund's derivative 
investments, unless the reference instrument is an index whose 
components are publicly available on a Web site and are updated on that 
Web site no less frequently than quarterly, or the notional amount of 
the derivative represents 1% or less of the net asset value of the 
fund.\671\ We understand that many indices used as reference 
instruments in derivative investments are proprietary to index 
providers, and are subject to licensing agreements between the index 
provider and the fund. Disclosing the components of a non-public index 
could result in costs to both the index provider, whose proprietary 
indexing strategy could be imitated, and the fund, whose investments 
could be front-run.\672\ Moreover, disclosing the underlying components 
of such an index could subject the fund to one-time costs associated 
with renegotiating licensing agreements and the ongoing payment of fees 
in order to obtain the rights to disclose the components of the 
index.\673\ Additionally, the increased transparency in proprietary 
indexes could ultimately decrease the incentives of index providers to 
license the use of such indices to funds as well as fund demand for 
securities products that incorporate these indices. Likewise, Form N-
PORT, as well as the proposed amendments to regulation S-X, would 
require funds to report certain information regarding fees and 
financing terms for certain derivatives contracts, particularly OTC 
swaps, which are not currently required to be publicly disclosed. The 
increased transparency could increase the competition among swap and 
security-based swap dealers to offer favorable fees and financing 
terms, as the fees and financing terms offered to one fund

[[Page 33662]]

would be known to other funds negotiating the terms of such contracts.
---------------------------------------------------------------------------

    \671\ See supra note 123 and accompanying text.
    \672\ See Antti Petajisto, The Index Premium and its Hidden Cost 
for Index Funds, Journal of Empirical Finance, Vol. 18, 271-288 
(2011). Petajisto finds evidence that mechanically induced demand 
changes to demand, such as index fund rebalancing, can result in 
price effects. If predictable, then other investors could take 
advantage of the changes to the proprietary indexes by front-running 
future trades.
    \673\ The Commission does not have information available to 
provide a reliable estimate of the increased costs of such licensing 
agreements because funds are currently not required to disclose the 
agreements or the components of the index.
---------------------------------------------------------------------------

    As discussed above, although our proposal would rescind Form N-Q, 
it would also require funds to file portfolio schedules prepared in 
accordance with Sec. Sec.  210.12-12 to 12-14 of Regulation S-X for the 
fund's first and third fiscal quarters, by attaching those schedules as 
attachments to its reports on Form N-PORT for those reporting periods. 
Although the schedules attached to Form N-PORT would be largely 
identical to the information currently reported on Form N-Q, under our 
proposal funds would have 30 days to prepare and file the attachments 
to Form N-PORT, as opposed to the 60 days that funds currently have to 
prepare, certify, and file reports on Form N-Q. The faster turnaround 
time may result in increased costs to funds, but we expect these costs 
may be mitigated by removing the requirement that funds certify this 
information.
    Rescission of Form N-Q would also eliminate certifications of the 
accuracy of the portfolio schedules reported for the first and third 
fiscal quarters, and would also result in funds providing 
certifications regarding their disclosure controls and procedures and 
internal control over financial reporting semi-annually rather than 
quarterly. To the extent that such certifications improve the accuracy 
of the data reported, removing such certifications could have negative 
effects on the quality of the data reported. Likewise, if the reduced 
frequency of the certifications affects the process by which controls 
and procedures are assessed, requiring such certifications semi-
annually rather than quarterly could reduce the effectiveness of the 
fund's disclosure controls and procedures and internal control over 
financial reporting are assessed. However, we expect such effects, if 
any, to be minimal because certifying officers would continue to 
certify portfolio holdings for the fund's second and fourth fiscal 
quarters and would further provide semi-annual certifications 
concerning disclosure controls and procedures and internal control over 
financial reporting that would cover the entire year.

C. Amendments to Regulation S-X

a. Introduction and Economic Baseline
    The proposed amendments to Regulation S-X would require new, 
standardized disclosures regarding fund holdings in open futures 
contracts, open forward foreign currency contracts, and open swap 
contracts, and additional disclosures regarding fund holdings of 
written and purchased option contracts; update the disclosures for 
other investments with conforming amendments, as well as reorganize the 
order in which some investments are presented; and amend the rules 
regarding the general form and content of fund financial statements, 
including requiring prominent placement of investments in derivative 
investments in a fund's financial statements, rather than allowing such 
schedules to be placed in the notes to the financial statements.\674\ 
Finally, our amendments would require a new disclosure in the notes to 
the financial statements relating to a fund's securities lending 
activities.
---------------------------------------------------------------------------

    \674\ See supra Part II.C. As discussed above, rule 12-13 of 
Regulation S-X requires limited generic information on the fund's 
investments other than securities. To address issues of inconsistent 
disclosures and lack of transparency, our proposal would standardize 
a fund's disclosures of open futures contacts, foreign currency 
forward contracts, and swaps. In addition, while many of the 
proposed amendments to Regulation S-X are similar to the proposed 
disclosures in Form N-PORT (e.g,. enhanced derivatives disclosures), 
the amendments to Regulation S-X would be investor-friendly, as the 
financial statements and schedule of investments are human-readable 
(as opposed to proposed Form N-PORT's structured data).
---------------------------------------------------------------------------

    The current set of requirements under Regulation S-X, as well as 
the current practice of many funds \675\ to voluntarily disclose 
additional portfolio investment information in fund financial 
statements and to follow industry guidance and other industry 
practices, is the baseline from which we discuss the economic effects 
of amendments to Regulation S-X.\676\ The parties that could be 
affected by the proposed amendments to Regulation S-X include funds 
that file or would file reports with the Commission and update or would 
update registration statements on file with the Commission, the 
Commission, current and future investors of investment companies, and 
other market participants that could be affected by the increase in the 
disclosure of portfolio investment information.
---------------------------------------------------------------------------

    \675\ As we discussed supra note 180, while ``funds'' are 
defined in the preamble as registered investment companies other 
than face amount certificate companies and any separate series 
thereof--i.e., management companies and UITs, we note that our 
proposed amendments to Regulation S-X apply to both registered 
investment companies and BDCs. See supra notes 264 and 265. 
Therefore, when discussing fund reporting requirements in the 
context of our proposed amendments to Regulation S-X, we are also 
including changes to the reporting requirements for BDCs.
    \676\ See discussion supra Part II.C.
---------------------------------------------------------------------------

    Regulation S-X prescribes the form and content of financial 
statements required in shareholder reports and registration updates. 
Today, Regulation S-X does not prescribe specific information to be 
disclosed under Regulation S-X for many investments in derivatives, 
which could result in inconsistent reporting between funds and reduced 
transparency of the information reported, and in some cases could 
result in insufficient information concerning the terms and underlying 
reference assets of derivatives to allow investors to understand the 
investment.
    Many of the economic effects from the proposed amendments to 
Regulation S-X would largely result from an increase in investor 
ability to make investment decisions dependent on more transparent 
disclosure in shareholder reports and in the financial statements of 
registration statements. As discussed above, the economic effects would 
depend on the extent to which the portfolios and investment practices 
of investment companies become more transparent, and the ability of 
investors, and in particular individual investors, to utilize 
shareholder reports to make investment decisions. The economic effects 
would also depend on the extent to which investment companies already 
voluntarily provide disclosures that would be required by the proposed 
amendments. As a result of these factors, some of which are difficult 
to quantify or unquantifiable, the discussion below is largely 
qualitative although certain one-time and ongoing costs associated with 
the proposed amendments are quantified below.
b. Benefits
    The amendments to Regulation S-X could benefit investors by 
updating the information funds disclose in the financial statements of 
registration statements and shareholder reports. Our proposed 
amendments could benefit investors through increased transparency into 
a fund's investments, particularly for individual investors that we 
would not expect to use the information in Form N-PORT because of its 
structured format. In particular, the additional information that 
Regulation S-X would require for open option contracts both written and 
purchased, open futures contracts, open forward foreign currency 
contracts, open swap contracts, and other investments would increase 
the transparency of the fund's portfolio investments and risk 
exposures.
    Other amendments would also improve the transparency into the 
fund's investments. For example, we are proposing to require funds to 
identify each investment whose fair value was determined using 
significant unobservable inputs.\677\ Likewise, we

[[Page 33663]]

are proposing a requirement that funds identify illiquid 
securities,\678\ as well as to separately identify investments that are 
restricted.\679\ As discussed above, we believe that the effect of 
these proposed amendments would be to increase transparency into the 
liquidity of investments and help investors better understand how fund 
investments are valued.\680\
---------------------------------------------------------------------------

    \677\ See, e.g., proposed rule 12-13, n.7 of Regulation S-X; see 
also proposed rules 12-13A, n.5; 12-13B, n.3; 12-13C, n.6; and 12-
13D, n.7 of Regulation S-X.
    \678\ See, e.g., proposed rule 12-13, n.8 of Regulation S-X; see 
also proposed rules 12-13A, n.6; 12-13B, n.4; 12-13C, n.7; and 12-
13D, n.8 of Regulation S-X.
    \679\ See proposed rule 12-13, n.6 of Regulation S-X; see also 
proposed rules 12-13A, n.4; 12-13B, n.2; 12-13C, n.5; and 12-13D, 
n.6 of Regulation S-X.
    \680\ See Part II.C.2.a
---------------------------------------------------------------------------

    In certain circumstances, we are also requiring funds to separately 
list each of the investments comprising the referenced assets 
underlying swap \681\ and option contracts.\682\ We believe that 
increased disclosure of the investments underlying a referenced asset 
could benefit investors by making it easier for them to understand and 
evaluate the specific risk exposures of a fund from certain swap and 
option contracts.
---------------------------------------------------------------------------

    \681\ See proposed rule 12-13C, n.3 of Regulation S-X; see also 
discussion supra Part II.C.2.d.
    \682\ See proposed rule 12-13, n.3 of Regulation S-X; see also 
discussion supra Part II.C.2.a.
---------------------------------------------------------------------------

    We also believe that our proposed changes to the form and content 
of financial statements in Article 6 of Regulation S-X will similarly 
benefit investors, particularly individual investors, through greater 
transparency in a fund's financial statements. For example, we are 
proposing to require funds to disclose their investments in derivatives 
in the financial statements, as opposed to in the notes to the 
financial statements.\683\ To the extent funds do not do this already, 
we believe that more prominent placement of investments in derivatives 
in the financial statements (immediately following the schedules for 
investments in securities of unaffiliated investors and securities sold 
short), would benefit investors through increased visibility of fund 
investments in derivatives. Likewise, we are proposing to eliminate the 
financial statement disclosure of ``Total investments'' on the balance 
sheet under ``Assets''.\684\ As we discuss in more detail in Part 
II.C.5, recognizing that investments in derivatives could be presented 
under both assets and liabilities on the balance sheet, eliminating 
this disclosure would benefit investors by providing a more accurate 
representation of the effect of these investments on a fund's balance 
sheet.\685\
---------------------------------------------------------------------------

    \683\ See proposed rule 6-10(a) of Regulation S-X; see also 
discussion supra Part II.C.5.
    \684\ See proposed rule 6-04 of Regulation S-X; see also 
discussion supra Part II.C.5.
    \685\ See id.
---------------------------------------------------------------------------

    Other parties that would be affected by the amendments to 
Regulation S-X include the Commission and other market participants 
that would use shareholder reports and registration statements to 
obtain fund information. Although the amendments to Regulation S-X 
would primarily benefit investors and particularly individual 
investors, the Commission and other market participants could use the 
information reported in a fund's shareholder report such as the 
proposed notes to financial statement relating to income and expenses 
from securities lending activities, as well as the terms governing the 
compensation of securities lending agents, and would benefit from an 
increase in transparency into a fund's investments and financial 
statements during examinations. Commission staff believes that a large 
number of funds currently adhere to industry practices from which the 
amendments to Regulation S-X are derived. The proposal to amend 
Regulation S-X, therefore, would effectively standardize the 
information that all funds disclose in financial statements, and make 
the schedule of investments and financial statement disclosures 
consistent and thus more comparable across funds. Similar to the 
introduction of Form N-PORT, the amendments to Regulation S-X, to the 
extent that it increases the transparency of shareholder reports, could 
improve the ability of investors, particularly individual investors, to 
differentiate investment companies and make investment decisions. An 
increase in the ability of investors to differentiate investment 
companies and allocate capital across reporting funds closer to their 
risk preferences would increase the competition among funds for 
investor capital. In addition, by improving the ability of investors to 
understand investment risks and hence their ability to allocate capital 
across funds and other investments more efficiently, the introduction 
of Form N-PORT could also promote capital formation.
c. Costs
    We believe that registrants on average will likely incur minimal 
costs from our proposed amendments to Regulation S-X because, as 
discussed above, based upon staff experience, we believe that a 
majority of funds are already providing the information that would be 
required by the proposed amendments to Regulation S-X in their 
financial statements.\686\ The costs to a fund of complying with the 
proposed rules would depend upon the extent to which funds are already 
making such disclosures voluntarily. As discussed above, the Commission 
is proposing to require parallel disclosures in Form N-PORT, and funds 
would incur one set of costs, both one-time and ongoing, to obtain the 
information that would be disclosed in Form N-PORT and in shareholder 
reports and registration statements. In addition, other costs that 
relate to the disclosure of portfolio investment information, including 
the ability of other investors to front-run or copycat the investment 
strategies of funds, would primarily relate to Form N-PORT because of 
the additional ability of other interested third-parties and market 
participants to efficiently obtain, aggregate, and analyze the 
information as a result of its structured format as compared to the 
non-structured format of reported portfolio investment information in 
shareholder reports.
---------------------------------------------------------------------------

    \686\ In order to reduce burdens on funds, we also endeavored, 
where appropriate, to require consistent derivatives holdings 
disclosures between Form N-PORT and Regulation S-X.
---------------------------------------------------------------------------

    For example, similar to our disclosures proposed in Form N-
PORT,\687\ proposed rules 12-13 and 12-13C of Regulation S-X would, 
under certain circumstances, require funds to list separately each of 
the investments comprising referenced assets underlying swap \688\ and 
option contracts,\689\ such as when the referenced asset is an index 
whose components are not periodically publicly available on a Web site. 
We understand that many indexes are the proprietary property of an 
index provider, and may be subject to licensing agreements between the 
index provider and the fund. Disclosing the underlying components of an 
index could subject the fund to costs associated with negotiating or 
renegotiating licensing agreements in order to publicly disclose the 
components of the index. The Commission does not have information 
available to provide a reliable estimate of the increased costs of 
licensing agreements because funds currently are not required to 
disclose the agreements or the components of the index. In addition, 
disclosing the components of a non-public index may include costs to 
both the index provider, whose proprietary indexing strategy could be

[[Page 33664]]

reverse engineered, and the fund, whose rebalancing trades could be 
front-run.\690\ However, the underlying components may be more 
accessible in Form N-PORT as a result of its structured format as 
compared to the non-structured format of the information in shareholder 
reports, and the costs of disclosing the information would therefore 
primarily relate to Form N-PORT.
---------------------------------------------------------------------------

    \687\ See Item C.11.c.iii and Item C.11.f.i of proposed Form N-
PORT.
    \688\ See proposed rule 12-13C, n.3 of Regulation S-X; see also 
discussion supra Part II.C.2.d.
    \689\ See proposed rule 12-13, n.3 of Regulation S-X.; see also 
discussion supra Part II.C.2.a.
    \690\ See supra note 672 and accompanying and following text.
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    As another example, the proposal includes an instruction to 
disclose the variable financing rates for swaps which pay or receive 
financing payments.\691\ It is our understanding that variable 
financing rates for swap contracts are often commercial terms of a deal 
that are negotiated between the fund and the counterparty to the swap. 
Disclosure of favorable variable financing rates could result in costs 
to the fund in the form of less favorable variable financing rates for 
future transactions, but may also improve the ability of other funds to 
negotiate more favorable terms. Similar to the introduction of Form N-
PORT, the increased transparency could increase the competition among 
swap and security-based swap dealers to offer favorable fees and 
financing terms. As with the disclosure of the components of an index, 
we believe that the majority of the costs associated with disclosures 
of variable financing rates, including the increase in competition for 
favorable fees and terms, would instead derive from the similar 
requirements in proposed Form N-PORT.\692\
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    \691\ See proposed rule 12-13C, n.3 of Regulation S-X.
    \692\ See Item C.11.f.i of proposed Form N-PORT; see also 
discussion supra Part II.A.2.g.iv.
---------------------------------------------------------------------------

    Funds would incur one-time and ongoing costs to comply with the 
amendments to Regulation S-X in addition to the costs attributable to 
new Form N-PORT. For the amendments to Regulation S-X, funds would 
incur one-time and ongoing costs to obtain the additional information 
that would be disclosed on shareholder reports and registration 
statements, and that would also not be disclosed on Form N-PORT; and 
funds would also incur one-time costs to format for presentation all 
additional information that would be disclosed on shareholder reports 
and registration statements. In addition, our proposal would require 
funds, to the extent they do not already do so, to present the 
schedules associated with rules 12-13 through 12-13D and 12-14 in the 
financial statements, as opposed to in the notes to the financial 
statements.\693\ Funds that do not currently present their schedule of 
investments in this manner would incur a one-time cost of modifying the 
presentation of their financial statements to conform to our proposal.
---------------------------------------------------------------------------

    \693\ See proposed rule 6-10 of Regulation S-X; see also 
discussion supra Part II.C.5.
---------------------------------------------------------------------------

    To the extent possible, we have attempted to quantify these costs. 
As discussed below, we estimate that management investment companies 
would incur certain one-time additional paperwork and other costs 
associated with preparing, reviewing, and filing semi-annual reports in 
accordance with our proposed amendments to Regulation S-X in the amount 
of approximately $2,417 per fund \694\ and $27,142,910 in the 
aggregate.\695\ We similarly estimate that management investment 
companies would incur certain ongoing paperwork and other costs 
associated with preparing, reviewing, and filing semi-annual reports in 
accordance with our proposed amendments to Regulation S-X in the amount 
of approximately $806 per fund \696\ and $9,051,380 in the 
aggregate.\697\ Likewise, we estimate that UITs would incur certain 
one-time additional paperwork and other costs associated with 
preparing, reviewing, and filing semi-annual reports in accordance with 
our proposed amendments to Regulation S-X in the amount of 
approximately $2,417 per fund \698\ and $1,757,159 in the 
aggregate.\699\ We similarly estimate that UITs would incur certain 
ongoing paperwork and other costs associated with preparing, reviewing, 
and filing semi-annual reports in accordance with our proposed 
amendments to Regulation S-X in the amount of approximately $806 per 
fund \700\ and $585,962 in the aggregate.\701\
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    \694\ See infra note 778 and accompanying text. The estimate is 
based upon the following calculations: ($2,417 = ($707 = 4.5 hours x 
$157/hour for an Intermediate Accountant) + ($1,710 = 4.5 hours x 
$380/hour for an Attorney)). The hourly wage figures in this and 
subsequent footnotes are from SIFMA's Management & Professional 
Earnings in the Securities Industry 2013, modified by Commission 
staff to account for an 1800-hour work-year and multiplied by 5.35 
to account for bonuses, firm size, employee benefits, and overhead.
    \695\ See infra note 777 and accompanying text. These estimates 
are based upon the following calculations: $27,142,910 = (11,230 
funds x $2,417 per fund).
    \696\ See infra note 779 and accompanying text. The estimate is 
based upon the following calculations: ($806 = ($236 = 1.5 hours x 
$157/hour for an Intermediate Accountant) + ($570 = 1.5 hours x 
$380/hour for an Attorney). The hourly wage figures in this and 
subsequent footnotes are from SIFMA's Management & Professional 
Earnings in the Securities Industry 2013, modified by Commission 
staff to account for an 1800-hour work-year and multiplied by 5.35 
to account for bonuses, firm size, employee benefits, and overhead.
    \697\ See infra note 777 and accompanying text. These estimates 
are based upon the following calculations: $9,051,380 = (11,230 
funds x $806 per fund).
    \698\ See infra note 790 and accompanying text. The estimate is 
based upon the following calculations: ($2,417 = ($707 = 4.5 hours x 
$157/hour for an Intermediate Accountant) + ($1,710 = 4.5 hours x 
$380/hour for an Attorney)). The hourly wage figures in this and 
subsequent footnotes are from SIFMA's Management & Professional 
Earnings in the Securities Industry 2013, modified by Commission 
staff to account for an 1800-hour work-year and multiplied by 5.35 
to account for bonuses, firm size, employee benefits, and overhead.
    \699\ See infra note 789 and accompanying text. These estimates 
are based upon the following calculations: $1,757,159 = (727 UITs x 
$2,417 per UIT).
    \700\ See infra note 791 and accompanying text. The estimate is 
based upon the following calculations: ($806 = ($236 = 1.5 hours x 
$157/hour for an Intermediate Accountant) + ($570 = 1.5 hours x 
$380/hour for an Attorney). The hourly wage figures in this and 
subsequent footnotes are from SIFMA's Management & Professional 
Earnings in the Securities Industry 2013, modified by Commission 
staff to account for an 1800-hour work-year and multiplied by 5.35 
to account for bonuses, firm size, employee benefits, and overhead.
    \701\ See infra note 789 and accompanying text. These estimates 
are based upon the following calculations: $585,962 = (727 UITs x 
$806 per UIT).
---------------------------------------------------------------------------

D. Option for Web Site Transmission of Shareholder Reports

a. Introduction and Economic Baseline
    As discussed above, the Commission is proposing new rule 30e-3 
under the Investment Company Act, which would permit, but not require, 
a fund to satisfy requirements under the Act and rules thereunder to 
transmit reports to shareholders if the fund meets certain 
requirements. These requirements include making the reports and certain 
other materials accessible on its Web site and periodically notifying 
investors of the materials' availability.\702\ Funds that do not 
maintain Web sites or that otherwise wish to transmit shareholder 
reports in paper or pursuant the Commission's existing electronic 
delivery guidance would continue to be able to satisfy the transmission 
requirements by those transmission methods.
---------------------------------------------------------------------------

    \702\ See supra Part II.D.
---------------------------------------------------------------------------

    The current set of requirements under which funds transmit 
shareholder reports to investors is the baseline from which we will 
discuss the economic effects of proposed rule 30e-3. The baseline also 
includes the current practice of many funds to make some or all of 
these reports--or other materials listing portfolio investment 
information such as reports on Form N-Q--accessible on their own Web 
sites. The baseline also reflects that some funds transmit these 
materials electronically today, pursuant to Commission guidance that 
permits such a transmission method on a shareholder-by-shareholder 
``opt in'' basis, provided that certain other conditions are met.\703\

[[Page 33665]]

The parties that could be affected by new rule 30e-3 are funds that 
currently are or would be required to transmit shareholder reports 
under rule 30e-1 or 30e-2, and other current and future users of fund 
portfolio investment information, including investors and third-party 
information providers.
---------------------------------------------------------------------------

    \703\ See supra note 289 and accompanying text.
---------------------------------------------------------------------------

    Today, most funds are required to disclose their portfolio holdings 
on a quarterly basis, with holdings as of the end of the second and 
fourth fiscal quarters disclosed in the fund's semiannual and annual 
reports, respectively, and holdings as of the end of the first and 
third fiscal quarters disclosed in reports on Form N-Q. Funds are 
generally required to transmit reports to shareholders on a semiannual 
basis, and these reports have historically been paper copies mailed to 
shareholders.\704\ As of December 31, 2014, about 11,957 funds could 
rely on proposed rule 30e-3 if it were in effect.\705\ As discussed in 
detail below, we estimate that these funds--and their shareholders--
bear aggregate annual paperwork expenses of about $616 million in 
connection with the required preparation and transmission of 
shareholder reports (or about $51,539 for each portfolio).\706\ Of 
those estimated expenses, we estimate that about $116 million are 
associated with the printing and mailing of shareholder reports.\707\ 
Reports on Form N-Q are available on EDGAR.\708\ Some funds choose to 
make some or all of these reports--or other materials listing portfolio 
holdings at particular times--accessible on their own Web sites, but 
funds do not do so uniformly.
---------------------------------------------------------------------------

    \704\ See supra note 288 and accompanying text.
    \705\ See infra note 799 and accompanying text.
    \706\ As discussed below, we previously estimated 994,960 
aggregate annual internal burden hours associated with rules 30e-1 
and 30e-2. See infra notes 853 and 855 (estimating 903,000 hours for 
rule 30e-1 and 91,960 hours for rule 30e-2). The Commission 
estimates the wage rate associated with these burden hours based on 
salary information for the securities industry compiled by the 
Securities Industry and Financial Markets Association. The estimated 
wage figure is based on published rates for attorneys and 
intermediate accountants, modified to account for an 1,800-hour 
work-year and multiplied by 5.35 to account for bonuses, firm size, 
employee benefits, and overhead, yielding an effective hourly rate 
of $268.50. This estimate is based upon the following calculation: 
($380 per hour for Attorneys x 0.5) + ($157 per hour for 
Intermediate Accountants x 0.5) = $268.50. See Securities Industry 
and Financial Markets Association, Report on Management & 
Professional Earnings in the Securities Industry 2013. Based on the 
Commission's estimate of 994,960 burden hours per year and the 
estimated wage rate of about $268.50 per hour, the total annual 
paperwork expenses for funds associated with the internal hour 
burden of rules 30e-1 and 30e-2 are approximately $267,146,760. This 
estimate is based upon the following calculation: 994,960 hours x 
$268.50 per hour = $267,146,760. We have also estimated aggregate 
annual external cost burden of $349,105,750 associated with rules 
30e-1 and 30e-2. See infra notes 854 and 856 (estimating 
$333,905,750 for rule 30e-1 and $15,200,000 for rule 30e-2). 
Therefore, we estimate that the total estimated aggregate annual 
paperwork expenses associated with rules 30e-1 and 30e-2 are 
$616,252,510. This estimate is based upon the following calculation: 
$267,146,760 expenses associated with internal burden hours + 
$349,105,750 external cost burden = $616,252,510. Using this 
estimate and our prior estimate of 11,957 funds, we estimate that 
annual paperwork expenses associated with rules 30e-1 and 30e-2 are 
about $51,539 on a per-portfolio basis. This estimate is based upon 
the following calculation: $616,252,510 aggregate annual paperwork 
expenses / 11,957 funds = $51,539.
    \707\ We estimate that one-third of the external costs 
attributed to rules 30e-1 and 30e-2 relate to printing and mailing 
expenses. See infra notes 857-858. Therefore, we estimate aggregate 
annual printing and mailings costs associated with those rules of 
about $116,368,583. This estimate is based upon the following 
calculation: $349,105,750 aggregate external cost burden / 3 = 
$116,368,583.33.
    \708\ See supra notes 637-642 and accompanying text.
---------------------------------------------------------------------------

    As technology has developed, so has the need to modernize the 
manner in which shareholder reports and portfolio investment 
information are delivered to investors. As discussed above, recent 
investor testing and Internet usage trends have highlighted that 
investor preferences about electronic delivery of information have 
evolved, and that many investors would prefer enhanced availability of 
fund information on the Internet.\709\ In addition, investor testing 
has suggested that fund investors are much more likely to seek out fund 
information on the fund's own Web site than they are to seek it out on 
EDGAR.\710\ Moreover, searching for and retrieving individual reports 
on Form N-Q on EDGAR may, in many cases, be more difficult than 
navigating a Web site with which the investor is likely to be already 
familiar. We therefore believe that many investors may not view the 
information that is available in reports on Form N-Q. Shareholders also 
pay, pro rata, the expenses associated with printing and mailing 
reports by default to shareholders, who may nonetheless prefer 
electronic transmission.
---------------------------------------------------------------------------

    \709\ See supra note 292 and accompanying text.
    \710\ See supra note 292 and accompanying text.
---------------------------------------------------------------------------

    The economic effects of proposed rule 30e-3 are dependent on a 
number of factors, including the number of funds that would rely on the 
rule, the number of funds which currently rely on Commission guidance 
to transmit shareholder reports electronically, and the extent to which 
shareholders become more aware of the availability of portfolio 
investment information, view the information, and use the information 
to make investment decisions. Due to the optionality of the rule, we 
would expect that, in general, each fund would only rely on the rule if 
the benefits to that fund exceeded the costs. We have provided 
estimates of the costs associated with printing and mailing shareholder 
reports. However, information that would allow the Commission to 
quantify the other economic effects of the rule, such as how the 
availability of shareholder reports online will affect investors' use 
of the information, is not known to us.
    Funds can transmit shareholder reports electronically today 
pursuant to Commission guidance. However, funds wishing to rely on this 
Commission guidance must satisfy certain conditions, including that 
shareholders agree to electronic transmission on a shareholder-by-
shareholder ``opt in'' basis. We recognize that express shareholder 
consent can be difficult to obtain even for practices that many 
shareholders may prefer.\711\ The number of funds that transmit 
shareholder reports electronically today is unclear to us, because 
funds are not required to report their reliance on the Commission's 
electronic delivery guidance or the number of investors that have given 
opt-in consent to receive electronic delivery. Commission staff is also 
not aware of information that describes the prevalence of electronic 
delivery of disclosure documents and other information. In addition, 
although survey evidence describes certain investor preferences 
regarding electronic delivery of shareholder report information,\712\ 
we are not aware of information that would describe the effect of this 
rule on investor ability to choose between funds and allocate capital 
across all investments. For these reasons, much of the discussion below 
is qualitative in nature.
---------------------------------------------------------------------------

    \711\ See Investment Company Act Release No. 22884 (Nov. 13, 
1997) [62 FR 61933, 61935 (Nov. 20, 1997)] (concerning implied 
consent to delivery of disclosure documents to households).
    \712\ See supra note 292 and accompanying text.
---------------------------------------------------------------------------

b. Benefits
    The proposed rule, to the extent that it is relied upon by funds 
and alters the current transmission of reports, would increase the 
accessibility of portfolio investment information including information 
from the first and third fiscal quarters that might otherwise be only 
available on EDGAR. The proposed rule would thereby increase the 
awareness of fund shareholders of the availability of portfolio 
investment information, and therefore also increase the likelihood that 
fund investors review portfolio investment information. The proposed 
rule would also increase the likelihood that fund shareholders view the 
portfolio

[[Page 33666]]

investment information in their preferred format, and thereby increase 
their use of the information to make investment decisions.\713\ Similar 
to the introduction of Form N-PORT and the amendments to Regulation S-
X, greater investor use of shareholder reports could result in more 
informed investment decisions, particularly for individual investors, 
and an increase in competition among funds for investor capital. A 
greater understanding of the investment strategy of the fund, its 
portfolio composition, and its investment risks could also result in a 
more efficient allocation of capital across funds and other 
investments, and could thereby promote capital formation.
---------------------------------------------------------------------------

    \713\ See supra notes 291-296 and accompanying text (concerning 
investor Internet usage statistics and transmission method 
preferences).
---------------------------------------------------------------------------

    Funds and their shareholders would also benefit from a reduction in 
expenses related to the physical distribution of shareholder reports. 
Although the proposed rule would not have much of an effect, if any, on 
the expenses associated with the preparation of reports, we expect that 
the expenses associated with printing and mailing of shareholder 
reports would be substantially reduced if the rule is adopted. As 
discussed in detail below, of the estimated $116 million in annual 
paperwork expenses associated with the printing and mailing of 
shareholder reports,\714\ we estimate that about $105 million would be 
eliminated if the proposed rule were adopted.\715\ The actual reduction 
in paperwork expenses would depend, in part, upon reliance on the 
proposed rule by funds and the extent of shareholder consent to 
electronic transmission of reports, each of which is uncertain.
---------------------------------------------------------------------------

    \714\ See supra notes 706-707 and accompanying text.
    \715\ We estimate that about 90% of the $116,368,583 in 
paperwork expenses associated with printing and mailing shareholder 
reports pursuant to rules 30e-1 and 30e-2 would be eliminated if 
rule 30e-3 were adopted. See supra note 707; infra notes 857-858. 
Therefore, we estimate that about $104,731,725 of annual paperwork 
expenses associated with rules 30e-1 and 30e-2 would be eliminated 
if rule 30e-3 were adopted. This estimate is based upon the 
following calculation: $116,368,583 in aggregate annual printing and 
mailing expenses x 0.90 proportion eliminated = $104,731,724.70 
eliminated annual printing and mailing expenses.
---------------------------------------------------------------------------

    The expected benefits would not necessarily be distributed 
uniformly across funds and across a fund's shareholders. Some funds 
already transmit materials electronically to some or all of their 
shareholders, and these funds would experience fewer benefits from 
electing to rely on the proposed rule. Some funds, such as funds that 
do not currently maintain Web sites, may choose not to rely on the 
proposed rule.
c. Costs
    Although we believe that permitting electronic delivery ``by 
default'' would improve overall alignment of transmission method with 
investor preferences,\716\ there may be some investors who would prefer 
to receive print copies that do not notify their fund of that 
preference and may be others that would benefit from print copies even 
though they prefer electronic transmission. These investors, depending 
on their ability and preference to access shareholder reports and 
portfolio investment information electronically, could overlook 
electronic deliveries or otherwise experience a reduction in their 
ability to access portfolio investment information, and could result in 
a decrease in their ability to efficiently allocate capital across 
funds and other investments. We have endeavored, through the consent 
and notice provisions of the proposed rule, to mitigate the potential 
costs associated with this possibility by requiring a fund wishing to 
rely on the proposed rule to alert an investor before beginning to 
transmit reports electronically and to notify the investor around the 
time each report is made accessible on the Web site. Although, as 
discussed above, an increase in investor use of shareholder reports 
could increase competition among funds for investor capital, funds that 
do not rely on the rule could be placed at a competitive disadvantage 
depending on whether investors choose funds based on their preference 
for Web site transmission.
---------------------------------------------------------------------------

    \716\ See supra note 292. We believe that the change from 
requiring shareholders to ``opt-in'' if they wish to receive 
electronic instead of print copies of shareholder reports, to--as 
under the proposed rule--``opt-out'' if they wish to receive print 
copies instead of electronic copies would increase the ability of 
funds to transmit shareholder reports electronically. Although the 
preferences of shareholders would not change dependent on the form 
of consent, behavioral economic theory and empirical evidence 
suggest the likelihood that shareholders receive electronic 
transmissions of fund reports would be greater under opt-out consent 
rather than opt-in consent. See, e.g., Richard H. Thaler and Shlomo 
Bernatzi, Save More TomorrowTM: Using Behavioral 
Economics to Increase Employee Saving, Journal of Political Economy, 
Vol. 112:1, S164-S187 (2004); Richard H. Thaler and Cass R. 
Sunstein, Libertarian Paternalism, The American Economic Review, 
Vol. 93:2, 175-179 (2003). Thaler and Sunstein argue that a ``status 
quo'' bias results in the continuance of existing arrangements even 
if better options are available. The authors illustrate their 
argument with higher rates of initial enrollments in employee 
savings plans when enrollment is automatic as compared to when 
employees must first complete an enrollment form.
---------------------------------------------------------------------------

    As discussed above, reliance on proposed rule 30e-3 would be 
optional, and funds that rely on the rule would incur costs to adhere 
to the rule. Relying funds would incur paperwork expenses associated 
with satisfying the conditions of the proposed rule, such as making the 
materials publicly accessible; preparing, reviewing, and transmitting a 
notice to shareholders; soliciting the consent of each shareholder by 
sending them an initial statement; and printing and mailing shareholder 
reports and other materials upon request. As discussed in detail below, 
we estimate that these paperwork expenses would be, in the aggregate, 
about $32 million each year.\717\ Relying funds would also incur

[[Page 33667]]

initial one-time costs associated with establishing systems and 
procedures for compliance. We estimate that these expenses would be, in 
the aggregate, about $16 million.\718\
---------------------------------------------------------------------------

    \717\ Below, we estimate that 10,761 funds would choose to rely 
on proposed rule 30e-3. See infra note 799 and accompanying text. 
Below, we estimate that funds that elect to rely on rule 30e-3 will, 
on average, incur 0.76 burden hours per fund per year to comply with 
the Web site accessibility conditions of rule 30e-3. See infra note 
808 and accompanying text. Therefore, in the aggregate, we estimate 
that such funds would incur about 8,178 burden hours to comply with 
these requirements. This estimate is based upon the following 
calculation: 0.76 burden hours per fund x 10,761 funds expected to 
rely on rule 30e-3 = 8,178.36 hours. The Commission estimates the 
wage rate associated with these burden hours based on salary 
information for the securities industry compiled by the Securities 
Industry and Financial Markets Association. The estimated wage 
figure is based on published rates for senior programmers, modified 
to account for an 1,800-hour work-year and multiplied by 5.35 to 
account for bonuses, firm size, employee benefits, and overhead, 
yielding an effective hourly rate of $303. See Securities Industry 
and Financial Markets Association, Report on Management & 
Professional Earnings in the Securities Industry 2013. Based on the 
Commission's estimate of 8,178 burden hours per year and the 
estimated wage rate of about $303 per hour, the total annual 
paperwork expenses for funds associated with the internal hour 
burden imposed by the Web site accessibility conditions of rule 30e-
3 are approximately $2,477,934. This estimate is based upon the 
following calculation: 8,178 hours x $303 per hour = $2,477,934.
     Below, we also estimate that funds that elect to rely on 
proposed rule 30e-3 would incur average annual external costs of 
$500 per fund in connection with the requirement to provide a 
complete shareholder report upon request of a shareholder. See infra 
note 816 and accompanying text. We estimate that aggregate external 
costs to funds in connection with this requirement would therefore 
be about $5,380,500. This estimate is based upon the following 
calculation: $500 per fund x 10,761 funds = $5,380,500.
     Below, we also estimate that funds that elect to rely on 
proposed rule 30e-3 would incur about 0.38 annual burden hours in 
connection with the initial statement conditions of the rule. See 
infra note 829 and accompanying text. Therefore, in the aggregate, 
we estimate that such funds would incur about 4,089 burden hours to 
comply with these requirements. This estimate is based upon the 
following calculation: 0.38 burden hours per fund x 10,761 funds 
expected to rely on rule 30e-3 = 4,089.18 hours. The Commission 
estimates the wage rate associated with these burden hours based on 
salary information for the securities industry compiled by the 
Securities Industry and Financial Markets Association. The estimated 
wage figure is based on published rates for compliance attorneys, 
modified to account for an 1,800-hour work-year and multiplied by 
5.35 to account for bonuses, firm size, employee benefits, and 
overhead, yielding an effective hourly rate of $334. See Securities 
Industry and Financial Markets Association, Report on Management & 
Professional Earnings in the Securities Industry 2013. Based on the 
Commission's estimate of 4,089 burden hours per year and the 
estimated wage rate of about $334 per hour, the total annual 
paperwork expenses for funds associated with the internal hour 
burden imposed by the initial statement conditions of rule 30e-3 are 
approximately $1,365,726. This estimate is based upon the following 
calculation: 4,089 hours x $334 per hour = $1,365,726. Below, we 
also estimate that these funds will incur annual cost burden of 
about $216 per fund to comply with the initial statement conditions. 
This estimate is based upon the following calculation: $49 per fund 
per year for services of outside counsel + $333 per year per fund to 
print and mail initial statements = $382 per fund per year. See 
infra notes 837 and 844. Such funds would therefore incur about 
$4,110,702 in aggregate annual cost burden to comply with the 
initial statement conditions. This estimate is based upon the 
following calculation: $382 per fund per year x 10,761 funds = 
$4,110,702 per year. Thus the total estimated annual paperwork 
expenses associated with the initial statement conditions are 
$5,476,428. This estimate is based upon the following calculation: 
$1,365,726 associated with internal burden + $4,110,702 external 
cost burden = $5,476,428.
    Below, we also estimate that funds that elect to rely on 
proposed rule 30e-3 would incur about 1.5 annual burden hours in 
connection with the notice conditions of the rule. See infra note 
832 and accompanying text. Therefore, in the aggregate, we estimate 
that such funds would incur about 16,142 burden hours to comply with 
these requirements. This estimate is based upon the following 
calculation: 1.5 burden hours per fund x 10,761 funds expected to 
rely on rule 30e-3 = 16,141.5 hours. Based on the Commission's 
estimate of 16,142 burden hours per year and the estimated wage rate 
of about $334 per hour, the total annual paperwork related expenses 
for funds associated with the internal hour burden imposed by the 
Web site accessibility conditions of rule 30e-3 are approximately 
$5,391,428. This estimate is based upon the following calculation: 
16,142 hours x $334 per hour = $5,391,428. Below, we also estimate 
that these funds will incur annual cost burden of about $1,190 per 
fund to comply with the notice conditions. This estimate is based 
upon the following calculation: $190 per fund per year for services 
of outside counsel + $1,000 per fund per year to print and mail 
notices = $1,190 per fund per year. See infra notes 840 and 845 and 
accompanying text. Such funds would therefore incur about 
$12,805,590 in aggregate annual cost burden to comply with the 
notice conditions. This estimate is based upon the following 
calculation: $1,190 per fund per year x 10,761 funds = $12,805,590 
per year. Thus the total estimated annual paperwork expenses 
associated with the notice conditions are $12,816,518. This estimate 
is based upon the following calculation: $5,391,428 associated with 
internal burden + $12,805,590 external cost burden = $18,197,018.
     Thus, we estimate that the total annual paperwork expenses 
associated with satisfying the conditions of proposed rule 30e-3 
would be $31,531,880. This estimate is based upon the following 
calculation: $2,477,934 associated with Web site accessibility 
conditions + $5,380,500 associated with provision of print report 
upon request condition + $5,476,428 associated with initial 
statement condition + $18,197,018 associated with notice condition = 
$31,531,880.
    \718\ Below, we estimate that funds that elect to rely on rule 
30e-3 will, on average, incur an additional 0.08 one-time burden 
hours per fund in the first year to comply with Web site 
accessibility conditions. See infra notes 807-808 and accompanying 
text. Therefore, in the aggregate, we estimate that such funds would 
incur about 861 one-time burden hours to comply with these 
requirements. This estimate is based upon the following calculation: 
0.08 hours per fund x 10,761 funds = 860.88 hours. Based on the 
Commission's estimate of 861 one-time burden hours and the estimated 
wage rate of about $303 per hour for senior programmers, the total 
annual paperwork expenses for funds associated with the internal 
hour burden imposed by the Web site accessibility conditions of rule 
30e-3 are approximately $260,883. This estimate is based upon the 
following calculation: 861 hours x $303 per hour = $260,883. Below, 
we also estimate that about 113 funds that wish to rely on proposed 
rule 30e-3 but that do not currently have a Web site will incur one-
time cost burden of $2,000 per fund to comply with the Web site 
accessibility conditions. See infra notes 804 and 811 and 
accompanying text. Such funds would therefore incur about $226,000 
in aggregate one-time cost burden to comply with the Web site 
accessibility conditions. $2,000 per fund x 113 funds = $226,000. 
Thus the total estimated one-time paperwork expenses associated with 
the Web site accessibility conditions are $486,883. This estimate is 
based upon the following calculation: $260,883 associated with 
internal burden + $226,000 external cost burden = $486,883.
    Below, we also estimate that funds that elect to rely on rule 
30e-3 will, on average, incur an additional 0.92 one-time burden 
hours per fund in the first year to comply with the initial 
statement conditions. See infra notes 828-829 and accompanying text. 
Therefore, in the aggregate, we estimate that such funds would incur 
about 9,900 one-time burden hours to comply with these requirements. 
This estimate is based upon the following calculation: 0.92 hours 
per fund x 10,761 funds = 9,900.12 hours. Based on the Commission's 
estimate of 9,900 one-time burden hours and the estimated wage rate 
of about $334 per hour, the total annual administrative expenses for 
funds associated with the internal hour burden imposed by the 
initial statement conditions of proposed rule 30e-3 are 
approximately $3,306,600. This estimate is based upon the following 
calculation: 9,900 hours x $334 per hour = $3,306,600. Below, we 
also estimate that these funds will incur one-time cost burden of 
$762 per fund to comply with the initial statement conditions. This 
estimate is based upon the following calculation: $95 per fund for 
the services of outside counsel + $667 per fund to print and mail 
initial statements = $762 per fund. See notes 836-843 and 
accompanying text. Such funds would therefore incur about $8,199,882 
in aggregate one-time cost burden to comply with the initial 
statement conditions. This estimate is based upon the following 
calculation: $762 per fund x 10,761 funds = $8,199,882. Thus the 
total estimated one-time paperwork expenses associated with the 
initial statement conditions are $11,506,482. $3,306,600 associated 
with internal burden + $8,199,882 external cost burden = 
$11,506,482.
    Below, we also estimate that funds that elect to rely on rule 
30e-3 will, on average, incur an additional 0.8 one-time burden 
hours per fund in the first year to comply with the notice 
conditions. See infra notes 831-832 and accompanying text. 
Therefore, in the aggregate, we estimate that such funds would incur 
about 8,609 one-time burden hours to comply with these requirements. 
This estimate is based upon the following calculation: 0.8 hours per 
fund x 10,761 funds = 8,608.8 hours. Based on the Commission's 
estimate of 8,609 one-time burden hours and the estimated wage rate 
of about $334 per hour, the total annual paperwork expenses for 
funds associated with the internal hour burden imposed by the notice 
conditions of proposed rule 30e-3 are approximately $2,875,406. This 
estimate is based upon the following calculation: 8,609 hours x $334 
per hour = $2,875,406. Below, we also estimate that these funds will 
incur one-time cost burden of $95 per fund to comply with the notice 
conditions. See infra notes 839-840 and accompanying text. Such 
funds would therefore incur about $1,022,295 in aggregate one-time 
cost burden to comply with the initial statement conditions. This 
estimate is based upon the following calculation: $95 per fund x 
10,761 funds = $1,022,295. Thus the total estimated one-time 
paperwork expenses associated with the notice conditions are 
$3,897,701. This estimate is based upon the following calculation: 
$2,875,406 associated with internal burden + $1,022,295 external 
cost burden = $3,897,701.
    Thus, we estimate that the total one-time paperwork expenses 
associated with satisfying the conditions of proposed rule 30e-3 
would be $15,891,066. This estimate is based upon the following 
calculation: $486,883 associated with Web site accessibility 
conditions + $11,506,482 associated with initial statement condition 
+ $3,897,701 associated with notice condition = $15,891,066.
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    We have endeavored to mitigate the costs associated with compliance 
with the rule's conditions by, for example, requiring that the required 
schedule of portfolio investment information as of the end of the first 
and third fiscal quarters be presented consistent with the reporting 
requirements of Regulation S-X. Most funds would have established 
procedures in place to prepare and review such disclosures and would be 
familiar with the disclosure requirements. Because reliance on the 
proposed rule would be optional, a particular fund would not be 
expected to rely on the proposed rule if the costs of the rule to that 
fund would exceed its benefits. Funds that do not rely on the proposed 
rule would therefore not incur compliance costs.

E. Form N-CEN and Rescission of Form N-SAR

a. Introduction and Economic Baseline
    Form N-CEN, as proposed, would require funds to report census 
information to the Commission on an annual basis. Although Form N-CEN 
would include many of the same data elements as the current census-type 
reporting form, Form N-SAR, it would replace items that are outdated or 
no longer informative with items of greater importance. Form N-CEN 
would also eliminate certain items that are reported to the Commission 
in other forms. Reports would also be filed in a structured, XML format 
to allow for easier aggregation and manipulation of the data. Form N-
SAR would be rescinded.
    The current set of requirements--management companies must file 
reports on Form N-SAR semi-

[[Page 33668]]

annually,\719\ and UITs file such reports annually \720\--is the 
baseline from which we discuss the economic effects of Form N-CEN. The 
parties that could be affected by the rescission of Form N-SAR and the 
introduction of Form N-CEN include funds that currently file reports on 
Form N-SAR and funds that would file reports on Form N-CEN; the 
Commission; and, other current and future users of fund census 
information including investors, third-party information providers, and 
other interested potential users.
---------------------------------------------------------------------------

    \719\ See rule 30b1-1.
    \720\ See rule 30a-1.
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    At the time it was adopted, Form N-SAR was intended to reduce 
reporting burdens and better align the information reported with the 
characteristics of the fund industry. As the fund industry has 
developed, including the development of new products, so has the need 
to update the information the Commission requires in order to improve 
its ability to monitor the compliance and risks of reporting funds. The 
format in which information is reported in Form N-SAR is also outdated, 
which reduces the ability of Commission staff to obtain and aggregate 
the information. The technology in which Form N-CEN would be filed 
allows for both the sender and recipient to validate the information 
against identical definitions, thereby increasing the accuracy of the 
information and therefore the ability of Commission staff to compare 
the information across funds.
    The economic effects from the introduction of new Form N-CEN and 
the rescission of Form N-SAR would largely result from an update to the 
format of the information reported, as well as the update to the census 
information that investment companies would report. The economic 
effects would therefore depend on the extent to which investment 
companies become more transparent, and the ability of Commission staff 
and investors to utilize the updated disclosures. Form N-CEN would 
require census information about the fund industry reported in a 
structured format. However, while Form N-SAR is also reported in a 
structured format, Form N-CEN would modernize the information funds 
report and the required format of the filings. Therefore, although the 
introduction of Form N-CEN would increase the transparency of the fund 
industry, we do not know the extent to which the transparency would 
increase or the significance of its economic implications.
b. Benefits
    As discussed above, the Commission is proposing to rescind Form N-
SAR and replace it with new Form N-CEN in order to improve the quality 
and utility of the information reported to the Commission. The 
improvement in the quality and utility of the information would allow 
Commission staff to better understand industry trends, inform policy, 
and assist with the Commission's examination program.
    Similar to Form N-PORT, the ability of the Commission to most 
effectively use the information is dependent on the ability of staff to 
compile and aggregate the information into a single database. The 
structuring of the information in an XML format would improve the 
ability and efficiency of Commission staff to obtain and analyze the 
information. An improved structured format could also promote 
additional efficiency to the extent that the new reporting requirements 
encourage modernization of internal systems and standardization for the 
disclosure and transmission of information. An XML format would also 
improve its accuracy by providing sophisticated constraints as to how 
information could be provided and by allowing for built-in validation.
    Form N-CEN would also modernize the census information that funds 
provide and increase its utility to Commission staff, investors, and 
other interested parties by reflecting the changes to the fund 
industry. The Commission would use the information in Form N-CEN to 
improve its understanding of fund industry trends and practices, and 
assist with the Commission's examination program. Commission staff has 
identified specific information that could improve its ability to 
effectively oversee funds including identifying information, when 
applicable, about the fund's service providers, information describing 
financial support by an affiliated entity, classification of fund type, 
and information describing investments in CFCs.
    Along with the additional information, Form N-CEN would add new 
requirements for information specifically relating to the ETF primary 
markets, including more detailed information on authorized participants 
and creation unit requirements.\721\ We believe that our proposed 
additional information on ETFs allows the Commission to better 
understand and assess the ETF market and also inform the public about 
certain characteristics of the ETF primary markets. Additionally, Form 
N-CEN, like Form N-SAR, has particular sections for closed-end funds, 
SIBCs, and UITs in order to obtain information about the particular 
characteristics of these entities to assist us in monitoring the 
activities of these funds and our examiners in their preparation for 
exams of these funds.
---------------------------------------------------------------------------

    \721\ See discussion supra Part II.E.4.e.
---------------------------------------------------------------------------

    Form N-CEN would also add new requirements for information relating 
to a management company's securities lending activities, including 
information concerning the management company's securities lending 
agents and cash collateral managers.\722\ Together with the 
requirements on securities lending activities in proposed Form N-PORT, 
this information would benefit the Commission's oversight abilities 
and, potentially, future policymaking concerning securities lending. 
Moreover, we believe that this information could inform investors and 
other interested parties about the use of and potential risks 
associated with a management company's securities lending activities.
---------------------------------------------------------------------------

    \722\ See Item 30 of proposed Form N-CEN.; see also discussion 
supra Part II.E.4.c.iii.
---------------------------------------------------------------------------

    We expect funds to also benefit from replacing Form N-SAR with Form 
N-CEN through reduced expenses. First, we estimate that N-CEN has a 
lower cost per filing than Form N-SAR, as a result of filing in an XML 
format, as opposed to the outdated format of Form N-SAR, and the 
elimination of certain information items on Form N-SAR that funds would 
not be required to report on Form N-CEN. Second, funds that are 
management investment companies would experience reduced paperwork 
related costs from decreasing the reporting frequency of census 
information from semi-annual to annual. We estimate that filers would 
have an aggregate annual paperwork related expenses of $12,395,064 for 
reports on Form N-CEN.\723\ By contrast, we estimate that the ongoing 
paperwork related expenses of filing Form N-SAR is $25,299,092 
annually.\724\

[[Page 33669]]

Accordingly, we estimate the annual paperwork related cost savings to 
funds associated with the adoption of Form N-CEN, compared to Form N-
SAR, would be $12,904,028. We recognize that these ongoing annual cost 
savings would be offset by a one-time cost in the first year to file 
reports on N-CEN, estimated at $20,040,020.\725\
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    \723\ This estimate is based on annual ongoing burden hour 
estimate of 32,294 burden hours for management companies (2,419 
management companies x 13.35 hours per filing) plus 6,623 burden 
hours for UITs (727 UITs x 9.11 burden hours per filing), for a 
total estimate of 38,917 burden ongoing hours. This was then 
multiplied by a blended hourly wage of $318.50 per hour, $303 per 
hour for Senior Programmers and $334 per hour for compliance 
attorneys, as we believe these employees would commonly be 
responsible for completing reports on proposed Form N-CEN ($318.50 x 
38,917 = $12,395,064.50). See infra Part V.B.1.
    \724\ This estimate is based on an assumption of annual ongoing 
burden hour estimate to file Form N-SAR of 74,263 burden hours for 
management investment companies (2,419 management companies x 15.35 
hours per filing x 2 filings per year) and 5,169 burden hours for 
UITs (727 UITs x 7.11 burden hours per filing) for a total estimate 
of 79,432 ongoing burden hours. This was then multiplied by a 
blended hourly wage of $318.50 per hour ($318.50 x 79,432 = 
25,299,092). See infra Part V.B.2.
    \725\ This estimate is based on an estimate of 20 initial burden 
hours per filer, multiplied by a blended hourly wage of $318.50 (20 
hours x 3,146 filers x $318.50 = $20,040,020).
---------------------------------------------------------------------------

    The rescission of Form N-SAR and the introduction of Form N-CEN, to 
the extent relevant, could provide similar benefits to investors, to 
third-party information providers, and to other potential users from an 
update to the census information that investment companies report and 
from an update to its structured format. Similar to Form N-PORT, we 
expect that institutional investors and other market participants could 
use the information from Form N-CEN more so than individual investors, 
and that the format of the data may make the information difficult for 
individual investors to understand. However, individual investors may 
indirectly benefit from the increase in information to the extent that 
it becomes available through third-party information providers. For the 
investors and other potential users that would obtain and use the 
information reported in Form N-CEN, the update to the structure of the 
information would improve their ability to efficiently aggregate the 
information collected on Form N-CEN across all investment companies.
    The changes to the reporting of census information, including the 
reporting of the information in a modern structured format, could 
improve the ability of investors to differentiate investment companies 
and could therefore lead to an increase in competition among funds for 
investor capital. These changes would not significantly relate to the 
ability of investors to understand the investment risks of investment 
companies, and therefore would not significantly improve the ability of 
investors to efficiently allocate capital. Consequently, the reporting 
changes would not significantly promote capital formation.
c. Costs
    As discussed above, we expect the adoption of N-CEN and rescission 
of Form N-SAR would result in reduced costs to funds in the form of 
lower expenses related to filing Form N-CEN relative to Form N-SAR. 
ETFs and closed-end funds, however, may have higher expenses in filing 
reports on Form N-CEN relative to other investment companies, as they 
will generally be required to provide more information. There could, 
however, be costs as a result of the change in the disclosure of census 
information. For example, the Commission would receive census 
information on an annual instead of semi-annual basis, and therefore 
the information would be more dated than if the information was 
reported to the Commission on a semi-annual basis.\726\ As discussed 
above, we believe that the costs related to reducing the frequency of 
the information received on Form N-SAR is not significant as this 
information is unlikely to change frequently. Also, some of the 
information from Form N-SAR would not be included in Form N-CEN.\727\ 
However, we have attempted to mitigate the potential cost relating to 
the loss of information by eliminating only that information which is 
either available elsewhere, not frequently used by Commission staff, or 
provides little benefit.
---------------------------------------------------------------------------

    \726\ However, as discussed supra note 378, this cost is 
mitigated, in part, by the fact that certain items that the 
Commission staff has deemed necessary on a more frequent basis would 
be included instead in reports on proposed Form N-PORT. In addition, 
the static nature of the information that would be reported on Form 
N-CEN increases the likelihood that the information remains current.
    \727\ See discussion supra Part II.E.5.
---------------------------------------------------------------------------

    Form N-CEN could impose costs on investors and other potential 
users of the information to obtain the information from a new or 
additional source, including the information that would not be included 
on Form N-CEN but would be available through other filings. The 
information that would not be included on Form N-CEN and that would not 
be available elsewhere would impose costs on investors and other 
potential users from a loss of information to the extent that the 
information is found to be useful.\728\ >
---------------------------------------------------------------------------

    \728\ Some of the information that would no longer be requested, 
such as loads paid to captive or unaffiliated brokers, has been 
found by interested third-parties, including researchers, to be 
important in their analysis of the fund industry. See, e.g., Susan 
E.K. Christoffersen, Richard Evans, and David K. Musto, What do 
Consumers' Fund Flows Maximize? Evidence from Their Brokers' 
Incentives, The Journal of Finance, Vol. 68(1), 201-235 (2013). We 
are proposing to eliminate certain items from Form N-SAR that are 
either infrequently used by the Commission, provide minimal 
benefits, or costly for funds to provide. We request comment on the 
items required by Form N-SAR that would be eliminated by Form N-CEN. 
See discussion supra Part II.E.5.
---------------------------------------------------------------------------

F. Alternatives to the Reporting Requirements

    The Commission has explored ways to modernize and improve the 
utility and the quality of the information that funds provide to the 
Commission and to investors. Commission staff examined how information 
reported to the Commission could be improved to assist the Commission 
in its rulemaking, inspection, examination, policymaking, and risk-
monitoring functions, and how technology could be used to facilitate 
those ends. Commission staff also examined enhancements that would 
benefit investors and other potential users of this information, 
including updating the reporting obligations of funds to keep pace with 
the changes in the fund industry.
    In formulating our proposal, we have considered many alternatives 
to the individual elements contained in our proposal, and those 
alternatives are outlined above in the sections discussing each of the 
five parts of our proposal, and we have requested comment on these 
alternatives.\729\ The following discussion addresses significant 
alternatives to our proposal, which involve broader issues than the 
more granular alternatives to the individual elements contained in each 
part of our proposal, as discussed above.
---------------------------------------------------------------------------

    \729\ See generally supra Parts II and II.G.5.
---------------------------------------------------------------------------

    We considered the frequency at which Commission staff believed it 
to be important to receive information from investment companies. A 
possible alternative to the monthly reporting of portfolio investment 
information in Form N-PORT is a quarterly reporting of the information, 
with the quarterly reports containing information for each month in the 
quarter. The quarterly reporting of portfolio investment information 
could decrease the ongoing burden of the proposal on investment 
companies. We do not believe, however, that the quarterly reporting of 
portfolio investment information would be as useful for Commission 
staff to oversee investment companies on an ongoing basis given the 
increase in alternative strategies and the use of derivatives, as this 
information, even if broken out into monthly data, would result in the 
Commission receiving the information with a longer time lag. For 
example, a longer time lag for the Commission to receive portfolio 
investment information could reduce its effectiveness to analyze the 
effect of a market or other event on the fund industry.
    Likewise, a possible alternative to the annual reporting of census 
information in Form N-CEN is a semiannual

[[Page 33670]]

reporting of the information similar to Form N-SAR. However, as we 
discussed above, the census-type nature of the information that we 
would collect from funds in Form N-CEN should not change frequently. 
Requiring management companies to report census information semi-
annually would therefore place a burden on funds without a commensurate 
increase in the value of the information received by the Commission.
    We also considered alternatives to extend or shorten the filing 
period of Form N-PORT from thirty days and Form N-CEN from sixty days. 
While a shorter filing period would provide more timely information to 
the Commission, it would also place a burden on funds that need time to 
collect, verify, and report the required information to the Commission. 
Conversely, a longer filing period would give funds more time to report 
the information and would decrease the potential costs to front-running 
or copycatting by other investors, but would decrease the utility of 
the information for the Commission. We therefore believe that the 
thirty-day filing period for Form N-PORT and the sixty-day filing 
period for Form N-CEN would appropriately balance the staff's need for 
timely information against the appropriate amount of time for funds to 
collect, verify, and report information to the Commission.
    Other significant alternatives relate to the public dissemination 
of information reported on Form N-PORT. Alternatives to the proposal 
include making more of the portfolio and other information reported on 
the form either non-public or public, including making all or none of 
the information reported on Form N-PORT each month publicly available, 
and increasing or decreasing the lag from the date funds would file 
this information to when the information would be publicly released. 
Making more of the portfolio and other information reported on the form 
non-public or increasing the time-lag to release the information would 
reduce the amount of information investors have access to when making 
investment decisions. However, as discussed above, making more of the 
portfolio and other information reported on the form public or 
decreasing the time-lag could increase the risk of front-running, 
predatory trading, and copycatting/reverse engineering of trading 
strategies by other investors.\730\ We believe the current proposal 
strikes an appropriate balance of providing more usable information to 
investors and other third-parties while mitigating the risk of 
potential investor harm that could occur from more frequent disclosure 
of portfolio information.
---------------------------------------------------------------------------

    \730\ See Part IV.C.c.
---------------------------------------------------------------------------

    Other alternatives relate to the information that the Commission 
could require when determining the specific items to include and 
exclude on From N-PORT and Form N-CEN. The Commission considered what 
information it believes to be important for the Commission's oversight 
activities and to the public, and the costs to investment companies to 
provide the information. In particular, the Commission considered the 
benefits and costs of the information already disclosed in Form N-CSR, 
Form N-Q, and Form N-SAR, and that could be required on Form N-PORT and 
Form N-CEN. Commission staff believes that the benefits of the 
information currently disclosed by investment companies that would be 
reported on Form N-PORT and Form N-CEN, especially in a structured 
format, justify the costs to investment companies to report the 
information in these forms.
    The Commission also considered the information that would be 
required on Form N-PORT as compared to the information on Form N-CEN. 
Commission staff considered the benefits to having the information more 
frequently updated as well as the cost to funds to report the 
information. Although the costs to report information on a more 
frequent basis imposes additional costs on funds, Commission staff 
believes the information that would be reported more frequently on Form 
N-PORT, relative to the annual reporting on Form N-CEN, is necessary 
for the Commission's oversight activities and could be important to 
other interested third-parties.
    The Commission also considered the benefits and costs of the new 
information that would be required on Form N-PORT and Form N-CEN. The 
new information that would be required includes contractual terms for 
debt securities and derivatives, a description of reference 
instruments, if any, and information describing securities lending and 
repurchase and reverse repurchase agreements. A reasonable alternative 
would be to not require some of the new information, and another 
reasonable alternative would be to require information in addition to 
what is currently proposed.
    As discussed, the Commission would require information which 
provides staff an ability to identify investment risks and engage in 
further outreach as necessary, and not requiring the information would 
substantially reduce the ability of the Commission to oversee the fund 
industry. In addition, the information would be important to investors 
to differentiate investment companies. Although the new information 
that would be reported on Form N-PORT and Form N-CEN could increase the 
initial and ongoing reporting costs for investment companies, and 
increase the likelihood of front-running or copycatting by other 
investors, Commission staff believes that the information is important 
to fully describe a fund's investments.
    The Commission is also proposing to require risk-sensitivity 
measures at the portfolio and position level on Form N-PORT. These 
measures would aid Commission staff to efficiently understand the risk 
exposures of investment companies, especially those funds that invest 
in debt securities and derivatives. The portfolio risk-sensitivity 
measures, DV01 and SDV01, and the position level risk-sensitivity 
measure, delta, would improve the ability of Commission staff to 
efficiently approximate the risk exposures of reporting funds.
    A reasonable alternative is to require additional portfolio and 
position level risk-sensitivity measures that would provide Commission 
staff a more precise approximation of the risk exposures of reporting 
funds for larger changes in the value of the reference instrument. For 
example, Form N-PORT could require at the portfolio level measures that 
describe the sensitivity of a reporting fund to a 50 or 100 basis point 
change in interest rates and credit spreads, and a measure of 
convexity; and Form N-PORT at the position level could require 
gamma.\731\ These measures could improve the ability of Commission 
staff to monitor the fund industry when large changes in prices and 
rates occur. The Commission could also require other risk measures 
including vega. While potentially valuable, requiring these additional 
risk-sensitivity measures could increase the burden on funds, and the 
additional precision might not significantly improve the ability of 
Commission staff to monitor the fund industry in most market 
environments. Another reasonable alternative is to not require any 
risk-sensitivity measures, or limit the requirement to certain 
derivatives such as those traded over-the-counter. Although the burden 
to investment companies to provide the information would be less if 
fewer or no risk-

[[Page 33671]]

sensitivity measures were required by the Commission, staff believes 
that the benefits from requiring the measures, including the ability to 
efficiently identify and size specific investment risks, justify the 
costs to investment companies to provide the measures.
---------------------------------------------------------------------------

    \731\ Other risk-sensitivity measures that the Commission could 
request include portfolio-level duration measures at the position 
level, or additional position level risk sensitivity measures such 
as vega.
---------------------------------------------------------------------------

    The Commission is proposing a tiered compliance for filing reports 
on Form N-PORT--funds that together with other investment companies in 
the same group of related investment companies with assets over $1 
billion would have eighteen months to file reports, and smaller groups 
of related investment companies with assets less than $1 billion would 
have thirty months to file reports. An alternative would be to not 
allow for tiered compliance and require all investment companies to 
begin filing reports on Form N-PORT within eighteen months. We believe 
it is appropriate to tier the compliance period to improve the ability 
of smaller fund complexes to make the system and internal process 
changes necessary to prepare reports on Form N-PORT. Although the 
Commission, investors, and other interested parties would potentially 
not have access to structured portfolio investment information for the 
smaller fund complexes until thirty months after the effective date, 
information similar to the proposed requirements concerning disclosures 
of derivatives that would be required on reports on proposed Form N-
PORT would be available elsewhere, such in the fund's financial 
statements as a result of amendments to Regulation S-X. Although 
another alternative would be to tier the compliance period for our 
proposed amendments to Regulation S-X, we believe that it is less 
likely that smaller fund complexes would benefit from additional time 
to modify systems to adhere to the amendments to Regulation S-X because 
the proposed amendments are largely consistent with current disclosure 
practices and would therefore be unnecessary. Likewise, we could 
propose a tiered compliance period for reports on proposed Form N-CEN. 
However, as discussed above, we believe that it is less likely that 
smaller fund complexes would need additional time to comply with the 
requirements to file Form N-CEN because the requirements are similar to 
the current requirements to file Form N-SAR, and we expect that filers 
will prefer the updated, more efficient filing format of Form N-CEN. 
Commission staff also considered requiring funds to continue to report 
Form N-Q, and to amend Form N-SAR instead of replacing it with Form N-
CEN. Commission staff believes, however, that the new reporting 
requirements for portfolio investment information, including the 
amendments to the certification requirements of Form N-CSR, would cause 
Form N-Q to become redundant if not outdated, and therefore impose 
costs on funds to file reports that would result in little benefit. 
Although requiring that certifying officers state that they have 
disclosed in the report any change in the registrant's internal control 
over financial reporting that occurred during the most recent fiscal 
half-year would increase the burden of filing Form N-CSR, these 
certifications are necessary to ensure that the information reported 
continues to be accurate. The Commission also believes that the 
technology associated with Form N-SAR required the introduction of a 
new form in order to increase the benefits from the changes made to the 
reporting of census information. One effect of the amendments to 
Regulation S-X would be to provide investors with more transparency in 
a fund's investments. For example, as discussed above, we are proposing 
to require funds, under certain circumstances, to disclose the 
components of a custom index underlying swaps or option contracts. As 
an alternative, we could require funds to only disclose a brief 
description of the index or require a different threshold for 
identifying the components of the swap or options contract, such as a 
custom basket that represents a larger portion of the fund's assets 
under management. Although these alternatives would attenuate the 
information disclosed and reduce the potential costs to funds and index 
providers, these alternatives would result in less transparency for 
investors into the assets underlying a swap or options contract and any 
related risks associated with these investments.
    The accessibility of information about a fund's investments would 
also increase as a result of the new option for transmission of 
shareholder reports and other portfolio investment information. In 
general, the requirements of proposed rule 30e-3 are designed to allow 
funds to take advantage of the cost efficiencies from the advancements 
in technology and to more closely align the transmission format to 
investor preferences, while at the same time ensuring that shareholders 
would have an opportunity to view reports in their desired form and 
have an opportunity to view portfolio investment information in a 
central and more familiar location. One alternative would be to require 
different notice and consent procedures, and another alternative would 
be for funds to report different portfolio investment information on 
their Web sites. We believe that the requirements of rule 30e-3, as 
proposed, provide investors an ability to receive shareholder reports 
in their desired format and become aware of the availability of 
portfolio investment information, while at the same time providing 
funds an opportunity to take advantage of advancements in technology 
and reduce burdens.
    Lastly, the Commission is proposing that investment companies file 
Form N-PORT and Form N-CEN in an XML structured format. One alternative 
is to not structure the information. As discussed, the ability of 
Commission staff investors, third-party information providers, and 
other potential users to utilize the information is dependent on the 
efficiency in which the information investment companies provide can be 
compiled and aggregated. Commission staff believes that the affected 
parties to this proposal would experience substantially less benefit 
from the reporting of investment company information if the information 
is not structured. In addition, based on the Commission's understanding 
of current practices, it is likely that investment companies and third 
party service providers have systems in place to accommodate the use of 
XML. Therefore, requiring information in a format such as XML should 
impose minimal costs. The proposal would require funds to file certain 
attachments to their reports on Form N-PORT and Form N-CEN, and these 
attachments would not be required in a structured format. Commission 
staff believes that only marginal benefits would result from requiring 
funds to file these attachments in a structured, XML format due to the 
narrative format of the information provided.
    The technology used to structure the data could affect the benefits 
and costs associated with the proposed rules, and we have therefore 
considered alternative formats for structuring the data, such as XBRL. 
Sending a data file from a sender to a recipient requires many 
conditions to be satisfied, and one of crucial importance to regulatory 
data collection is the need for validation. XML provides for a built-in 
validation framework, and is supported in all modern programming 
languages. Other data formats can achieve validation but through custom 
software. The nature of the information we are collecting also lends 
itself to an XML format due to the non-complex requirements to 
structure the information, and does not necessitate

[[Page 33672]]

the need for a more robust framework such as XBRL.

G. Request for Comments

    Throughout this release, we have discussed the anticipated benefits 
and costs of the proposed rules and their potential impact on 
efficiency, competition, and capital formation. While the Commission 
does not have comprehensive information on all aspects of asset 
management industry reporting, the Commission is using the data 
currently available in considering the effects of the proposals. The 
Commission requests comment on all aspects of this initial economic 
analysis, including on whether the analysis has: (1) Identified all 
benefits and costs, including all effects on efficiency, competition, 
and capital formation; (2) given due consideration to each benefit and 
cost, including each effect on efficiency, competition, and capital 
formation; and (3) identified and considered reasonable alternatives to 
the proposed new rules and rule amendments. We request and encourage 
any interested person to submit comments regarding the proposed rules, 
our analysis of the potential effects of the rules and other matters 
that may have an effect on the proposed rules. The Commission requests 
that commenters identify sources of data and information as well as 
provide data and information to assist the Commission in analyzing the 
economic consequences of the proposed rules. We are also interested in 
comments on the qualitative benefits and costs we have identified and 
any benefits and costs we may have overlooked. We urge commenters to be 
as specific as possible.
    Comments on the following questions are of particular interest.
     To what extent would the monthly public reporting or the 
quarterly public reporting of monthly portfolio investment information 
aid in the ability of other investors to front-run, predatory trade, or 
copycat/reverse engineer the investment strategy of reporting funds? To 
what extent would the monthly public reporting or the quarterly public 
reporting of monthly portfolio investment information reduce the 
incentives of fund companies to develop new or alternative strategies, 
and what would be the effect on fund competition? How would investors 
benefit from the public reporting of portfolio investment information 
in the first and second month of each fiscal quarter as compared to the 
public reporting of the third month only? Would investors benefit from 
the quarterly public reporting of monthly portfolio investment 
information? Why?
     To what extent would the additional information required 
on Form N-PORT, especially with respect to the contractual terms for 
debt securities and derivatives, including information describing 
reference instruments, if any, and to securities lending and repurchase 
and reverse repurchase result in additional front-running, predatory 
trading, or copycatting/reverse engineering by other investors? Does 
this raise any confidentiality or other concerns?
     What are the benefits, costs, and other economic effects 
from funds providing portfolio investment information in a structured 
XML format? In particular, what are the effects of structured portfolio 
investment information on the ability of other investors to front-run, 
predatory trade, or copycat/reverse engineer the investment strategy of 
reporting funds? How would the effect of structured portfolio 
investment information differ between funds that engage in alternative 
strategies or utilize derivatives as part of its investment strategy 
and those funds that do not? To what extent would portfolio investment 
information that is structured reduce the incentives of fund companies 
to develop new or alternative strategies, and what would be the effect 
on fund competition? Also, would the public reporting of portfolio 
investment information in an XML format result in a decrease in the 
costs to investors from obtaining the information?
     What are the operational benefits and costs to investment 
companies to file Form N-PORT and Form N-CEN in a structured format? 
What are the costs to funds from adapting systems to the new filing 
requirements? To what extent would the fund industry benefit from a 
standard format to report information?
     Is there additional information that Form N-PORT and Form 
N-CEN, as proposed, could require that would aid in the ability of the 
Commission to oversee the fund industry or that could be beneficial to 
other potential users? Are any of the proposed information requirements 
duplicative or unnecessary? What are the benefits and costs of 
reporting this additional information? Is there information that Form 
N-PORT and Form N-CEN, as proposed, would require that does not aid in 
the ability of the Commission to oversee the fund industry and would 
not benefit other potential users? What are the benefits and costs of 
not reporting this information?
     What are the costs, benefits, and other economic effects 
from investment companies reporting risk-sensitivity measures on Form 
N-PORT? What is the current availability of the measures to investment 
companies, in particular for more complex or exotic derivatives? Are 
there competitive or other economic effects from the reporting of risk-
sensitivity measures? Would the public reporting of the risk-
sensitivity measures disclose information relating to proprietary risk 
management practices of investment companies?
     To what extent would the proposal affect the ability of 
investors to understand the investment risks of investment companies as 
a result of the proposal and to efficiently allocate capital? Would 
investors be more likely to allocate additional capital to investment 
companies? What would be the effect on fund competition for investor 
capital?
     Under what circumstances and to what extent would funds 
choose to rely on proposed rule 30e-3 by making shareholder reports 
publicly accessible on a Web site and satisfying the other conditions 
of the rule? Would allowing funds that choose to rely on the proposed 
rule to transmit shareholder reports to their investors ``by default'' 
result in more investors viewing shareholder reports in a format that 
the investors prefer, or would the need for each investor who wishes to 
receive a printed report to affirmatively ``opt-out'' of electronic 
delivery reduce the number of shareholders that receive reports in the 
format that they prefer? Why or why not? What is the likelihood that 
investors would mistakenly opt-out and consent to Web site posting? 
Lastly, to what extent do investors compare portfolio investment 
information between fiscal quarters, and would investors benefit from 
the requirement that a fund's shareholder reports as well as its 
complete portfolio holdings from its most recent first and third fiscal 
quarters be publicly accessible on a Web site?
     What are the costs, benefits, and other economic effects 
to other market participants including third-party information 
providers, index providers, and swap dealers? For instance, what would 
be the economic effects of structured data on the cost to service 
providers to offer aggregated information to investors? Are there other 
market participants that would be affected by the proposal that are not 
discussed above? What are the benefits and costs to these other market 
participants?
     What are the benefits and costs of providing an additional 
twelve months for smaller entities to comply with the requirements to 
file Form N-PORT? Are there potential costs from smaller fund

[[Page 33673]]

complexes potentially not providing structured portfolio investment 
information during the additional twelve months? Are the potential 
costs, if any, from a loss of disclosed portfolio investment 
information from small fund complexes mitigated by the amendments to 
Regulation S-X? Are there other alternatives to the current compliance 
dates that would be more beneficial or that would be less costly, 
including with respect to other parts of the proposal? Which 
alternatives and why?
     What are the costs associated with rescinding N-Q and 
replacing Form N-SAR? How reliant are investors, third-party 
information providers, and other interested parties on the data 
reported on these forms? What are the costs to investors, third-party 
information providers, and other interested parties to obtain the 
information from alternative sources? What are the benefits from the 
amendments to certification requirements of Form N-CSR? What are the 
costs?
     Are there alternatives to the proposal that the Commission 
did not consider that would result in a more robust disclosure regime 
for investment companies? What are the costs associated with those 
alternatives? Similarly, are there alternatives to the proposal that 
would result in the same benefits but that would be less costly? Which 
alternatives and why?

V. Paperwork Reduction Act

    Proposed new forms, Form N-CEN and Form N-PORT, and proposed new 
rule 30e-3 contain ``collections of information'' within the meaning of 
the Paperwork Reduction Act of 1995 (``PRA'').\732\ In addition, the 
proposed amendments to Articles 6 and 12 of Regulation S-X would impact 
the collections of information under rules 30e-1 and 30e-2 of the 
Investment Company Act,\733\ and the proposed amendments to Forms N-1A, 
N-2, N-3, N-4 and N-6 under the Investment Company Act and Securities 
Act would impact the collections of information under those forms. 
Furthermore, the proposals would rescind Forms N-Q and N-SAR, thus 
eliminating the collections of information associated with those forms.
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    \732\ 44 U.S.C. 3501 through 3521.
    \733\ The paperwork burden from Regulation S-X is imposed by the 
rules and forms that relate to Regulation S-X and, thus, is 
reflected in the analysis of those rules and forms. To avoid a PRA 
inventory reflecting duplicative burdens and for administrative 
convenience, we have previously assigned a one-hour burden to 
Regulation S-X.
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    The titles for the existing collections of information are: ``Form 
N-Q-Quarterly Schedule of Portfolio Holdings of Registered Management 
Investment Company'' (OMB Control No. 3235-0578); \734\ ``Form N-SAR 
under the Investment Company Act of 1940, Semi-Annual Report for 
Registered Investment Companies'' (OMB Control No. 3235-0330); Rule 
30e-1 under the Investment Company Act of 1940, Reports to Stockholders 
of Management Companies'' (OMB Control No. 3235-0025); ``Rule 30e-2 
pursuant to Section 30(e) of the Investment Company Act of 1940. 
Reports to Shareholders of Unit Investment Trusts'' (OMB Control No. 
3235-0494); ``Form N-CSR under the Securities Exchange Act of 1934 and 
under the Investment Company Act of 1940, Certified Shareholder Report 
of Registered Management Investment Companies'' (OMB Control No. 3235-
0570); ``Form N-1A under the Securities Act of 1933 and under the 
Investment Company Act of 1940, Registration Statement of Open-End 
Management Investment Companies'' (OMB Control No. 3235-0307); ``Form 
N-2 under the Investment Company Act of 1940 and Securities Act of 
1933, Registration Statement of Closed-End Management Investment 
Companies'' (OMB Control No. 3235-0026); ``Form N-3 Under the 
Securities Act of 1933 and Under the Investment Company Act of 1940, 
Registration Statement of Separate Accounts Organized as Management 
Investment Companies'' (OMB Control No. 3235-0316); ``Form N-4 (17 CFR 
239.17b) Under the Securities Act of 1933 and (17 CFR 274.11c) Under 
the Investment Company Act of 1940, Registration Statement of Separate 
Accounts Organized as Unit Investment Trusts'' (OMB Control No. 3235-
0318); and ``Form N-6 (17 CFR 239.17c) Under the Securities Act of 1933 
and (17 CFR 274.11d) Under the Investment Company Act of 1940, 
Registration Statement of Separate Accounts Organized as Unit 
Investment Trusts that Offer Variable Life Insurance Policies'' (OMB 
Control No. 3235-0503). We are also submitting new collections of 
information for proposed new forms, Form N-CEN and Form N-PORT and 
proposed new rule 30e-3 under the Investment Company Act. The titles 
for these new collections of information would be: ``Form N-CEN Under 
the Investment Company Act, Annual Report for Registered Investment 
Companies;'' ``Form N-PORT Under the Investment Company Act, Monthly 
Portfolio Investments Report;'' ``Rule 30e-3 Under the Investment 
Company Act, Web site Transmission of Shareholder Reports.'' The 
Commission is submitting these collections of information to the OMB 
for review in accordance with 44 U.S.C. 3507(d) and 5 CFR 1320.11. An 
agency may not conduct or sponsor, and a person is not required to 
respond to, a collection of information unless it displays a currently 
valid control number.
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    \734\ Currently, there is a collection of information associated 
with rule 30b1-5 under the Investment Company Act. See rule 30b1-5, 
`Quarterly Report' Originally submitted and approved as Proposed 
Rule 30b1-4 under the Investment Company Act of 1940, `Quarterly 
Report''' (OMB Control No. 3235-0577). Rule 30b1-5 is the rule that 
requires certain funds to file Form N-Q. Among other things, today's 
proposals would rescind Form N-Q and require certain funds to file 
proposed Form N-PORT pursuant to proposed rule 30b1-9. If proposed 
rule 30b1-9 is adopted, we anticipate discontinuing the information 
collection for rule 30b1-5.
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    The Commission is proposing new forms, Form N-CEN and Form N-PORT, 
new rule 30e-3, and amendments to Regulation S-X and the relevant 
registration forms, as well as the rescission of Forms N-Q and Form N-
SAR as part of a set of reporting and disclosure reforms. These reforms 
are designed to harness the benefits of advanced technology and to 
modernize the fund reporting regime in order to help investors and 
other market participants better assess different fund products and to 
assist the Commission in carrying out our regulatory functions. We 
discuss below the collection of information burdens associated with 
these reforms.

A. Portfolio Reporting

1. Form N-PORT
    Under our proposal, certain funds would be required to file an 
electronic monthly report on proposed Form N-PORT within thirty days 
after the end of each month. Proposed Form N-PORT is intended to 
improve transparency of information about funds' portfolio holdings and 
facilitate oversight of funds. The information required by proposed 
Form N-PORT would be data-tagged in XML format. The respondents to 
proposed Form N-PORT would be management investment companies (other 
than money market funds and small business investment companies) and 
UITs that operate as ETFs. Compliance with proposed Form N-PORT would 
be mandatory for all such funds. Responses to the reporting 
requirements would be kept confidential for reports filed with respect 
to the first two months of each quarter; the third month of the quarter 
would not be kept confidential, but made public sixty days after the 
quarter end.

[[Page 33674]]

    We estimate that 10,710 funds \735\ would be required to file, on a 
monthly basis, a complete report on proposed Form N-PORT reporting 
certain information regarding the fund and its portfolio holdings. 
Based on our experience with other interactive data filings, we 
estimate that funds would prepare and file their reports on proposed 
Form N-PORT by either (1) licensing a software solution and preparing 
and filing the reports in house, or (2) retaining a service provider to 
provide data aggregation, validation and/or filing services as part of 
the preparation and filing of reports on proposed Form N-PORT on behalf 
of the fund. We estimate that 35% of funds (3,749 funds) would license 
a software solution and file reports on proposed Form N-PORT in 
house.\736\ We further estimate that each fund that files reports on 
proposed Form N-PORT in house would require an average of approximately 
44 burden hours to compile (including review of the information), tag, 
and electronically file a report on proposed Form N-PORT for the first 
time \737\ and an average of approximately 14 burden hours for 
subsequent filings.\738\ Therefore, we estimate the per fund average 
annual hour burden associated with proposed Form N-PORT for 3,749 fund 
filers is 198 hours for the first year \739\ and 168 hours for each 
subsequent year.\740\ Amortized over three years, the average aggregate 
annual hour burden would be 178 hours per fund.\741\
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    \735\ This estimate includes 8,731 mutual funds (excluding money 
market funds), 1,411 ETFs and 568 closed-end funds and is based on 
ICI statistics as of December 31, 2014 available at http://www.ici.org/research/stats.
    \736\ See Money Market Fund Reform 2014 Release, supra note 13, 
at 47945 (adopting amendments to Form N-MFP and noting that 
approximately 35% of money market funds that report information on 
Form N-MFP license a software solution from a third party that is 
used to assist the funds to prepare and file the required 
information).
    \737\ We anticipate that these funds would use the same software 
that was used to generate reports on Form N-Q and that the software 
vendor offering the Form N-Q software would likely offer an update 
to that software to handle reports on Form N-PORT. Accordingly, we 
estimate the burden associated with information that is currently 
filed on Form N-Q and that would also be filed on Form N-PORT to 
generally be the same--10.5 hours per filing. With respect to new 
data that would be required by Form N-PORT that was not required by 
Form N-Q, we generally estimate that it would initially take up to 
10 hours to connect the software to the new data points. However, 
because we understand risk metrics data may be located on a 
different system than portfolio holdings data and because current 
reporting requirements do not require funds to have a process in 
place for these two systems to work together, with respect to the 
new risk metrics data that would be required by Form N-PORT, we 
estimate that it would initially take up to 15 hours to connect the 
risk metrics data to the software and that, once connected, it would 
take 5 hours to program the risk metrics software to output the 
required data to the Form N-PORT software. Additionally, we added 
another 3.5 hours to our estimated initial burden to account for the 
increased amount of information that would be required to be 
reported on Form N-PORT, but that is not currently required by Form 
N-Q. See infra note 738 (discussing the additional 30% burden added 
to the current Form N-Q estimate). We also note that funds that are 
part of a larger fund complex may realize certain economies of scale 
when preparing and filing reports on proposed Form N-PORT. For 
purposes of our analysis, we do not account for such economies of 
scale.
    \738\ We anticipate that most of the burden associated with 
licensing a software solution, as discussed above, will be a one-
time burden. Accordingly, we estimate approximately 14 hours per 
fund for subsequent filings. This estimate is based on the 10.5 
hours currently estimated for filings on Form N-Q, plus 30% to 
account for the amount of additional information that would be 
required to be filed on Form N-PORT. Additionally, because we 
believe that the required information is generally maintained by 
funds pursuant to other regulatory requirements or in the ordinary 
course of business, for the purposes of our analysis, we have not 
ascribed any time to collecting the required information. See also 
supra note 737 (noting that our estimates do not account for 
economies of scale).
    \739\ The estimate is based on the following calculation: (1 
filing x 44 hours) + (11 filings x 14 hours) = 198 burden hours in 
the first year.
    \740\ This estimate is based on the following calculation: 12 
filings x 14 hours = 168 burden hours in each subsequent year.
    \741\ The estimate is based on the following calculation: (198 + 
(168 x 2))/3 = 178.
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    We estimate that 65% of funds (6,962 funds) would retain the 
services of a third party to provide data aggregation, validation and/
or filing services as part of the preparation and filing of reports on 
proposed Form N-PORT on the fund's behalf.\742\ Because reports on Form 
N-PORT would be filed in a structured format and more frequently than 
current portfolio holdings reports (i.e., Form N-CSR and Form N-Q), we 
anticipate that funds and their third-party service providers will move 
to automate the aggregation and validation process to the extent they 
do not already use an automated process for portfolio holdings reports. 
For these funds, we estimate that each fund would require an average of 
approximately 60 burden hours to compile and review the information 
with the service provider prior to electronically filing the report for 
the first time \743\ and an average of approximately 9 burden hours for 
subsequent filings.\744\ Therefore, we estimate the per fund average 
annual hour burden associated with proposed Form N-PORT for 6,962 funds 
would be 159 hours for the first year \745\ and 108 hours for each 
subsequent year.\746\ Amortized over three years, the average aggregate 
annual hour burden would be 125 hours per fund.\747\ In sum, we 
estimate that filing reports on proposed Form N-PORT would impose an 
average total annual hour burden of 1,537,572 on applicable funds.\748\
---------------------------------------------------------------------------

    \742\ See Money Market Fund Reform 2014 Release, supra note 13, 
at 47945 (adopting amendments to Form N-MFP and noting that 
approximately 65% of money market funds that report information on 
Form N-MFP retain the services of a third party to provide data 
aggregation and validation services as part of the preparation and 
filing of reports on Form N-MFP).
    \743\ In order to be able to automate the process of 
communicating data to a third-party service provider so that it can 
be reported on Form N-PORT, we estimate that it will initially take 
a fund 60 hours to either procure software and integrate it into its 
systems or, alternatively, to write its own software. For those 
funds that already have an automated portfolio reporting process in 
place, we estimate that they would initially incur the same burden 
as those funds that license a software solution and file reports on 
proposed Form N-PORT in house. For these latter funds, however, we 
are using the higher burden hours estimated for using a third party 
service provider in order to be conservative in our estimates 
because we lack data on the number of funds that currently have an 
automated portfolio reporting process in place. See supra note 737 
(discussing the burdens associated with licensing a software 
solution and filing reports on proposed Form N-PORT in house); see 
also supra note 737 (noting that our estimates do not account for 
economies of scale).
    \744\ We anticipate that most of the burden associated with 
third-party aggregation and validation will be the result of 
creating an automated process, as discussed above, and thus will be 
a one-time burden. Accordingly, we estimate approximately 9 hours 
per fund for subsequent filings. This estimate is based on the 10.5 
hours currently estimated for filings on Form N-Q, plus 30% to 
account for the amount of additional information that would be 
required to be filed on Form N-PORT, and subtracting 5 hours in 
recognition of the use of a third-party service provider to assist 
in the preparation and filing of reports on the form. Additionally, 
because we believe that the required information is generally 
maintained by funds pursuant to other regulatory requirements or in 
the ordinary course of business, for the purposes of our analysis, 
we have not ascribed any time to collecting the required 
information. See also supra note 737 (noting that our estimates do 
not account for economies of scale).
    \745\ The estimate is based on the following calculation: (1 
filing x 60 hours) + (11 filings x 9 hours) = 159 burden hours per 
year.
    \746\ The estimate is based on the following calculation: 12 
filings x 9 hours = 108.
    \747\ The estimate is based on the following calculation: (159 + 
(108 x 2))/3 = 125.
    \748\ The estimate is based on the following calculation: (3,749 
x 178 hours) + (6,962 x 125 hours) = 1,537,572.
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    In addition to the costs associated with the hour burdens discussed 
above, funds would also incur other external costs in connection with 
reports on proposed Form N-PORT. Based on our experience with other 
interactive data filings, we estimate that funds that would file 
reports on proposed Form N-PORT in house would license a third-party 
software solution to assist in filing their reports at an average cost 
of $4,805 per fund per year.\749\ In addition, we

[[Page 33675]]

estimate that funds that would use a service provider to prepare and 
file reports on proposed Form N-PORT would pay an average fee of 
$11,440 per fund per year for the services of that third-party 
provider.\750\ In sum, we estimate that all applicable funds would 
incur on average, in the aggregate, external annual costs of 
$97,674,221.\751\
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    \749\ We estimate that money market funds that file reports on 
Form N-MFP in house license a third-party software solution for 
approximately $3,696 per fund per year. Due to the increased volume 
and complexity of the information that would be filed in reports 
pursuant to proposed Form N-PORT, we have increased our external 
cost estimate for funds filing in house on proposed Form N-PORT by 
30% (or $1,109).
    \750\ We estimate that money market funds that file reports on 
Form N-MFP through a third-party service provider pay approximately 
$8,800 per fund per year. Due to the increased volume and complexity 
of the information that would be filed in reports pursuant to 
proposed Form N-PORT, we have increased our estimate for funds 
filing through a third-party service provider on proposed Form N-
PORT by 30% (or $2,640).
    \751\ This estimate is based on the following calculation: 
(3,749 funds that would file reports on proposed Form N-PORT in 
house x $4,809 per fund, per year) + (6,962 funds that would file 
reports on proposed Form N-PORT using a third-party service provider 
x $11,440 per fund, per year) = $97,674,221.
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2. Rescission of Form N-Q
    Our proposed reforms would rescind Form N-Q in order to eliminate 
unnecessarily duplicative reporting requirements. The proposed 
rescission of Form N-Q would affect all management investment companies 
required to file reports on the form.
    We currently estimate that each fund requires an average of 
approximately 21 hours per year to prepare and file two reports on Form 
N-Q annually, for a total estimated annual burden of 219,513 
hours.\752\ Accordingly, we estimate that, in the aggregate, our 
proposed rescission would eliminate the 219,513 annual burden hours 
associated with filing Form N-Q. Additionally, we currently estimate 
that there are no external costs associated with the certification 
requirement or with preparation of reports on Form N-Q in general.
---------------------------------------------------------------------------

    \752\ Management investment companies are required to file a 
quarterly report on Form N-Q after the close of the first and third 
quarters of each fiscal year.
---------------------------------------------------------------------------

B. Census Reporting

1. Form N-CEN
    As proposed, amended rule 30a-1 would require all funds to file 
reports on proposed Form N-CEN with the Commission on an annual 
basis.\753\ Similar to current Form N-SAR, proposed Form N-CEN would 
require reporting with the Commission of certain census-type 
information. However, unlike Form N-SAR, which requires semi-annual 
reporting for all management investment companies, proposed Form N-CEN 
would require annual reporting.\754\ Proposed Form N-CEN would be a 
collection of information under the PRA, and is designed to facilitate 
the Commission's oversight of funds and its ability to monitor trends 
and risks. This new collection of information would be mandatory for 
all funds, and responses would not be kept confidential.
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    \753\ For purposes of the PRA analysis, the burdens associated 
with amended rule 30a-1, as proposed, are included in the collection 
of information estimates of Form N-CEN.
    \754\ UITs are only required to file Form N-SAR on an annual 
basis. See rule 30a-1.
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    The staff estimates that the Commission would receive an average of 
3,146 reports per year, based on the number of existing Form N-SAR 
filers.\755\ We estimate that management investment companies would 
each spend as much as 13.35 hours annually, preparing and filing 
reports on proposed Form N-CEN.\756\ The Commission further estimates 
that UITs, including separate account UITs, would each spend as much as 
9.11 hours annually, preparing and filing reports on proposed Form N-
CEN, since a UIT would be required to respond to fewer items.\757\
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    \755\ This estimate is based on 2,419 management companies and 
727 UITs filing reports on Form N-SAR as of December 31, 2014.
    \756\ Our estimate includes the hourly burden associated with 
registering/maintaining LEIs for the registrant/funds, which would 
be required to be included in reports on Form N-CEN.
    \757\ See id.
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    As discussed below, we currently estimate that management 
investment companies spend as much as 15.35 hours preparing and filing 
each report on Form N-SAR. We have generally sought with proposed Form 
N-CEN, where appropriate, to simplify and decrease the census-type 
reporting burdens placed on registrants by current Form N-SAR. For 
example, proposed Form N-CEN would reduce the number of attachments 
that may need to be filed with the reports and largely eliminate 
financial statement-type information from the reports. Additionally, we 
believe that reports in XML on proposed Form N-CEN will be less 
burdensome to produce than the reports on Form N-SAR currently required 
to be filed using outdated technology. Accordingly, for management 
investment companies we believe the estimated hour burden for filing 
reports on proposed Form N-CEN should be a reduced burden from the hour 
burden associated with Form N-SAR.\758\ As such, we estimate that the 
annual hour burden for management companies will be 13.35 per report on 
proposed Form N-CEN, down from 15.35 hours per report for Form N-SAR.
---------------------------------------------------------------------------

    \758\ We note that reports on Form N-CEN would be filed 
annually, rather than semi-annually as in the case of reports on 
Form N-SAR. Thus, while we estimate that the burden associated with 
each report on Form N-CEN for management companies would be two 
hours less than the burden associated with each report on Form N-
SAR, we estimate that the annual Form N-CEN burden for management 
companies would actually be 17.35 hours less than that associated 
with Form N-SAR. This estimate is based on the following 
calculation: (15.35 Form N-SAR burden hours x 2 reports) - 13.35 
Form N-CEN burden hours = 17.35 hours.
---------------------------------------------------------------------------

    UITs may, however, experience an increase in the hour burden 
associated with census-type reporting if proposed Form N-CEN is adopted 
because UITs would be required to respond to more items in the form 
than they are currently required to respond to under Form N-SAR. For 
example, UITs would be required to provide certain background 
information and attachments in their reports on proposed Form N-CEN, 
which they are not currently required to provide in their reports on 
Form N-SAR. As a result, we have increased the annual hour burden for 
UITs from 7.11 hours in the currently approved collection for Form N-
SAR to 9.11 hours for proposed Form N-CEN.
    The Commission also believes that, in the first year reports on the 
form are filed, funds may require additional time to prepare and file 
reports. We estimate that, for the first year, funds would require 20 
additional hours.\759\ Accordingly, we estimate that management 
investment companies would require 33.35 annual burden hours in the 
first year \760\ and 13.35 annual burden hours in each subsequent year 
for preparing and filing reports on proposed Form N-CEN. Additionally, 
we estimate that UITs would require 29.11 annual burden hours in the 
first year \761\ and 9.11 annual burden hours in each subsequent year 
for preparing and filing reports on proposed Form N-CEN.
---------------------------------------------------------------------------

    \759\ This additional time may be attributable to, among other 
things, reviewing and collecting new or revised data pursuant to the 
Form N-CEN requirements or changing the software currently used to 
generate reports on Form N-SAR in order to output similar data in a 
different format.
    \760\ This estimate is based on the following calculation: 13.35 
hours for filings + 20 additional hours for the first filing = 33.35 
hours.
    \761\ This estimate is based on the following calculation: 9.11 
hours for filings + 20 additional hours for the first filing = 29.11 
hours.
---------------------------------------------------------------------------

    We estimate that the average annual hour burden per response for 
proposed Form N-CEN for the first year would be 32.37 hours \762\ and 
12.37 hours in subsequent years.\763\ Amortizing the

[[Page 33676]]

burden over three years, we estimate that the average annual hour 
burden per fund per year would be 19.04 \764\ and the total average 
annual hour burden would be 59,900.\765\
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    \762\ This estimate is based on the following calculation: 
((2,419 management investment companies x 33.35 hours) + (727 UITs x 
29.11 hours))/3,146 total funds = 32.37 hours.
    \763\ This estimate is based on the following calculation: 
((2,419 management investment companies x 13.35 hours) + (727 UITs x 
9.11 hours))/3,146 = 12.37 hours.
    \764\ This estimate is based on the following calculation: 
(32.37 + (12.37 x 2))/3 = 19.04.
    \765\ This estimate is based on the following calculation: 3,146 
x 19.04 = 59,900.
---------------------------------------------------------------------------

    With respect to the initial filing of a report on Form N-CEN, we 
estimate an external cost of $220 per fund and, with respect to 
subsequent filings, we estimate an annual external cost of $120 per 
fund.\766\ We estimate the amortized annual external cost per fund 
would be $153.\767\ We currently estimate that no external cost burden 
is associated with Form N-SAR. External costs include the cost of goods 
and services, which with respect to reports on Form N-CEN, would 
include the costs of registering and maintaining an LEI for the 
registrant/funds.\768\ In sum, we estimate that all applicable funds 
would incur, in the aggregate, external annual costs of 
$1,748,637.\769\
---------------------------------------------------------------------------

    \766\ See supra note 46 (discussing the costs associated with 
registering and maintaining an LEI).
    \767\ This estimate is based on the following calculation: $220 
+ (2 years x $120)/3 = $153.
    \768\ See Items 2.d. and 25.c. of Form N-CEN (requiring LEI for 
the registrant and each management company).
    \769\ This estimate is based on the following calculation: $153 
x 11,429 funds = $1,748,637; see infra note 799 (explaining the 
calculation of 11,429 funds).
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2. Rescission of Form N-SAR
    Our proposed reforms would rescind Form N-SAR in order to eliminate 
unnecessarily duplicative reporting requirements. The proposed 
rescission would affect all management investment companies and UITs.
    We currently estimate that the weighted average annual hour burden 
per response for Form N-SAR is 14.25 hours,\770\ with a total annual 
hour burden for all respondents of approximately 82,223 hours. 
Accordingly, we estimate that, in the aggregate, our proposed 
rescission would eliminate the 82,223 annual burden hours associated 
with filing Form N-SAR. Additionally, we currently estimate that there 
are no external costs associated with preparation of reports on Form N-
SAR.
---------------------------------------------------------------------------

    \770\ This weighted estimate accounts for management companies 
filing reports on Form N-SAR twice a year and UITs filing reports on 
Form N-SAR once a year.
---------------------------------------------------------------------------

C. Amendments to Regulation S-X

1. Rule 30e-1
    Section 30(e) of the Investment Company Act requires every 
registered investment company to transmit to its stockholders, at least 
semiannually, reports containing such information and financial 
statements or their equivalent, as of a reasonably current date, as the 
Commission may prescribe by rules and regulations.\771\ Rule 30e-1 
generally requires management investment companies to transmit to their 
shareholders, at least semi-annually, reports containing the 
information that is required to be included in such reports by the 
fund's registration statement form under the Investment Company 
Act.\772\ Pursuant to this rule and Forms N-1A and N-2, management 
investment companies are required to include the financial statements 
required by Regulation S-X in their shareholder reports.\773\
---------------------------------------------------------------------------

    \771\ Section 30(e).
    \772\ Rule 30e-1.
    \773\ See Item 27 of Form N-1A and Item 24 of Form N-2.
---------------------------------------------------------------------------

    Rule 30e-1 also permits, under certain conditions, delivery of a 
single shareholder report to investors who share an address 
(``householding'').\774\ Specifically, rule 30e-1 permits householding 
of annual and semi-annual reports by management companies to satisfy 
the transmission requirements of rule 30e-1 if, in addition to the 
other conditions set forth in the rule, the management company has 
obtained from each applicable investor written or implied consent to 
the householding of shareholder reports at such address. The rule 
requires management companies that wish to household shareholder 
reports with implied consent to send a notice to each applicable 
investor stating, among other things, that the investors in the 
household will receive one report in the future unless the investors 
provide contrary instructions. In addition, at least once a year, 
management companies relying on the householding provision must explain 
to investors who have provided written or implied consent how they can 
revoke their consent.
---------------------------------------------------------------------------

    \774\ See rule 30e-1(f).
---------------------------------------------------------------------------

    Compliance with the disclosure requirements of rule 30e-1 is 
mandatory. Responses to the disclosure requirements are not be kept 
confidential.
    Based on staff conversations with fund representatives, we 
currently estimate that it takes approximately 84 hours per fund to 
comply with the collection of information associated with rule 30e-1, 
including the householding requirements. This time is spent, for 
example, preparing, reviewing, and certifying the reports. The current 
total estimated annual hour burden of responding to rule 30e-1 is 
approximately 903,000 hours.\775\
---------------------------------------------------------------------------

    \775\ This estimate is based on the following calculation: 84 
hours per fund x 10,750 funds (the estimated number of portfolios 
the last time the rule's information collections were submitted for 
PRA renewal in 2012) = 903,000 hours.
---------------------------------------------------------------------------

    As discussed above, we are proposing certain amendments to Articles 
6 and 12 of Regulation S-X. As outlined in Part II.C. above, the 
amendments would: (1) Require new, standardized disclosures regarding 
fund holdings in open futures contracts, open forward foreign currency 
contracts, and open swap contracts, and additional disclosures 
regarding fund holdings of written and purchased options; (2) update 
the disclosures for other investments, as well as reorganize the order 
in which some investments are presented; (3) amend the rules regarding 
the general form and content of fund financial statements; and (iv) 
require a new disclosure in the notes to the financial statements 
relating to a fund's securities lending activities.\776\
---------------------------------------------------------------------------

    \776\ Our amendments would also require prominent placement of 
disclosures regarding investments in derivatives in a fund's 
financial statements, rather than allowing such schedules to be 
placed in the notes to the financial statements. See supra Part 
II.C.
---------------------------------------------------------------------------

    We estimate that that there are 11,230 management companies that 
would have to comply with these amendments.\777\ In addition, we 
estimate that these amendments would likely increase the time spent 
preparing, reviewing and certifying reports, if adopted. The extent to 
which a fund's burden would increase as a result of the proposed 
amendments would depend on the extent to which the fund invests in the 
instruments covered by many of the amendments. We estimate that, on an 
annual basis, funds generally will incur an additional 9 burden hours 
in the first year \778\ and an additional 3

[[Page 33677]]

burden hours for filings in subsequent years in order to comply with 
the proposed amendments.\779\ Amortized over three years, the average 
annual hour burden associated with the amendments for Regulation S-X 
would be 5 hours per fund.\780\ Accordingly, the estimated total annual 
average hour burden associated with the amendments would be 
56,150.\781\
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    \777\ This estimate includes 9,259 mutual funds (including money 
market funds), 1,403 ETFs (1,411 ETFs--8 UIT ETFs) and 568 closed-
end funds and is based on internal SEC data as well as ICI 
statistics as of December 31, 2014 available at http://www.ici.org/research/stats.
    \778\ With respect to the amendments to Article 6 of Regulation 
S-X, we estimate that each fund would spend an average of five hours 
to initially comply with the amendments. For example, amendments to 
Article 6-07.1 would likely require funds to identify non-cash 
income and put a process in place to capture it in the financial 
statements. In addition, some funds would also likely move their 
schedules from financial statement notes to the financial statements 
themselves. With respect to the amendments requiring disclosure of 
the components of a custom basket/index, some funds voluntarily 
provide this disclosure now, but others do not; we recognize that 
funds would be affected by this requirement differently depending on 
their investments.
    With respect to the amendments to article 12 of Regulation S-X, 
we estimate each fund would spend an average of four hours to 
initially comply with the amendments. For example, while accounting 
guidance already requires funds to identify the level of each 
security (such as Level 3 securities), we estimate there will be an 
increased burden in adding another note to the financial statements. 
This increased burden would vary depending on the information 
already reported by funds in their financial statements. Likewise, 
while many funds voluntarily identify illiquid securities in their 
schedule of investments, the funds that do not make this disclosure 
would bear an initial burden to comply with these amendments.
    \779\ With respect to the amendments to Article 6 of Regulation 
S-X, we estimate each fund would require two hours to comply with 
the requirements in each subsequent year. We likewise estimate that 
each fund would require one hour to comply with the requirements of 
the proposed amendments to Article 12 in each subsequent year.
    \780\ The estimate is based on the following calculation: (9 
hours + (3 hours x 2))/3 = 5.
    \781\ The estimate is based on the following calculation: 5 
hours x 11,230 management investment companies = 56,150.
---------------------------------------------------------------------------

    We estimate that the annual external cost burden of compliance with 
the information collection requirements of rule 30e-1, which is 
currently $31,061 per fund, will not change as a result of the proposed 
amendments to Regulation S-X.\782\ We further estimate that the total 
annual external cost burden for rule 30e-1 would be $348,815,030.\783\ 
External costs include, for example, the costs for funds to prepare, 
print, and mail the reports.
---------------------------------------------------------------------------

    \782\ Because the proposed amendments would largely reorganize 
information currently reported by funds in their financial 
statements, either voluntarily or because it is required, we do not 
believe the external costs, such as printing and mailing costs, will 
increase as a result of the amendments.
    \783\ This estimate is based on the following calculation: 
11,230 funds x$31,061 = $348,815,030. The current total annual cost 
burden of rule 30e-1 is $333,905,750, which reflects the higher 
estimated number of funds subject to rule 30e-1 at the time of the 
last renewal for the rule. See supra note 775.
---------------------------------------------------------------------------

2. Rule 30e-2
    Rule 30e-2 requires registered UITs that invest substantially all 
of their assets in shares of a management investment company to send 
their unitholders annual and semiannual reports containing financial 
information on the underlying company.\784\ Specifically, rule 30e-2 
requires that the report contain all the applicable information and 
financial statements or their equivalent, required by rule 30e-1 under 
the Investment Company Act to be included in reports of the underlying 
fund for the same fiscal period.\785\ Rule 30e-2 also permits UITs to 
rely on the householding provision in rule 30e-1 to transmit a single 
shareholder report to investors who share an address.\786\
---------------------------------------------------------------------------

    \784\ Rule 30e-2.
    \785\ As discussed above, rule 30e-1 (together with Forms N-1A 
and N-2) essentially requires management investment companies to 
transmit to their shareholders, at least semi-annually, reports 
containing the financial statements required by Regulation S-X.
    \786\ See rule 30e-2(b); see also supra note 774 and 
accompanying text.
---------------------------------------------------------------------------

    Compliance with the disclosure requirements of rule 30e-2 is 
mandatory. Responses to the disclosure requirements are not kept 
confidential.
    The Commission currently estimates that the annual burden 
associated with rule 30e-2, including the householding requirements, is 
121 hours per respondent. The Commission currently estimates that the 
total hour burden is approximately 91,960 hours.\787\
---------------------------------------------------------------------------

    \787\ 760 UITs (the estimated number of UITs the last time the 
rule's information collections were submitted for PRA renewal in 
2012) x 121 hours per UIT = 91,960.
---------------------------------------------------------------------------

    As discussed above, we are proposing certain amendments to Articles 
6 and 12 of Regulation S-X that, if adopted, would likely increase the 
time spent preparing, reviewing and certifying reports.\788\ The extent 
to which a UIT's burden increases as a result of the proposed 
amendments would depend on the extent to which an underlying fund 
invests in the instruments covered by many of the amendments. We 
estimate that there are 727 UITs that may be subject to the proposed 
amendments.\789\ We also estimate that, on an annual basis, UITs 
generally will incur an additional 9 burden hours in the first year 
\790\ and an additional 3 burden hours for filings in subsequent years 
in order to comply with the proposed amendments.\791\ Amortized over 
three years, we estimate that the average annual hour burden associated 
with the proposed amendments would be 5 hours per fund.\792\ 
Accordingly, we estimate that the total average annual hour burden 
associated with the proposed amendments to Regulation S-X would be 
3,635 hours.\793\
---------------------------------------------------------------------------

    \788\ As discussed above, the amendments would: (1) Require new, 
standardized disclosures regarding fund holdings in open futures 
contracts, open forward foreign currency contracts, and open swap 
contracts, and additional disclosures regarding fund holdings of 
written and purchased options; (2) update the disclosures for other 
investments, as well as reorganize the order in which some 
investments are presented; (3) amend the rules regarding the general 
form and content of fund financial statements; and (iv) require a 
new disclosure in the notes to the financial statements relating to 
a fund's securities lending activities. In addition, our amendments 
would also require prominent placement of disclosures regarding 
investments in derivatives in a fund's financial statements, rather 
than allowing such schedules to be placed in the notes to the 
financial statements.
    \789\ This estimate is based on the number of UITs that filed 
Form N-SAR with the Commission as of December 31, 2014.
    \790\ See supra note 778.
    \791\ See supra note 779.
    \792\ The estimate is based on the following calculation: (9 
hours + (3 hours x 2))/3 = 5.
    \793\ The estimate is based on the following calculation: 5 
hours x 727 UITs = 3,635.
---------------------------------------------------------------------------

    In addition, we estimate that the annual external cost burden of 
compliance with the information collection requirements of rule 30e-2, 
which are currently $20,000 per respondent, will not change as a result 
of the proposed amendments to Regulation S-X.\794\ We further estimate 
that the total annual external cost burden for rule 30e-2 would be 
$14,540,000.\795\ External costs include, for example, the costs for 
the funds to prepare, print, and mail the reports.
---------------------------------------------------------------------------

    \794\ See supra note 782.
    \795\ This estimate is based on the following calculation: 727 
UITs x $20,000 = $14,540,000. The current total annual cost burden 
of rule 30e-2 is $15,200,000, which reflects the higher estimated 
number of UITs at the time of the last renewal for the rule. See 
supra note 787.
---------------------------------------------------------------------------

D. Option for Web Site Transmission of Shareholder Reports

    We are also proposing new rule 30e-3, which would permit, but not 
require, a fund to transmit its reports to shareholders by posting them 
on its Web site, as long as the fund meets certain other conditions of 
the rule regarding (a) availability of the report and other materials, 
(b) shareholder consent, (c) notice to shareholders, and (d) delivery 
of materials upon request of the shareholder.\796\ Reliance on the rule 
would be voluntary; however, compliance with the rule's conditions is 
mandatory for funds relying on the rule. Responses to the information 
collections would not be kept confidential.
---------------------------------------------------------------------------

    \796\ See proposed rule 30e-3.
---------------------------------------------------------------------------

1. Availability of Report and Other Materials and Delivery Upon Request
    Proposed rule 30e-3 would provide that a fund's annual or 
semiannual report to shareholders would be considered transmitted to a 
shareholder of record if certain conditions set forth in the rule are 
satisfied. Among these conditions are the requirements that (i) the 
fund's shareholder report, any previous shareholder report transmitted 
to shareholders of record within the last 244 days, and in the case of 
a fund that is not an SBIC, the fund's complete portfolio holdings as 
of the close of its most recent first and third fiscal quarters, be 
publicly accessible, free of charge, at a specified Web site

[[Page 33678]]

address,\797\ and (ii) the fund (or a financial intermediary through 
which shares of the fund may be purchased or sold) must send a paper 
copy of any of the materials discussed in (i) above to a shareholder 
upon request.\798\
---------------------------------------------------------------------------

    \797\ Proposed rule 30e-3(b)(1)(i)-(iii).
    \798\ Proposed rule 30e-30(e).
---------------------------------------------------------------------------

    We estimate that 11,957 funds could rely on proposed new rule 30e-
3.\799\ Of these funds, we estimate that 90% of all funds (or 10,761 
funds) would rely on proposed rule 30e-3.\800\ Of this 10,761, we 
estimate 9,634 are funds relying on the summary prospectus rule (rule 
498 under the Securities Act) and, thus, currently posting annual and 
semiannual shareholder reports on their Web sites. Accordingly, with 
respect to these funds, we estimate that annual compliance with the 
posting requirements of proposed rule 30e-3 will require a half hour 
burden per fund.\801\
---------------------------------------------------------------------------

    \799\ This estimate includes 9,259 mutual funds (including money 
market funds), 1,403 ETFs (1,411 ETFs--8 UIT ETFs), 568 closed-end 
funds, and 727 UITs (including UIT ETFs) based on ICI statistics, 
Form N-SAR filings, and internal SEC data as of December 31, 2014. 
See ICI statistics available at http://www.ici.org/research/stats.
    \800\ Open-end funds relying on the summary prospectus rule, 
rule 498 under the Securities Act, are required to post their annual 
and semi-annual reports online. See rule 498(e)(1). In 2014, 9,634 
funds filed a summary prospectus, which amounts to 90% of all open-
end funds (9,634/(9,259 mutual funds + 1,403 ETFs (not including 
UITs))). Because these funds are already posting their shareholder 
reports online, we estimate that they will rely on proposed rule 
30e-3 to transmit their reports. Based on the percentage of funds 
that rely on the summary prospectus rule, which, like proposed rule 
30e-3, requires posting of documents online while also reducing 
printing and mailing costs for funds, we estimate that 90% of 
closed-end funds and UITs (or 1,166 funds ((568 closed-end funds + 
727 UITs) x 90%) will rely on proposed rule 30e-3. Accordingly, we 
estimate that 90% of all funds ((9,634 open-end funds + 1,166 other 
funds)/11,957 funds) would also rely on proposed rule 30e-3.
    \801\ Because each of these funds is already required to have a 
Web site and to post its annual and semiannual shareholder reports 
on this Web site, we estimate that proposed rule 30e-3 will only 
result in each of these funds incurring a half hour burden per year 
to post their first and third quarter portfolio holdings on their 
Web sites, including in the first year of compliance with the rule.
---------------------------------------------------------------------------

    Of the remaining funds estimated to rely on proposed rule 30e-3, we 
further estimate that approximately 90% of those funds \802\ (or 1,014 
funds) already have a Web site.\803\ With respect to these funds, we 
estimate that the posting requirements of proposed rule 30e-3 will 
require a one and half hour burden per fund to post the required 
documents online, both in the first year and annually thereafter. For 
the remaining 10% of funds (or 113 funds) that we estimate will rely on 
the proposed rule but that do not have a Web site,\804\ we estimate 
initial compliance with the posting requirements will require 
approximately 24 hours per fund of internal fund staff time to develop 
a Web page and post the required documents on the Web page.\805\ In 
addition, we estimate that each of these funds would spend 
approximately four hours of professional time to maintain and update a 
Web page with the required information on a quarterly basis.\806\
---------------------------------------------------------------------------

    \802\ See Money Market Fund Reform 2010 Release, supra note 13, 
at 10092 (estimating that 20% of money market funds would have to 
develop a Web site in connection with new Web site posting 
requirements). Because five years have passed since we estimated 80% 
of money market funds had Web sites, and given the increased use of 
the Internet, we believe it is appropriate to estimate that 90% of 
funds currently have Web sites.
    \803\ This estimate is based on the following calculation: 
(10,761 funds--9,634 open-end funds relying on the summary 
prospectus rule) x 90% = 1,014 funds.
    \804\ This estimate is based on the following calculation: 
(10,761 funds--9,634 open-end funds relying on the summary 
prospectus rule) x 10% = 113 funds.
    \805\ See Money Market Fund Reform 2010 Release, supra note 13, 
at 10092 (estimating 24 hours of internal staff time to develop a 
Web page). Funds that are part of a larger fund complex may realize 
certain economies of scale in connection with creating a Web site. 
For purposes of our analysis, we do not account for such economies 
of scale.
    \806\ See id. (estimating 4 hours of professional time to 
maintain and update a Web page with the required money market fund 
information on a monthly basis). Funds that are part of a larger 
fund complex may realize certain economies of scale in connection 
with maintaining and updating a Web site. For purposes of our 
analysis, we do not account for such economies of scale.
---------------------------------------------------------------------------

    Accordingly, we estimate that the posting requirements will result 
in an average annual hour burden of 0.84 hours per fund in the first 
year of compliance \807\ and 0.76 hours per fund for each of the next 
two years.\808\ Amortized over three years, the average annual hour 
burden would be 0.79 hours per fund.\809\ In sum, we estimate that the 
posting requirements of proposed rule 30e-3 would impose an average 
total annual hour burden of 8,447 hours on applicable funds.\810\
---------------------------------------------------------------------------

    \807\ This estimate is based on the following calculations: 
9,634 open-end funds relying on the summary prospectus rule x .5 
hours = 4,817 hours; 1,014 funds with a Web site but not relying on 
the summary prospectus rule x 1.5 hours = 1,521 hours; 113 funds 
without a Web site x 24 hours in the first year = 2,712 hours; 4,817 
hours + 1,521 hours + 2,712 hours = 9,050; 9,050/10,761 = 0.84 
hours.
    \808\ This estimate is based on the following calculations: 
9,634 open-end funds relying on the summary prospectus rule x .5 
hours = 4,817 hours; 1,014 funds with a Web site but not relying on 
the summary prospectus rule x 1.5 hours = 1,521 hours; 113 funds 
without a Web site x (4 hours x 4 quarters) = 1,808 hours; 4,817 + 
1,521 + 1,808 = 8,146; 8,146/10,761= 0.76 hours.
    \809\ The estimate is based on the following calculation: (0.84 
+ (0.76 x 2))/3 = 0.79 hours.
    \810\ This estimate is based on the following calculations: 
9,050 hours for the first year + (8,146 hours x the 2 following 
years) = 25,342; 25,342/3 = 8,447.
---------------------------------------------------------------------------

    In addition, with respect to those funds that would rely on 
proposed rule 30e-3 but that do not currently have a Web site, we 
estimate that the posting requirements of the proposed rule will result 
in an external cost burden of $2000 per fund in the first year to 
develop a Web site,\811\ but no cost burden in subsequent years.\812\ 
We further estimate that the amortized annual external cost burden 
associated with developing a Web site would be $667.\813\ In the 
aggregate, we estimate that the annual total external cost burden with 
respect to these funds would be $75,371.\814\ With respect to those 
funds that currently have Web sites, we estimate that the posting 
requirements of the proposed rule will not result in any external 
costs.\815\ The external cost burden is the cost of goods and services 
purchased in connection with complying with the rule, which, with 
respect to the posting requirements, would include costs associated 
with development of a Web site.
---------------------------------------------------------------------------

    \811\ See, e.g., How Much Should a Web Design Cost, Budgeting 
for a Professional Design for a Small Business Web site, available 
at http://webdesign.about.com/od/beforeyoustartaWebsite/a/how-much-should-a-web-design-cost.htm (suggesting that a fairly basic Web 
site would cost $1250-$1500); What Does a Web site Cost? Web site 
Development Costs, available at http://www.atilus.com/what-does-a-Website-cost-Website-development-costs/ (suggesting a basis Web site 
can be created for $2000-$5000). We believe that a Web site 
developed for purposes of proposed rule 30e-3 could be fairly basic 
considering the Web site would only need to accommodate posting of 
the required documents.
    \812\ We believe the collection of information burden in 
subsequent years will be handled internally and have, therefore, 
accounted for this burden in our estimate of the hourly burden for 
subsequent years. See supra note 806.
    \813\ This estimate is based on the following calculation: 
$2000/3 = $667.
    \814\ This estimate is based on the following calculation: 113 
funds x $667 = $75,371.
    \815\ Because these funds maintain their Web sites for reasons 
other than compliance with proposed rule 30e-3, we do not attribute 
any costs related to such maintenance to proposed rule 30e-3.
---------------------------------------------------------------------------

    Furthermore, we also estimate that funds may incur external costs 
in connection with the requirement to provide a complete shareholder 
report upon request of a shareholder. We estimate that the annual costs 
associated with printing and mailing these reports would be $500 per 
fund.\816\

[[Page 33679]]

Accordingly, we estimate that the aggregate annual external costs 
associated with printing and mailing shareholder reports upon request 
would be $5,380,500.\817\ Together with the external costs for those 
funds that would rely on proposed rule 30e-3 but that do not currently 
have a Web site, we estimate that the posting and shareholder request 
requirements of the proposed rule will result in an annual external 
cost burden of $5,455,871.\818\
---------------------------------------------------------------------------

    \816\ As noted above, we estimate the external costs associated 
with rules 30e-1 and 30e-2 (the rules relating to shareholder 
reports) to be $31,061 and $20,000, respectively. These costs 
account for preparation and transmission of complete shareholder 
reports twice a year in paper to shareholders. We estimate that one-
third of these external costs are attributed to printing and mailing 
shareholder reports. Additionally, we estimate that 5% of 
shareholders may request paper copies of shareholder reports 
transmitted via Web site pursuant to proposed rule 30e-3. In this 
regard, we note that shareholders preferring paper copies of 
shareholder reports will also have the ability to return the 
postage-paid, pre-addressed reply card that all shareholders will 
receive with their Initial Statement to indicate that they want to 
opt-out of Web site transmission. See Part II.D.3.b. above 
(discussing the Initial Statement). Accordingly, we believe that 
only a small percentage of shareholders whose shareholder reports 
are transmitted via Web site will request paper copies. In order to 
be conservative in our estimates, we have multiplied 5% by $10,000, 
which is approximately one-third of the external costs associated 
with management companies' shareholder reports ($31,061/3 = 
$10,354), which are higher than the external costs associated with 
UITs' shareholder reports. Thus, we estimate that the external costs 
associated with providing complete shareholder reports upon request 
would be $500 (5% x $10,000).
    \817\ This estimate is based on the following calculation: $500 
x 10,761 funds = $5,380,500.
    \818\ This estimate is based on the following calculation: 
$5,380,500 + $75,371 = $5,455,871.
---------------------------------------------------------------------------

2. Shareholder Consent and Notice
    Proposed rule 30e-3 would permit electronic transmission of a 
shareholder report to a particular shareholder only if the shareholder 
has either previously consented to this method of transmission or has 
been determined to have provided implied consent under certain 
conditions specified in the rule.\819\ One of the conditions for 
implied consent requires that the fund transmit to the shareholder an 
Initial Statement, at least 60 days before it begins to rely on the 
rule, notifying the shareholder of the fund's intent to make future 
shareholder reports available on the fund's Web site until the 
shareholder revokes consent. Additionally, proposed rule 30e-3 would 
require funds relying on the rule with respect to a shareholder who has 
consented to electronic transmission to send a Notice containing 
certain information to the shareholder within 60 days of the close of 
the fiscal period to which the report relates.\820\ The proposed rule 
would also require funds to file a form of the Notice with the 
Commission not later than 10 days after the Notice is sent to 
shareholders.\821\
---------------------------------------------------------------------------

    \819\ See proposed rule 30e-3(c).
    \820\ See proposed rule 30e-3(d).
    \821\ See proposed rule 30e-3(d)(7).
---------------------------------------------------------------------------

    As discussed in Part V.D.1. above, we estimate that 90% of all 
eligible funds (or 10,761 funds) will choose to rely on proposed rule 
30e-3.\822\ For those funds relying on the rule, we estimate that it 
will take each fund one and a half hours to prepare the Initial 
Statement in the first year of compliance with the rule.\823\ We 
further estimate that each fund will incur a half hour burden in 
subsequent years to the extent the fund has shareholders that have not 
previously consented to Web site transmission of the fund's shareholder 
reports.\824\ We also estimate that each fund will incur two hours to 
prepare and file the first Notice in the first year \825\ and an hour 
for each subsequent notice.\826\ Additionally, with respect to both the 
Initial Statement and the Notice, we estimate that 75% of the annual 
hour burden would be incurred by the fund and that 25% of the burden 
would be incurred by outside counsel retained by the fund.\827\
---------------------------------------------------------------------------

    \822\ See supra note 800 and accompanying text.
    \823\ See Internet Availability of Proxy Materials, Exchange Act 
Release No. 55146 (Jan. 22, 2007) [72 FR 4148, 4161 (Jan. 29, 2007)] 
(``Proxy Notice Release'') (estimating the annual burden for an 
issuer or other soliciting person to prepare a notice of Internet 
availability of proxy materials (``proxy notice'') to be 
approximately one and half hours). We estimate that the length and 
breadth of the Initial Statement would be similar to that of a proxy 
notice.
    \824\ Based our initial hour burden estimate for the Initial 
Statement, and given that a fund will only have to provide the 
Initial Statement in subsequent years to those shareholders who have 
not previously consented, we believe the subsequent hour burden will 
be minimal. Accordingly, we have estimated a half hour burden per 
fund in subsequent years.
    \825\ See supra note 823. We estimate that the length and 
breadth of the Notice would be similar to that of a proxy notice. 
However, under proposed rule 30e-3, a Notice would also have to be 
separately filed with the Commission. Accordingly, we have increased 
the initial estimated hour burden for the Notice to two hours versus 
the hour and half estimated hour burden for the proxy notice. In 
addition, a fund relying on the proposed rule would have to prepare 
and send a notice to relevant shareholders, and file the notice with 
the Commission, twice a year--once for the annual shareholder report 
and once for the semiannual shareholder report. In the first year of 
compliance with the rule, we estimate that the fund would need two 
hours to prepare and file the first notice and one hour to prepare 
and file the second notice, for a total of three hours in the first 
year of compliance.
    \826\ Based our initial hour burden estimate for the Notice, and 
given that a fund will likely use its original Notice as a template 
for subsequent notices but will also have to file each Notice with 
the Commission, we believe one hour burden per fund per subsequent 
filing is an appropriate estimate. As noted above, a fund would have 
to prepare and file a Notice twice a year. As such, we estimate the 
hour burden for each fund in subsequent years would be two hours.
    \827\ See Proxy Notice Release, supra note 823 (estimating 75% 
of the proxy notice burden would be prepared by the issuer and that 
25% of the burden would be prepared by outside counsel retained by 
the issuer).
---------------------------------------------------------------------------

    Accordingly, we estimate that the Initial Statement will result in 
an average hourly burden per fund of 1.3 hours in the first year \828\ 
and 0.38 hours in each subsequent year.\829\ Amortized over three 
years, the average annual hour burden associated with the Initial 
Statement would be 0.69 hours per fund.\830\ In addition, we estimate 
that the Notice will result in an average annual hour burden of 2.3 
hours per fund in the first year \831\ and 1.5 hours per fund in each 
subsequent year.\832\ Amortized over three years, the average annual 
hour burden associated with the Notice would be 1.8 hours per 
fund.\833\ In sum, we estimate that the shareholder consent and Notice 
requirements of proposed rule 30e-3 would impose an average total 
annual hour burden of 8,932 hours on applicable funds.\834\
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    \828\ The estimate is based on the following calculation: 1.5 
hours x 75% = 1.3 hours.
    \829\ The estimate is based on the following calculation: 0.5 
hours x 75% = 0.38 hours.
    \830\ The estimate is based on the following calculation: (1.3 
hours + (2 years x 0.38 hours))/3 years = 0.69 hours.
    \831\ The estimate is based on the following calculation: (2 
hours + 1 hour) x 75% = 2.3 hours.
    \832\ The estimate is based on the following calculation: (1 
hour + 1 hour) x 75% = 1.5 hours.
    \833\ The estimate is based on the following calculation: (2.3 
hours + (2 years x 1.5 hours))/3 years = 1.8 hours.
    \834\ This estimate is based on the following calculations: 
(0.69 hours for the Initial Statement x 10,761 funds) + (1.8 hours 
for the Notice x 10,761 funds) = 26,795; 26,795 hours/3 years = 
8,932.
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    In addition, we estimate that funds will incur external costs if 
they rely on proposed rule 30e-3. The external cost burden is the cost 
of goods and services purchased in connection with complying with the 
rule, which, with respect to the Initial Statement and Notice, we 
estimate would include the costs associated with outside counsel and 
printing and mailing costs.
    We estimate outside counsel retained by the fund will incur 25% of 
the hourly burden associated with each of the Initial Statement and 
Notice at a rate of $380 per hour.\835\ Accordingly, we estimate that 
outside counsel costs associated with the Initial Statement will result 
in an average cost burden per fund of $144 in the first year,\836\ $49 
in subsequent years, \837\ and amortized over three years, $81.\838\ 
Additionally, we estimate that outside counsel costs associated with 
the Notice will result in

[[Page 33680]]

an average cost burden per fund of $285 in the first year,\839\ $190 in 
subsequent years, \840\ and amortized over three years, $222.\841\ In 
sum, we estimate that the outside counsel costs related to the 
shareholder consent and Notice requirements of proposed rule 30e-3 
would impose an annual average total cost burden of $3,260,583 on 
applicable funds.\842\
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    \835\ This estimate is based on the rate for attorneys in 
SIFMA's Management and Professional Earnings in the Securities 
Industry 2013, modified by Commission staff to account for an 1800-
hour work year and multiplied by 5.35 to account for bonuses, firm 
size, employee benefits, and overhead.
    \836\ The estimate is based on the following calculation: 1.5 
hours associated with x 25% = 0.38 hours; 0.38 hours x $380 = $144.
    \837\ The estimate is based on the following calculation: 0.5 
hours x 25% = 0.13 hours; 0.13 hours x $380 = $49.
    \838\ The estimate is based on the following calculation: ($144 
+ (2 years x $49))/3 = $81.
    \839\ The estimate is based on the following calculation: (2 
hours + 1 hour) x 25% = 0.75 hours; 0.75 hours x $380 = $285.
    \840\ The estimate is based on the following calculation: (1 
hour + 1 hour) x 25% = 0.5 hours; 0.5 hours x $380 = $190.
    \841\ The estimate is based on the following calculation: ($285 
+ (2 years x $190))/3 = $222.
    \842\ This estimate is based on the following calculations: ($81 
for the Initial Statement x 10,761 funds) + ($222 for the Notice x 
10,761) = $3,260,583.
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    We also estimate that, in the first year, each fund will incur 
approximately $1000 in printing and mailing costs related to each of 
the first Initial Statement and Notice.\843\ In subsequent years, we 
estimate each fund will incur $333 in printing and mailing costs 
related to the Initial Statement\844\ and $1000 with respect to each 
Notice.\845\ Amortized over three years, we estimate that the Initial 
Statement will result in $555 annual cost burden per fund\846\ and the 
Notice will result in a $2000 annual cost burden per fund.\847\ In sum, 
we estimate that the printing and mailing costs related to the 
shareholder consent and Notice requirements of proposed rule 30e-3 
would impose an average annual total cost burden of $27,494,355 on 
applicable funds.\848\ Accordingly, together with the costs associated 
with outside counsel, we estimate that the shareholder consent and 
Notice requirements of the proposed rule would impose an average annual 
total cost burden of $30,754,938.\849\
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    \843\ As noted above, we estimate the external costs associated 
with rules 30e-1 and 30e-2 (the rules relating to shareholder 
reports) to be $31,061 and $20,000, respectively. These costs 
account for preparation and transmission of complete shareholder 
reports twice a year in paper to shareholders. We estimate that one-
third of these external costs are attributed to printing and mailing 
shareholder reports. We estimate that the Initial Statement and 
Notice would require significantly less be spent on printing and 
mailing costs given the significantly smaller size of the documents. 
Accordingly, we estimate that each of the Initial Statement and 
Notice would require 10% of the printing and mailing costs 
associated with complete shareholder reports. We also estimate that 
there would be no other external costs attributable to the Initial 
Statement or Notice. In order to be conservative in our estimates, 
we have multiplied 10% by $10,000, which is approximately one-third 
of the external costs associated with management companies' 
shareholder reports ($31,061/3 = $10,354), which are higher than the 
external costs associated with UITs' shareholder reports. Thus, we 
estimate that the initial printing and mailing costs associated with 
each of the Initial Statement and Notice would be $1000 (10% x 
$10,000). Additionally, however, with respect to the Notice, we note 
that a fund would send two Notices a year--one for each shareholder 
report. Accordingly, we estimate that the printing and mailing costs 
associated with the Notice would be $2000 ($100 x 2 Notices) in the 
first year.
    \844\ Given that funds will only have to send the Initial 
Statement to shareholders who have not yet consented (e.g., new 
shareholders), we estimate that the external cost burden in 
subsequent years would only be one-third the cost of the first 
Initial Statement ($1000/3 = $333).
    \845\ We do not believe the external costs associated with 
printing and mailing the Notice will be different in subsequent 
years because proposed rule 30e-3 specifies the information to be 
included in the Notice, which must be sent each time a shareholder 
report is transmitted. As noted above, funds would send two Notices 
a year--one for each shareholder report. Accordingly, we estimate 
that the printing and mailing costs associated with the Notice would 
be $2000 ($1000 x 2 Notices) in each subsequent year.
    \846\ This estimate is based on the following calculation: 
($1000 + (2 years x $333))/3 = $555.
    \847\ This estimate is based on the following calculation: 
($2000 per year x 3 years)/3 = $2000.
    \848\ This estimate is based on the following calculations: 
($555 for the Initial Statement x 10,761 funds) + ($2000 for the 
Notice x 10,761) = $27,494,355.
    \849\ This estimate is based on the following calculations: 
$3,260,583+ $27,494,355 = $30,754,938.
---------------------------------------------------------------------------

    In total, proposed rule 30e-3 would impose an average total annual 
hour burden of 17,379 hours on applicable funds\850\ and a total annual 
external cost burden of $36,210,809 on applicable funds.\851\
---------------------------------------------------------------------------

    \850\ This estimate is based on the following calculation: 8,447 
hours for the posting requirements + 8,932 hours for the written 
shareholder consent statement and Notice requirements = 17,379 
hours.
    \851\ This estimate is based on the following calculation: 
$5,455,871 + $30,754,938 = $36,210,809.
---------------------------------------------------------------------------

3. Impact on Information Collections for Rules 30e-1 and 30e-2
    As discussed in Sections V.C.1. and 2. above, rule 30e-1 under the 
Investment Company Act requires management companies to transmit semi-
annual reports to their shareholders and rule 30e-2 under the 
Investment Company Act requires certain UITs to similarly transmit 
semi-annual reports to their unitholders.\852\ Also as discussed above, 
we currently estimate, with respect to rule 30e-1, that each fund 
incurs an annual hourly burden of 84 hours \853\ and an annual external 
cost burden of $31,061 per fund.\854\ Additionally, with respect to 
rule 30e-2, we currently estimate that each UIT respondent incurs an 
annual hourly burden of 121 hours per fund \855\ and an annual external 
cost burden of $20,000 per fund.\856\
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    \852\ See supra notes 784 and 785 and accompanying text.
    \853\ As discussed in Part V.C.1., the current estimated total 
annual hourly burden for all funds is 903,000 hours. See supra note 
775.
    \854\ As discussed in Part V.C.1., the current total estimated 
annual cost burden for all funds is $333,905,750. See supra note 
783.
    \855\ As discussed in Part V.C.2., the current estimated total 
annual hourly burden for all UIT respondents is 91,960 hours. See 
supra note 787.
    \856\ As discussed in Part V.C.2., the current total estimated 
annual cost burden for all UIT respondents is $15,200,000. See supra 
note 795.
---------------------------------------------------------------------------

    As discussed above, we estimate that 90% of all funds will rely on 
proposed rule 30e-3. In addition, we estimate that a fund's hourly 
burden associated with rule 30e-1 or rule 30e-2 will not change as 
result of proposed rule 30e-3. However, we estimate that, for those 
funds that rely on proposed rule 30e-3, the fund's external cost burden 
would decrease. In this regard, we estimate that for 90% of funds 
relying on rule 30e-3, their annual cost burden related to rule 30e-1 
would decrease from $31,061 to $20,707.\857\ Additionally, we estimate 
that for the 90% of funds relying on rule 30e-3, their annual cost 
burden related to rule 30e-2 would decrease from $20,000 to 
$13,333.\858\ Accordingly, if proposed rule 30e-3 is adopted, we 
estimate that for 90% of management companies the total annual external 
cost burden for rule 30e-1 would be $209,285,649 \859\ and the total 
annual external cost burden for all management companies under rule 
30e-1 would be $244,167,152.\860\ Additionally, if proposed rule 30e-3 
is adopted, we estimate that for 90% of UITs the total annual external 
cost burden for rule 30e-2 would be $8,719,782 \861\ and the total 
annual external cost burden for all UITs under rule 30e-2 would be 
$10,179,782.\862\
---------------------------------------------------------------------------

    \857\ As discussed above, we estimate that one-third of the 
external costs currently attributed to rule 30e-1 relate to printing 
and mailing costs, which would not be applicable to management 
companies relying on proposed rule 30e-3. Accordingly, our estimate 
is based on the following calculation: $31,061/3 = $10,354; 
$31,061--$10,354 = $20,707.
    \858\ As discussed above, we estimate that one-third of the 
external costs currently attributed to rule 30e-2 relate to printing 
and mailing costs, which would not be applicable to UITs relying on 
proposed rule 30e-3. Accordingly, our estimate is based on the 
following calculation: $20,000/3 = $6,667; $20,000--$6,667 = 
$13,333.
    \859\ This estimate is based on the following calculation: 
11,230 funds x 90% = 10,107; 10,107 funds x $20,707 = $209,285,649. 
See also note 777 (estimating the number of management companies 
subject to rule 30e-1 as 11,230).
    \860\ This estimate is based on the following calculation: 
11,230 funds--10,107 funds = 1,123 funds; 1,123 funds x $31,061 = 
$34,881,503; $209,285,649 + $34,881,503 = $244,167,152.
    \861\ This estimate is based on the following calculation: 727 
UITs x 90% = 654; 654 UITs x $13,333 = $8,719,782; see also note 789 
(estimating the number of UITs subject to rule 30e-2 as 727).
    \862\ This estimate is based on the following calculation: 727 
UITs--654 UITs = 73 UITs; 73 UITs x $20,000 = $1,460,000; $8,719,782 
+ $1,460,000 = $10,179,782.

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[[Page 33681]]

E. Amendments to Certification Requirements of Form N-CSR

    In connection with the rescission of Form N-Q, we are proposing to 
amend Form N-CSR, the reporting form used by management companies to 
file certified shareholder reports under the Investment Company Act and 
the Exchange Act. Form N-Q currently requires principal executive and 
financial officers of the fund to make certifications for the first and 
third fiscal quarters relating to (1) the accuracy of information 
reported to the Commission, and (2) disclosure controls and procedures 
and internal control over financial reporting.\863\ Rescission of Form 
N-Q would eliminate these certifications.
---------------------------------------------------------------------------

    \863\ See supra note 178 and accompanying text.
---------------------------------------------------------------------------

    Form N-CSR requires similar certification with respect to the 
fund's second and fourth fiscal quarters. As a result of the proposed 
rescission of Form N-Q, we are proposing to amend the form of 
certification in Form N-CSR to require each certifying officer to state 
that he or she has disclosed in the report any change in the 
registrant's internal control over financial reporting that occurred 
during the most recent fiscal half-year, rather than the registrant's 
most recent fiscal quarter as currently required by the form.\864\ 
Lengthening the look-back of this certification to six months, so that 
the certifications on Form N-CSR for the semi-annual and annual reports 
would cover the first and second fiscal quarters and third and fourth 
fiscal quarters, respectively, would fill the gap in certification 
coverage that would otherwise occur once Form N-Q is rescinded.
---------------------------------------------------------------------------

    \864\ Proposed Item 11(b) of Form N-CSR; proposed paragraph 5(b) 
of certification exhibit of Item 11(a)(2) of Form N-CSR.
---------------------------------------------------------------------------

    Compliance with the amended certification requirements would be 
mandatory and responses would not be kept confidential.
    We currently estimate that the annual burden associated with Form 
N-CSR is 14.42 hours per fund \865\ and that the current total annual 
time burden for Form N-CSR is 177,799 hours.\866\ We note that the 
amount and content of the information contained in the reports filed on 
Form N-CSR would not change as the result of the proposed amendments 
and the funds likely already have policies and procedures in place to 
assist officers in their certifications of this information. 
Accordingly, we estimate that the proposed amendments to Form N-CSR 
would not change the annual hour burden associated with Form N-CSR and, 
thus, we continue to estimate the annual hour burden associated with 
Form N-CSR to be 14.42 hours per fund. With respect to the total annual 
hour burden, however, we estimate 161,937 hours.\867\ This decrease in 
the current total annual hour burden is a result of the decrease in the 
number of funds estimated to file Form N-CSR.
---------------------------------------------------------------------------

    \865\ This estimate accounts for two filings per year. In 
addition, we note that our current estimate does not separately 
account for the certifications on Form N-CSR.
    \866\ This estimate is based on the following calculation: 14.42 
hours x 12,330 funds (the estimated number of funds the last time 
the rule's information collections were submitted for PRA renewal in 
2013)).
    \867\ This estimate is based on the following calculation: 
11,230 funds x 14.42 hours = 161,937. See supra note 777 
(calculating the estimate for 11,230 funds).
---------------------------------------------------------------------------

    In addition, we currently estimate that the annual cost of outside 
services associated with Form N-CSR is approximately $129 per 
fund.\868\ External costs include the cost of goods and services 
purchased to prepare and update filings on Form N-CSR. We do not 
believe that these costs will change as a result of the proposed 
amendments to Form N-CSR and, thus, continue to estimate an external 
cost burden of $129 per fund to file Form N-CSR. We further estimate 
that the total annual external cost burden for Form N-CSR would be 
$2,897,340.\869\
---------------------------------------------------------------------------

    \868\ The external costs associated with Form N-CSR do not 
include the external costs associated with the shareholder report. 
The external costs associated with the shareholder report are 
accounted for under the collections of information related to rules 
30e-1 and 30e-2 under the Investment Company Act.
    \869\ This estimate is based on the following calculation: 
11,230 funds x $129 = $1,448,670; $1,448,670 x 2 times per year = 
$2,897,340. The current total annual cost burden of Form N-CSR is 
$3,189,771, which reflects the higher estimated number of filers for 
Form N-CSR at the time of the last renewal for the form. See supra 
n.866.
---------------------------------------------------------------------------

F. Amendments to Registration Statement Forms

    We are also proposing to amend Forms N-1A, N-2, N-3, N-4, and N-6 
to exempt funds from those forms' respective books and records 
disclosures if the information is provided in a fund's most recent 
report on Form N-CEN.\870\ The books and records disclosures required 
by these registration statement forms are not provided in a structured 
format. We believe that having this information in a structured format 
would increase our efficiency in preparing for exams as well as our 
ability to identify current industry trends and practices and, 
therefore, are proposing it be reported on proposed Form N-CEN.
---------------------------------------------------------------------------

    \870\ See supra notes 397-399 and accompanying text. As 
discussed in Part II.F. above, we are also proposing technical and 
conforming amendments to certain registration forms. We do not 
believe these changes will result in any change to the burden and 
cost estimates currently applicable to those forms.
---------------------------------------------------------------------------

    Currently, we estimate the following total hour burden for each of 
the relevant forms: (i) Form N-1A--1,579,974 hours; (ii) Form N-2--
86,533 hours; (iii) Form N-3--2,173 hours; (iv) Form N-4--256,835 
hours; and (v) Form N-6--34,349 hours. We estimate the total hour 
burden, as discussed above, for each respective form will not change as 
result of the proposed amendments. Additionally, we do not believe the 
total cost burden for any of the relevant forms would change as a 
result of the proposed amendments and, therefore, we continue to 
estimate the following total cost burden for each of the respective 
forms: (i) Form N-1A--$124,820,197; (ii) Form N-2--$5,488,048; (iii) 
Form N-3--$139,300; (iv) Form N-4--$26,609,241; and (v) Form N-6--
$3,820,447.

G. Request for Comments

    We request comment on whether our estimates for burden hours and 
any external costs as described above are reasonable. Pursuant to 44 
U.S.C. 3506(c)(2)(B), the Commission solicits comments in order to: (i) 
Evaluate whether the proposed collections of information are necessary 
for the proper performance of the functions of the Commission, 
including whether the information will have practical utility; (ii) 
evaluate the accuracy of the Commission's estimate of the burden of the 
proposed collections of information; (iii) determine whether there are 
ways to enhance the quality, utility, and clarity of the information to 
be collected; and (iv) determine whether there are ways to minimize the 
burden of the collections of information on those who are to respond, 
including through the use of automated collection techniques or other 
forms of information technology.
    The agency has submitted the proposed collection of information to 
OMB for approval. Persons wishing to submit comments on the collection 
of information requirements of the proposed amendments should direct 
them to the Office of Management and Budget, Attention Desk Officer for 
the Securities and Exchange Commission, Office of Information and 
Regulatory Affairs, Washington, DC 20503, and should send a copy to 
Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F 
Street NE., Washington, DC 20549 1090, with reference to File No. S7-
08-15. OMB is required to make a decision concerning the collections of 
information between 30 and 60 days after publication of this

[[Page 33682]]

release; therefore, a comment to OMB is best assured of having its full 
effect if OMB receives it within 30 days after publication of this 
release. Requests for materials submitted to OMB by the Commission with 
regard to these collections of information should be in writing, refer 
to File No. S7-08-15, and be submitted to the Securities and Exchange 
Commission, Office of FOIA Services, 100 F Street NE., Washington, DC 
20549-2736.

VI. Initial Regulatory Flexibility Analysis

    This Initial Regulatory Flexibility Analysis (``IRFA'') has been 
prepared in accordance with section 3 of the Regulatory Flexibility Act 
(``RFA'').\871\ It relates to proposed new Form N-PORT and amendments 
to the Form N-CSR certification requirement, amendments to Regulation 
S-X, the proposed rule governing electronic transmission of shareholder 
reports, the rescission of Forms N-Q and N-SAR, and proposed amendments 
to Forms N-1A, N-2, N-3, N-4, and N-6.
---------------------------------------------------------------------------

    \871\ 5 U.S.C. 603.
---------------------------------------------------------------------------

A. Reasons for and Objectives of the Proposed Actions

    The Commission collects certain information about the funds that it 
regulates. The Commission is proposing new rules, rule amendments, and 
new forms and form amendments that would improve the quality of 
information that funds report to the Commission, benefitting the 
Commission's risk monitoring and oversight, examination, and 
enforcement programs.
    We believe that our proposals would improve the information that 
funds report to their shareholders and the Commission. In addition, the 
proposed new forms would require reports be filed in a structured data 
format (XML) to allow for easier collection and analysis of data by 
Commission staff and the public. This is the format used by Form N-MFP, 
Form 13F, and Form D, which greatly improves the ability of Commission 
staff and other potential users to aggregate and analyze the data 
reported.
    The Commission's objective is to gain more timely and useful 
information about funds' operations and portfolio holdings. The 
Commission also believes that its risk monitoring and oversight, 
examination, and enforcement programs would be improved by requiring 
enhanced information from funds.

B. Legal Basis

    The Commission is proposing the rules and forms contained in this 
document under the authority set forth in the Securities Act, 
particularly, section 19 thereof [15 U.S.C. 77a et seq.], the Trust 
Indenture Act, particularly, section 319 thereof [15 U.S.C. 77aaa et 
seq.], the Exchange Act, particularly, sections 10, 13, 15, 23, and 35A 
thereof [15 U.S.C. 78a et seq.], the Investment Company Act, 
particularly, sections 8, 30, and 38 thereof [15 U.S.C. 80a et seq.], 
and 44 U.S.C. 3506, 3507.

C. Small Entities Subject to the 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.\872\ Commission staff estimates that, as of 
December 2014, approximately 146 registered investment companies, 
including 133 open and closed-end funds (including one SBIC) and 13 
UITs. The Commission staff further estimates that, as of December 2014, 
approximately 28 BDCs are small entities.
---------------------------------------------------------------------------

    \872\ 17 CFR 270.0-10(a).
---------------------------------------------------------------------------

D. Projected Reporting, Recordkeeping, and Other Compliance 
Requirements

    The proposed amendments would create, amend, or eliminate current 
reporting requirements for small entities.
1. Form N-PORT
    Funds currently report portfolio holdings information quarterly on 
Form N-Q (first and third fiscal quarters) and Form N-CSR (second and 
fourth fiscal quarters). The Commission is proposing to adopt new Form 
N-PORT on which funds, other than MMFs, UITs, and SBICs, would be 
required to report portfolio holdings information and information 
related to liquidity, derivatives, securities lending, purchases and 
redemptions, and counterparty exposure each month. Funds would be 
required to file Form N-PORT within 30 days after the end of the 
monthly period using a structured format. Only information reported for 
the third month of each quarter would be available to the public and 
such information would not be made public until 60 days after the end 
of the third month of the fund's fiscal quarter. For smaller funds and 
fund groups (i.e., funds that together with other investment companies 
in the same ``group of related investment companies'' have net assets 
of less than $1 billion as of the end of the most recent fiscal year), 
which would include small entities, we expect to provide for an extra 
12 months (or 30 months after the effective date) to comply with the 
new Form N-PORT reporting requirements.
    Based on our experience with other interactive data filings, we 
estimate that funds would prepare and file their reports on proposed 
Form N-PORT by either (1) licensing a software solution and preparing 
and filing the reports in house, or (2) retaining a service provider to 
provide data aggregation and validation services as part of the 
preparation and filing of reports on proposed Form N-PORT on behalf of 
the fund. We estimate that approximately 132 open and closed-end funds 
(other than money market funds and SBICs), are small entities that 
would be required to file, on a monthly basis, a complete report on 
proposed Form N-PORT reporting certain information regarding the fund 
and its portfolio holdings. As discussed above, we estimate, for funds 
that choose to license a software solution to file reports on Form N-
PORT, that completing, reviewing, and filing Form N-PORT would cost 
$55,970 for each fund, including small entities, in its first year of 
reporting and $46,745 per year for each subsequent year.\873\ We 
further estimate, for funds that choose to retain a third-party service 
provider to provide data aggregation and validation services as part of 
the preparation and filing of reports on Form N-PORT, that completing, 
reviewing, and filing Form N-PORT would cost $54,821 for each fund, 
including small entities, in its first year of reporting, and $38,746 
per year for each subsequent year.\874\
---------------------------------------------------------------------------

    \873\ See supra notes 658-659 and accompanying text.
    \874\ See supra notes 660-661 and accompanying text.
---------------------------------------------------------------------------

2. Rescission of Form N-Q
    Our proposal would rescind Form N-Q in order to eliminate 
unnecessarily duplicative reporting requirements. The proposed 
rescission of Form N-Q would affect all management investment companies 
required to file reports on the form. We expect that approximately 132 
open and closed-end funds are small entities that would be affected by 
the recession of Form N-Q.
    As discussed above, we estimate that the rescission of Form N-Q 
would save $6,762 per year for each fund, including small 
entities.\875\
---------------------------------------------------------------------------

    \875\ The estimated cost is based upon the following 
calculations: ($6,762 = 21 hours/fund x $322/hour compensation for 
professionals commonly used in preparation of Form N-Q filings.) See 
supra Part V.A.2.

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[[Page 33683]]

3. Form N-CEN
    Funds currently report census type information relating to the 
fund's organization, service providers, fees and expenses, portfolio 
strategies and investments, portfolio transactions, and share 
transactions on Form N-SAR. Funds file this form semi-annually with the 
Commission, except for UITs, which must file such reports 
annually.\876\ The utility of the information reported on Form N-SAR 
has been limited for two reasons. First, the data items funds are 
required to report on Form N-SAR have not been updated to reflect 
current Commission staff needs. Second, the technology by which funds 
file reports on Form N-SAR has not been updated and limits the 
Commission staff's ability to extract and analyze reported data.
---------------------------------------------------------------------------

    \876\ See rule 30b1-1 and rule 30a-1.
---------------------------------------------------------------------------

    Because of these limitations, the Commission is proposing to 
replace Form N-SAR with new Form N-CEN. This new form would streamline 
and updated the required data items to reflect current Commission staff 
needs. The Commission is also proposing that funds file reports on Form 
N-CEN in a structured (XML) format, which would allow for easier data 
analysis and use in the Commission's rulemaking, inspection, and risk 
monitoring functions and reduce burdens on filers. Finally, the 
Commission is proposing that funds file reports on Form N-CEN annually, 
opposed to semi-annually, which is currently required for Form N-SAR 
(except UITs, which currently must file reports annually).
    We estimate that approximately 146 registered investment companies, 
including 133 open and closed-end funds (including one SBIC) and 13 
UITs, are small entities that would be required to file a complete 
report on Form N-CEN. Although UITs are required to complete fewer 
items on Form N-CEN than other registered investment companies, the 
burden on UITs would increase because UITs would be required to respond 
to more items in Form N-CEN than they are currently required to respond 
to under Form N-SAR.
    As discussed above, the SEC estimates that completing, reviewing, 
and filing Form N-CEN would cost $10,622 for each fund,\877\ including 
small entities, in its first year of reporting, and $4,252 per year for 
each subsequent year.\878\ We further estimate that completing, 
reviewing, and filing Form N-CEN would cost $9,272 for each UIT,\879\ 
including small entities, in its first year of reporting, and $2,902 
per year for each subsequent year.\880\
---------------------------------------------------------------------------

    \877\ See supra notes 723 and 725 and accompanying text. The 
estimated costs is based upon the following calculations: ($10,622 = 
(13.35 hours/fund ongoing costs + 20 hours/fund initial costs) x 
$318.50/hour compensation for professionals commonly used in 
preparation of Form N-CEN filings).
    \878\ See supra note 724 and accompanying text. The estimated 
costs is based upon the following calculations: ($4,252 = 13.35 
hours/fund ongoing costs x $318.50/hour compensation for 
professionals commonly used in preparation of Form N-CEN filings).
    \879\ See supra notes 723 and 725 and accompanying text. The 
estimated costs is based upon the following calculations: ($9,272 = 
(9.11 hours/UIT ongoing costs + 20 hours/UIT initial costs) x 
$318.50/hour compensation for professionals commonly used in 
preparation of Form N-CEN filings).
    \880\ See supra note 724 and accompanying text. The estimated 
costs is based upon the following calculations: ($2,902 = 9.11 
hours/UIT ongoing costs x $318.50/hour compensation for 
professionals commonly used in preparation of Form N-CEN filings).
---------------------------------------------------------------------------

4. Rescission of Form N-SAR
    Our proposal would rescind Form N-SAR in order to eliminate 
unnecessarily duplicative reporting requirements. We estimate that that 
approximately 146 registered investment companies that are small 
entities, including 133 open and closed-end funds (including one SBIC) 
and 13 UITs would be affected by the rescission of Form N-SAR.
    We estimate that rescinding Form N-SAR would save $9,778 per year 
for each fund, including small entities.\881\ We further estimate that 
rescinding Form N-SAR would save $2,265 per year for each UIT, 
including small entities.\882\
---------------------------------------------------------------------------

    \881\ The estimated savings is based upon the following 
calculations: ($9,778 = 15.35 hours/fund x $318.50/hour compensation 
for professionals commonly used in preparation of Form N-SAR filings 
x 2 filings/year.) See supra notes 724-725 and accompanying text 
(using a weighted average annual hour burden per response for Form 
N-SAR of 14.25 hours).
    \882\ The estimated savings is based upon the following 
calculations: ($2,265 = 7.11 hours/UIT x $318.50/hour compensation 
for professionals commonly used in preparation of Form N-SAR 
filings.) See supra notes 724-725 and accompanying text (using a 
weighted average annual hour burden per response for Form N-SAR of 
14.25 hours).
---------------------------------------------------------------------------

5. Regulation S-X Amendments
    The Commission is also proposing to amend Regulation S-X to require 
new, standardized disclosures regarding fund holdings in open futures 
contracts, open forward foreign currency contracts, and open swap 
contracts, and additional disclosures regarding fund holdings of 
written and purchased options, update the disclosures for other 
investments with conforming amendments, and amend the rules regarding 
the form and content of fund financial statements. We believe that the 
amendments we are proposing today are generally consistent with how 
many funds are currently reporting investments (including derivatives), 
and other information according to current industry practices. The 
Commission believes investors would benefit from our proposed 
amendments because increased disclosure and standardization of fund 
holdings would improve comparability among funds including transparency 
for investors regarding a fund's use of derivatives and the liquidity 
of certain investments. The Commission also believes that greater 
clarity would benefit the industry, while any additional burdens would 
be reduced since similar disclosures would be proposed to be required 
on Form N-PORT.
    We expect that approximately 146 registered investment companies, 
including 133 open and closed-end funds (including one SBIC) and 13 
UITs and, approximately 28 BDCs, are small entities that would be 
affected by the amendments to Regulation S-X. As discussed above, we 
estimate that amending Regulation S-X would cost $2,417 for each fund, 
including small entities, in its first year of reporting, and $806 per 
year for each subsequent year.\883\ As discussed above, we further 
estimate that amending Regulation S-X would cost $2,417 for each UIT, 
including small entities, in its first year of reporting, and $806 per 
year for each subsequent year.\884\
---------------------------------------------------------------------------

    \883\ See supra notes 694-699 and accompanying text.
    \884\ See supra notes 698-701 and accompanying text.
---------------------------------------------------------------------------

6. Web Site Transmission of Shareholder Reports
    The Commission is proposing new rule 30e-3 under the Investment 
Company Act, which would, if adopted, permit, but not require, a fund 
to satisfy requirements under the Act and rules thereunder to transmit 
reports to shareholders if the fund makes the reports and certain other 
materials accessible on its Web site and periodically notifies 
investors of the materials' availability.\885\ Proposed rule 30e-3 
would provide that a fund's annual or semiannual report to shareholders 
would be considered ``transmitted'' to a shareholder of record if 
certain conditions set forth in the rule are satisfied.\886\ Funds that 
do not maintain Web sites or that otherwise wish to transmit 
shareholder reports in paper or pursuant the Commission's

[[Page 33684]]

existing electronic delivery guidance would continue to be able to 
satisfy their transmission requirements by those transmission methods.
---------------------------------------------------------------------------

    \885\ See supra Part II.D.
    \886\ Proposed rule 30e-3(a).
---------------------------------------------------------------------------

    We expect that approximately 146 registered investment companies, 
including 133 open and closed-end funds (including one SBIC) and 13 
UITs, are small entities that would rely on the Web site reporting 
rules. As discussed above, the SEC estimates that our proposed Web site 
reporting would save $4,792 for each fund, including small entities, in 
its first year of reporting, and $6,122 per year for each subsequent 
year.\887\
---------------------------------------------------------------------------

    \887\ See supra notes 715, 717, and 718 and accompanying text.
---------------------------------------------------------------------------

7. Amendments to Form N-CSR
    Form N-Q and Form N-CSR currently require a quarterly SOX 
certification relating to the accuracy of information reported to the 
Commission and disclosure controls and procedures and internal control 
over financial reporting. To facilitate the elimination of Form N-Q, we 
are proposing to expand the SOX certification for Form N-CSR to six 
months to maintain coverage for the entire fiscal year. We expect that 
approximately 146 registered investment companies, including 133 open 
and closed-end funds (including one SBIC) and 13 UITs, are small 
entities that would be affected by the amendments to Form N-CSR. As 
discussed above, the Commission does not believe that the costs 
associated with reporting on Form N-CSR for will change for funds, 
including small entities, as a result of the proposed amendments to 
Form N-CSR.\888\
---------------------------------------------------------------------------

    \888\ See supra Part V.E.
---------------------------------------------------------------------------

8. Amendments to Registration Statement Forms
    We are also proposing to amend Forms N-1A, N-2, N-3, N-4, and N-6 
to exempt funds from those forms' respective books and records 
disclosures if the information is provided in a fund's most recent 
report on Form N-CEN.\889\ The books and records disclosures required 
by these registration statement forms are not provided in a structured 
format. We believe that having this information in a structured format 
would increase our efficiency in preparing for exams as well as our 
ability to identify current industry trends and practices and, 
therefore, are proposing it be reported on proposed Form N-CEN. We are 
also proposing amendments that would restrict funds that would rely on 
proposed rule 30e-3 from providing a Summary Schedule in their 
shareholder reports in lieu of a complete schedule, and certain 
technical and conforming amendments to Forms N-1A, N-2 and N-3 to refer 
to the availability of portfolio holdings schedules attached to reports 
on Form N-PORT and posted on fund Web sites rather than on reports on 
Form N-Q.
---------------------------------------------------------------------------

    \889\ See supra notes 397-399 and accompanying text.
---------------------------------------------------------------------------

    We expect that approximately 146 registered investment companies, 
including 133 open and closed-end funds (including one SBIC) and 13 
UITs, and approximately 28 BDCs, are small entities that would be 
required to file registration statements. As discussed above, the SEC 
estimates that our proposed amendments would not change for funds, 
including small entities, as a result of our proposed amendments to 
Forms N-1A, N-2, N-3, N-4, and N-6.\890\
---------------------------------------------------------------------------

    \890\ See supra Part V.F.
---------------------------------------------------------------------------

E. Duplicative, Overlapping, or Conflicting Federal Rules

    Funds currently report portfolio holdings information for the first 
and third fiscal quarters on Form N-Q and for the second and fourth 
fiscal quarters on Form N-CSR. As a result of our proposal to create 
new Form N-PORT, on which funds will report portfolio holdings 
information monthly, the Commission is proposing to eliminate Form N-Q, 
which will reduce duplication of portfolio holdings information for the 
first and third fiscal quarters. We acknowledge that Form N-CSR, Form 
N-PORT, Regulation S-X, and Web reporting would require reporting of 
some duplicative information, including information currently reported 
on the fund's registration statements and annual reports. However, we 
believe that both the nature and structure of the reporting are 
sufficiently different to justify overlapping information requirements 
on the fund's Web site or on respective Commission forms.\891\
---------------------------------------------------------------------------

    \891\ For example, the purpose of Form N-PORT is to provide 
structured portfolio holdings data for Commission staff and other to 
analyze, while the purpose of web reporting is to provide 
shareholders with investor-friendly portfolio disclosures on a 
quarterly basis.
---------------------------------------------------------------------------

    Funds currently report census information on Form N-SAR. As part of 
our proposed amendments, the Commission is proposing to replace Form N-
SAR with new Form N-CEN. In addition, we are proposing that reports on 
Form N-CEN be filed annually, as opposed to semi-annually, which is 
generally required for Form N-SAR. Again, we acknowledge that Form N-
CEN would require reporting of some duplicative information, including 
information currently reported on the fund's registration statements 
and annual reports. Like Form N-PORT and Form N-CSR, we believe that 
both the nature and structure of the reporting are sufficiently 
different to justify overlapping information requirements.
    Finally, in order to reduce duplicative information in Form N-CEN 
and fund registration statements, we are proposing to amend Forms N-1A, 
N-2, N-3, N-4, and N-6 to exempt funds from those forms' respective 
books and records disclosures if the information is provided in a 
fund's most recent report on Form N-CEN.

F. Significant Alternatives

    The RFA directs the Commission to consider significant alternatives 
that would accomplish our stated objective, while minimizing any 
significant economic impact on small entities. The Commission 
considered the following alternatives for small entities in relation 
our proposed amendments: (i) Establishing different reporting 
requirements or frequency to account for resources available to small 
entities; (ii) using performance rather than design standards; and 
(iii) exempting small entities from all or part of the proposal.
    Small entities currently follow the same requirements that large 
entities do when filing reports on Form N-SAR, Form N-CSR, and Form N-
Q. The Commission believes that establishing different reporting 
requirements or frequency for small entities would not be consistent 
with the Commission's goal of industry oversight and investor 
protection. However, as discussed above, we are proposing a delayed 
compliance period for small entities that would file reports on Form N-
PORT.

G. General Request for Comment

    The Commission requests comments regarding this IRFA. We request 
comments on the number of small entities that may be affected by our 
proposed rules and guidelines, and whether the proposed rules and 
guidelines would have any effects not considered in this analysis. We 
request that commenters describe the nature of any effects on small 
entities subject to the rules, and provide empirical data to support 
the nature and extent of such effects. We also request comment on the 
proposed compliance burdens and the effect these burdens would have on 
smaller entities.

[[Page 33685]]

VII. Consideration of Impact on The Economy

    For purposes of the Small Business Regulatory Enforcement Fairness 
Act of 1996 (``SBREFA''),\892\ the Commission must advise OMB whether a 
proposed regulation constitutes a ``major'' rule. Under SBREFA, a rule 
is considered ``major'' where, if adopted, it results in or is likely 
to result in:
---------------------------------------------------------------------------

    \892\ Public Law 104-121, Title II, 110 Stat. 857 (1996) 
(codified in various sections of 5 U.S.C., 15 U.S.C., and as a note 
to 5 U.S.C. 601).
---------------------------------------------------------------------------

     An annual effect on the economy of $100 million or more;
     A major increase in costs or prices for consumers or 
individual industries; or
     Significant adverse effects on competition, investment, or 
innovation.
    We request comment on whether our proposal would be a ``major 
rule'' for purposes of SBREFA. We solicit comment and empirical data 
on:
     The potential effect on the U.S. economy on an annual 
basis;
     Any potential increase in costs or prices for consumers or 
individual industries; and
     Any potential effect on competition, investment, or 
innovation.
    Commenters are requested to provide empirical data and other 
factual support for their views to the extent possible.

VIII. Statutory Authority and Text of Proposed Amendments

    We are proposing the rules and forms contained in this document 
under the authority set forth in the Securities Act, particularly, 
section 19 thereof [15 U.S.C. 77a et seq.], the Trust Indenture Act, 
particularly, section 319 thereof [15 U.S.C. 77aaa et seq.], the 
Exchange Act, particularly, sections 10, 13, 15, 23, and 35A thereof 
[15 U.S.C. 78a et seq.], the Investment Company Act, particularly, 
sections 8, 30, and 38 thereof [15 U.S.C. 80a et seq.], and 44 U.S.C. 
3506, 3507.

List of Subjects

17 CFR Part 200

    Administrative practice and procedure, Organization and functions 
(Government agencies).

17 CFR Part 210

    Accounting, Investment companies, Reporting and recordkeeping 
requirements, Securities.

17 CFR Parts 230 and 239

    Investment companies, Reporting and recordkeeping requirements, 
Securities.

17 CFR Part 232

    Administrative practice and procedure, Reporting and recordkeeping 
requirements, Securities.

17 CFR Parts 240 and 249

    Reporting and recordkeeping requirements, Securities.

17 CFR Parts 270 and 274

    Investment companies, Reporting and recordkeeping requirements, 
Securities.

    For reasons set forth in the preamble, Title 17, Chapter II of the 
Code of Federal Regulations is proposed to be amended as follows:

PART 200--ORGANIZATION; CONDUCT AND ETHICS; AND INFORMATION AND 
REQUESTS

Subpart N--Commission Information Collection Requirements Under the 
Paperwork Reduction Act: OMB Control Numbers

0
1. The authority citation for Part 200 Subpart N continues to read as 
follows:

    Authority: 44 U.S.C. 3506; 44 U.S.C. 3507.

0
2. Section 200.800 is amended in paragraph (b) by removing the entry 
for ``Form N-SAR'' and adding in its place an entry ``Form N-CEN'' and 
adding an entry in numerical order by part and section number for 
``Form N-PORT'', to read as follows:


Sec.  200.800  OMB control numbers assigned pursuant to the Paperwork 
Reduction Act.

* * * * *
    (b) * * *

----------------------------------------------------------------------------------------------------------------
                                               17 CFR part or
                                                section where
      Information collection requirement       identified and               Current OMB control No.
                                                  described
----------------------------------------------------------------------------------------------------------------
 
                                                  * * * * * * *
Form N-CEN...................................         274.101  [OMB control number TBD].
 
                                                  * * * * * * *
Form N-PORT..................................         274.150  [OMB control number TBD].
 
                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------

PART 210--FORM AND CONTENT OF AND REQUIREMENTS FOR FINANCIAL 
STATEMENTS, SECURITIES ACT OF 1933, SECURITIES EXCHANGE ACT OF 
1934, INVESTMENT COMPANY ACT OF 1940, INVESTMENT ADVISERS ACT OF 
1940, AND ENERGY POLICY AND CONSERVATION ACT OF 1975

0
3. The authority citation for part 210 continues to read as follows:

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77z-2, 77z-3, 
77aa(25), 77aa(26), 77nn(25), 77nn(26), 78c, 78j-1, 78l, 78m, 78n, 
78o(d), 78q, 78u-5, 78w, 78ll, 78mm, 80a-8, 80a-20, 80a-29, 80a-30, 
80a-31, 80a-37(a), 80b-3, 80b-11, 7202 and 7262, unless otherwise 
noted.

0
4. Revise Sec.  210.6-01 and the undesignated heading preceding it to 
read as follows:

Registered Investment Companies and Business Development Companies


Sec.  210.6-01  Application of Sec. Sec.  210.6-01 to 210.6-10.

    Sections 210.6-01 to 210.6-10 shall be applicable to financial 
statements filed for registered investment companies and business 
development companies.
0
5. Revise Sec.  210.6-03 to read as follows:


Sec.  210.6-03  Special rules of general application to registered 
investment companies and business development companies.

    The financial statements filed for persons to which Sec. Sec.  
210.6-01 to 210.6-10 are applicable shall be prepared in accordance 
with the following special

[[Page 33686]]

rules in addition to the general rules in Sec. Sec.  210.1-01 to 210.4-
10 (Articles 1, 2, 3, and 4). Where the requirements of a special rule 
differ from those prescribed in a general rule, the requirements of the 
special rule shall be met.
    (a) Content of financial statements. The financial statements shall 
be prepared in accordance with the requirements of this part 
(Regulation S-X) notwithstanding any provision of the articles of 
incorporation, trust indenture or other governing legal instruments 
specifying certain accounting procedures inconsistent with those 
required in Sec. Sec.  210.6-01 to 210.6-10.
    (b) Audited financial statements. Where, under Article 3 of this 
part, financial statements are required to be audited, the independent 
accountant shall have been selected and ratified in accordance with 
section 32 of the Investment Company Act of 1940 (15 U.S.C. 80a-31).
    (c) Consolidated and combined statements. (1) Consolidated and 
combined statements filed for registered investment companies and 
business development companies shall be prepared in accordance with 
Sec. Sec.  210.3A-01 to 210.3A-04 (Article 3A) except that:
    (i) Statements of the registrant may be consolidated only with the 
statements of subsidiaries which are investment companies;
    (ii) A consolidated statement of the registrant and any of its 
investment company subsidiaries shall not be filed unless accompanied 
by a consolidating statement which sets forth the individual statements 
of each significant subsidiary included in the consolidated statement: 
Provided, however, That a consolidating statement need not be filed if 
all included subsidiaries are totally held; and
    (iii) Consolidated or combined statements filed for subsidiaries 
not consolidated with the registrant shall not include any investment 
companies unless accompanied by consolidating or combining statements 
which set forth the individual statements of each included investment 
company which is a significant subsidiary.
    (2) If consolidating or combining statements are filed, the amounts 
included under each caption in which financial data pertaining to 
affiliates is required to be furnished shall be subdivided to show 
separately the amounts:
    (i) Eliminated in consolidation; and
    (ii) Not eliminated in consolidation.
    (d) Valuation of investments. The balance sheets of registered 
investment companies and business development companies, other than 
issuers of face-amount certificates, shall reflect all investments at 
value, with the aggregate cost of each category of investment reported 
under Sec. Sec.  210.6-04.1, 6-04.2, 6-04.3 and 6-04.9 or the aggregate 
cost of each category of investment reported under Sec.  210.6-05.1 
shown parenthetically. State in a note the methods used in determining 
value of investments. As required by section 28(b) of the Investment 
Company Act of 1940 (15 U.S.C. 80a-28(b)), qualified assets of face-
amount certificate companies shall be valued in accordance with certain 
provisions of the Code of the District of Columbia. For guidance as to 
valuation of securities, see Sec. Sec.  404.03 to 404.05 of the 
Codification of Financial Reporting Policies.
    (e) Qualified assets. State in a note the nature of any investments 
and other assets maintained or required to be maintained, by applicable 
legal instruments, in respect of outstanding face-amount certificates. 
If the nature of the qualifying assets and amount thereof are not 
subject to the provisions of section 28 of the Investment Company Act 
of 1940 (15 U.S.C. 80a-28), a statement to that effect shall be made.
    (f) Restricted securities. State in a note unless disclosed 
elsewhere the following information as to investment securities which 
cannot be offered for public sale without first being registered under 
the Securities Act of 1933 (restricted securities):
    (1) The policy of the person with regard to acquisition of 
restricted securities.
    (2) The policy of the person with regard to valuation of restricted 
securities. Specific comments shall be given as to the valuation of an 
investment in one or more issues of securities of a company or group of 
affiliated companies if any part of such investment is restricted and 
the aggregate value of the investment in all issues of such company or 
affiliated group exceeds five percent of the value of total assets. (As 
used in this paragraph, the term affiliated shall have the meaning 
given in Sec.  210.6-02(a).)
    (3) A description of the person's rights with regard to demanding 
registration of any restricted securities held at the date of the 
latest balance sheet.
    (g) Income recognition. Dividends shall be included in income on 
the ex-dividend date; interest shall be accrued on a daily basis. 
Dividends declared on short positions existing on the record date shall 
be recorded on the ex-dividend date and included as an expense of the 
period.
    (h) Federal income taxes. The company's status as a regulated 
investment company as defined in subtitle A, chapter 1, subchapter M of 
the Internal Revenue Code, as amended, shall be stated in a note 
referred to in the appropriate statements. Such note shall also 
indicate briefly the principal assumptions on which the company relied 
in making or not making provisions for income taxes. However, a company 
which retains realized capital gains and designates such gains as a 
distribution to shareholders in accordance with section 852(b)(3)(D) of 
the Internal Revenue Code shall, on the last day of its taxable year 
(and not earlier), make provision for taxes on such undistributed 
capital gains realized during such year.
    (i) Issuance and repurchase by a registered investment company or 
business development company of its own securities. Disclose for each 
class of the company's securities:
    (1) The number of shares, units, or principal amount of bonds sold 
during the period of report, the amount received therefor, and, in the 
case of shares sold by closed-end management investment companies, the 
difference, if any, between the amount received and the net asset value 
or preference in involuntary liquidation (whichever is appropriate) of 
securities of the same class prior to such sale; and
    (2) The number of shares, units, or principal amount of bonds 
repurchased during the period of report and the cost thereof. Closed-
end management investment companies shall furnish the following 
additional information as to securities repurchased during the period 
of report:
    (i) As to bonds and preferred shares, the aggregate difference 
between cost and the face amount or preference in involuntary 
liquidation and, if applicable net assets taken at value as of the date 
of repurchase were less than such face amount or preference, the 
aggregate difference between cost and such net asset value;
    (ii) As to common shares, the weighted average discount per share, 
expressed as a percentage, between cost of repurchase and the net asset 
value applicable to such shares at the date of repurchases.

Note to paragraphs (h)(2)(i) and (ii): The information required by 
paragraphs (h)(2)(i) and (ii) of this section may be based on 
reasonable estimates if it is impracticable to determine the exact 
amounts involved.
    (j) Series companies. (1) The information required by this part 
shall, in the case of a person which in essence

[[Page 33687]]

is comprised of more than one separate investment company, be given as 
if each class or series of such investment company were a separate 
investment company; this shall not prevent the inclusion, at the option 
of such person, of information applicable to other classes or series of 
such person on a comparative basis, except as to footnotes which need 
not be comparative.
    (2) If the particular class or series for which information is 
provided may be affected by other classes or series of such investment 
company, such as by the offset of realized gains in one series with 
realized losses in another, or through contingent liabilities, such 
situation shall be disclosed.
    (k) Certificate reserves. (1) For companies issuing face-amount 
certificates subsequent to December 31, 1940 under the provisions of 
section 28 of the Investment Company Act of 1940 (15 U.S.C. 80a-28), 
balance sheets shall reflect reserves for outstanding certificates 
computed in accordance with the provisions of section 28(a) of the Act.
    (2) For other companies, balance sheets shall reflect reserves for 
outstanding certificates determined as follows:
    (i) For certificates of the installment type, such amount which, 
together with the lesser of future payments by certificate holders as 
and when accumulated at a rate not to exceed 3\1/2\ per centum per 
annum (or such other rate as may be appropriate under the circumstances 
of a particular case) compounded annually, shall provide the minimum 
maturity or face amount of the certificate when due.
    (ii) For certificates of the fully-paid type, such amount which, as 
and when accumulated at a rate not to exceed 3\1/2\ per centum per 
annum (or such other rate as may be appropriate under the circumstances 
of a particular case) compounded annually, shall provide the amount or 
amounts payable when due.
    (iii) Such amount or accrual therefor, as shall have been credited 
to the account of any certificate holder in the form of any credit, or 
any dividend, or any interest in addition to the minimum maturity or 
face amount specified in the certificate, plus any accumulations on any 
amount so credited or accrued at rates required under the terms of the 
certificate.
    (iv) An amount equal to all advance payments made by certificate 
holders, plus any accumulations thereon at rates required under the 
terms of the certificate.
    (v) Amounts for other appropriate contingency reserves, for death 
and disability benefits or for reinstatement rights on any certificate 
providing for such benefits or rights.
    (l) Inapplicable captions. Attention is directed to the provisions 
of Sec. Sec.  210.4-02 and 210.4-03 which permit the omission of 
separate captions in financial statements as to which the items and 
conditions are not present, or the amounts involved not significant. 
However, amounts involving directors, officers, and affiliates shall 
nevertheless be separately set forth except as otherwise specifically 
permitted under a particular caption.
    (m) Securities Lending. State in a note unless disclosed elsewhere 
the following information regarding securities lending activities and 
cash collateral management:
    (1) The gross income from securities lending activities, including 
income from cash collateral reinvestment;
    (2) The dollar amount of all fees and/or compensation paid by the 
registrant for securities lending activities and related services, 
including borrower rebates and cash collateral management services;
    (3) The net income from securities lending activities;
    (4) The terms governing the compensation of the securities lending 
agent, including any revenue sharing split, with the related percentage 
split between the registrant and the securities lending agent, and/or 
any fee-for-service, and a description of services included;
    (5) The details of any other fees paid directly or indirectly, 
including any fees paid directly by the registrant for cash collateral 
management and any management fee deducted from a pooled investment 
vehicle in which cash collateral is invested; and
    (6) The monthly average of the value of portfolio securities on 
loan.

0
6. Revise Sec.  210.6-04 to read as follows:


Sec.  210.6-04  Balance sheets.

    This section is applicable to balance sheets filed by registered 
investment companies and business development companies except for 
persons who substitute a statement of net assets in accordance with the 
requirements specified in Sec.  210.6-05, and issuers of face-amount 
certificates which are subject to the special provisions of Sec.  
210.6-06. Balance sheets filed under this rule shall comply with the 
following provisions:
Assets
    1. Investments in securities of unaffiliated issuers.
    2. Investments in and advances to affiliates. State separately 
investments in and advances to: (a) Controlled companies and (b) other 
affiliates.
    3. Other investments. State separately amounts of assets related to 
(a) variation margin receivable on futures contracts, (b) forward 
foreign currency contracts; (c) swap contracts; and (d) investments--
other than those presented in Sec. Sec.  210.12-12, 12-12A, 12-12B, 12-
13, 12-13A, 12-13B, and 12-13C.
    4. Cash. Include under this caption cash on hand and demand 
deposits. Provide in a note to the financial statements the information 
required under Sec.  210.5-02.1 regarding restrictions and compensating 
balances.
    5. Receivables. (a) State separately amounts receivable from (1) 
sales of investments; (2) subscriptions to capital shares; (3) 
dividends and interest; (4) directors and officers; and (5) others.
    (b) If the aggregate amount of notes receivable exceeds 10 percent 
of the aggregate amount of receivables, the above information shall be 
set forth separately, in the balance sheet or in a note thereto, for 
accounts receivable and notes receivable.
    6. Deposits for securities sold short and other investments. State 
separately amounts held by others in connection with: (a) Short sales; 
(b) open option contracts (c) futures contracts, (d) forward foreign 
currency contracts; (e) swap contracts; and (f) investments--other than 
those presented in Sec. Sec.  210.12-12, 12-12A, 12-12B, 12-13, 12-13A, 
12-13B, and 12-13C.
    7. Other assets. State separately (a) prepaid and deferred 
expenses; (b) pension and other special funds; (c) organization 
expenses; and (d) any other significant item not properly classified in 
another asset caption.
    8. Total assets.
Liabilities
    9. Other investments. State separately amounts of liabilities 
related to: (a) Securities sold short; (b) open option contracts 
written; (c) variation margin payable on futures contracts, (d) forward 
foreign currency contracts; (e) swap contracts; and (f) investments--
other than those presented in Sec. Sec.  210.12-12, 12-12A, 12-12B, 12-
13, 12-13A, 12-13B, and 12-13C.
    10. Accounts payable and accrued liabilities. State separately 
amounts payable for: (a) Other purchases of securities; (b) capital 
shares redeemed; (c) dividends or other distributions on capital 
shares; and (d) others. State separately the amount of any other 
liabilities which are material.

[[Page 33688]]

    11. Deposits for securities loaned. State the value of securities 
loaned and indicate the nature of the collateral received as security 
for the loan, including the amount of any cash received.
    12. Other liabilities. State separately (a) amounts payable for 
investment advisory, management and service fees; and (b) the total 
amount payable to: (1) Officers and directors; (2) controlled 
companies; and (3) other affiliates, excluding any amounts owing to 
noncontrolled affiliates which arose in the ordinary course of business 
and which are subject to usual trade terms.
    13. Notes payable, bonds and similar debt. (a) State separately 
amounts payable to: (1) Banks or other financial institutions for 
borrowings; (2) controlled companies; (3) other affiliates; and (4) 
others, showing for each category amounts payable within one year and 
amounts payable after one year.
    (b) Provide in a note the information required under Sec.  210.5-
02.19(b) regarding unused lines of credit for short-term financing and 
Sec.  210.5-02.22(b) regarding unused commitments for long-term 
financing arrangements.
    14. Total liabilities.
    15. Commitments and contingent liabilities.
Net Assets
    16. Units of capital. (a) Disclose the title of each class of 
capital shares or other capital units, the number authorized, the 
number outstanding, and the dollar amount thereof.
    (b) Unit investment trusts, including those which are issuers of 
periodic payment plan certificates, also shall state in a note to the 
financial statements: (1) The total cost to the investors of each class 
of units or shares; (2) the adjustment for market depreciation or 
appreciation; (3) other deductions from the total cost to the investors 
for fees, loads and other charges, including an explanation of such 
deductions; and (4) the net amount applicable to the investors.
    17. Accumulated undistributed income (loss). Disclose:
    (a) The accumulated undistributed investment income-net,
    (b) accumulated undistributed net realized gains (losses) on 
investment transactions, and
    (c) net unrealized appreciation (depreciation) in value of 
investments at the balance sheet date.
    18. Other elements of capital. Disclose any other elements of 
capital or residual interests appropriate to the capital structure of 
the reporting entity.
    19. Net assets applicable to outstanding units of capital. State 
the net asset value per share.
0
7. Revise Sec.  210.6-05 to read as follows:


Sec.  210.6-05  Statements of net assets.

    In lieu of the balance sheet otherwise required by Sec.  210.6-04, 
persons may substitute a statement of net assets if at least 95 percent 
of the amount of the person's total assets are represented by 
investments in securities of unaffiliated issuers. If presented in such 
instances, a statement of net assets shall consist of the following:
Statements of Net Assets
    1. A schedule of investments in securities of unaffiliated issuers 
as prescribed in Sec.  210.12-12.
    2. The excess (or deficiency) of other assets over (under) total 
liabilities stated in one amount, except that any amounts due from or 
to officers, directors, controlled persons, or other affiliates, 
excluding any amounts owing to noncontrolled affiliates which arose in 
the ordinary course of business and which are subject to usual trade 
terms, shall be stated separately.
    3. Disclosure shall be provided in the notes to the financial 
statements for any item required under Sec.  210.6-04.3 and Sec. Sec.  
210.6-04.9 to 210.6-04.13.
    4. The balance of the amounts captioned as net assets. The number 
of outstanding shares and net asset value per share shall be shown 
parenthetically.
    5. The information required by (i) Sec.  210.6-04.16, (ii) Sec.  
210.6-04.17 and (iii) Sec.  210.6-04.18 shall be furnished in a note to 
the financial statements.
0
8. Revise Sec.  210.6-07 to read as follows:


Sec.  210.6-07  Statements of operations.

    Statements of operations filed by registered investment companies 
and business development companies, other than issuers of face-amount 
certificates subject to the special provisions of Sec.  210.6-08, shall 
comply with the following provisions:
Statements of Operations
    1. Investment income. State separately income from: (a) Cash 
dividends; (b) non-cash dividends; (c) interest on securities excluding 
payment in kind interest; (d) payment in kind interest on securities; 
and (e) other income. If income from investments in or indebtedness of 
affiliates is included hereunder, such income shall be segregated under 
an appropriate caption subdivided to show separately income from: (1) 
Controlled companies; and (2) other affiliates. If non-cash dividends 
or payment in kind interest are included in income, the bases of 
recognition and measurement used in respect to such amounts shall be 
disclosed. Any other category of income which exceeds five percent of 
the total shown under this caption shall be stated separately.
    2. Expenses. (a) State separately the total amount of investment 
advisory, management and service fees, and expenses in connection with 
research, selection, supervision, and custody of investments. Amounts 
of expenses incurred from transactions with affiliated persons shall be 
disclosed together with the identity of and related amount applicable 
to each such person accounting for five percent or more of the total 
expenses shown under this caption together with a description of the 
nature of the affiliation. Expenses incurred within the person's own 
organization in connection with research, selection and supervision of 
investments shall be stated separately. Reductions or reimbursements of 
management or service fees shall be shown as a negative amount or as a 
reduction of total expenses shown under this caption.
    (b) State separately any other expense item the amount of which 
exceeds five percent of the total expenses shown under this caption.
    (c) A note to the financial statements shall include information 
concerning management and service fees, the rate of fee, and the base 
and method of computation. State separately the amount and a 
description of any fee reductions or reimbursements representing: (1) 
Expense limitation agreements or commitments; and (2) offsets received 
from broker-dealers showing separately for each amount received or due 
from (i) unaffiliated persons; and (ii) affiliated persons. If no 
management or service fees were incurred for a period, state the reason 
therefor.
    (d) If any expenses were paid otherwise than in cash, state the 
details in a note.
    (e) State in a note to the financial statements the amount of 
brokerage commissions (including dealer markups) paid to affiliated 
broker-dealers in connection with purchase and sale of investment 
securities. Open-end management companies shall state in a note the net 
amounts of sales charges deducted from the proceeds of sale of capital 
shares which were retained by any affiliated principal underwriter or 
other affiliated broker-dealer.
    (f) State separately all amounts paid in accordance with a plan 
adopted

[[Page 33689]]

under 17 CFR 270.12b-1 of this chapter. Reimbursement to the fund of 
expenses incurred under such plan (12b-1 expense reimbursement) shall 
be shown as a negative amount and deducted from current 12b-1 expenses. 
If 12b-1 expense reimbursements exceed current 12b-1 costs, such excess 
shall be shown as a negative amount used in the calculation of total 
expenses under this caption.
    (g)(1) Brokerage/Service Arrangements. If a broker-dealer or an 
affiliate of the broker-dealer has, in connection with directing the 
person's brokerage transactions to the broker-dealer, provided, agreed 
to provide, paid for, or agreed to pay for, in whole or in part, 
services provided to the person (other than brokerage and research 
services as those terms are used in section 28(e) of the Securities 
Exchange Act of 1934 [15 U.S.C. 78bb(e)]), include in the expense items 
set forth under this caption the amount that would have been incurred 
by the person for the services had it paid for the services directly in 
an arms-length transaction.
    (2) Expense Offset Arrangements. If the person has entered into an 
agreement with any other person pursuant to which such other person 
reduces, or pays a third party which reduces, by a specified or 
reasonably ascertainable amount, its fees for services provided to the 
person in exchange for use of the person's assets, include in the 
expense items set forth under this caption the amount of fees that 
would have been incurred by the person if the person had not entered 
into the agreement.
    (3) Financial Statement Presentation. Show the total amount by 
which expenses are increased pursuant to paragraphs (1) and (2) of this 
paragraph (2)(g) as a corresponding reduction in total expenses under 
this caption. In a note to the financial statements, state separately 
the total amounts by which expenses are increased pursuant to 
paragraphs (1) and (2) of this paragraph (2)(g), and list each category 
of expense that is increased by an amount equal to at least 5 percent 
of total expenses. If applicable, the note should state that the person 
could have employed the assets used by another person to produce income 
if it had not entered into an arrangement described in paragraph 
(2)(g)(2) of this section.
    3. Interest and amortization of debt discount and expense. Provide 
in the body of the statements or in the footnotes, the average dollar 
amount of borrowings and the average interest rate.
    4. Investment income before income tax expense.
    5. Income tax expense. Include under this caption only taxes based 
on income.
    6. Investment income--net.
    7. Realized and unrealized gain (loss) on investments--net. (a) 
State separately the net realized gain or loss from: (1) Transactions 
in investment securities of unaffiliated issuers, (2) transactions in 
investment securities of affiliated issuers, (3) expiration or closing 
of option contracts written, (4) closed short positions in securities, 
(5) expiration or closing of futures contracts, (6) settlement of 
forward foreign currency contracts, (7) expiration or closing of swap 
contracts, and (8) transactions in other investments held during the 
period.
    (b) Distributions of realized gains by other investment companies 
shall be shown separately under this caption.
    (c) State separately the amount of the net increase or decrease 
during the period in the unrealized appreciation or depreciation in the 
value of: (1) Investment securities of unaffiliated issuers, (2) 
investment securities of affiliated issuers, (3) option contracts 
written, (4) short positions in securities, (5) futures contracts, (6) 
forward foreign currency contracts, (7) swap contracts, and (8) other 
investments held at the end of the period.
    (d) State separately any: (1) Federal income taxes and (2) other 
income taxes applicable to realized and unrealized gain (loss) on 
investments, distinguishing taxes payable currently from deferred 
income taxes.
    8. Net gain (loss) on investments.
    9. Net increase (decrease) in net assets resulting from operations.
0
9. Revise Sec.  210.6-10 to read as follows:


Sec.  210.6-10  What schedules are to be filed.

    (a) The schedules shall be examined by an independent accountant if 
the related financial statements are so examined.
    (b) Management investment companies. (1) Except as otherwise 
provided in the applicable form, the schedules specified in this 
paragraph shall be filed for management investment companies as of the 
dates of the most recent audited balance sheet and any subsequent 
unaudited statement being filed for each person or group.
    Schedule I--Investments in securities of unaffiliated issuers. The 
schedule prescribed by Sec.  210.12-12 shall be filed in support of 
caption 1 of each balance sheet.
    Schedule II--Investments in and advances to affiliates. The 
schedule prescribed by Sec.  210.12-14 shall be filed in support of 
caption 2 of each balance sheet.
    Schedule III--Investments--securities sold short. The schedule 
prescribed by Sec.  210.12-12A shall be filed in support of caption 
9(a) of each balance sheet.
    Schedule IV--Open option contracts written. The schedule prescribed 
by Sec.  210.12-13 shall be filed in support of caption 9(b) of each 
balance sheet.
    Schedule V--Open futures contracts. The schedule prescribed by 
Sec.  210.12-13A shall be filed in support of captions 3(a) and 9(c) of 
each balance sheet.
    Schedule VI--Open forward foreign currency contracts. The schedule 
prescribed by Sec.  210.12-13B shall be filed in support of captions 
3(b) and 9(d) of each balance sheet.
    Schedule VII--Open swap contracts. The schedule prescribed by Sec.  
210.12-13C shall be filed in support of captions 3(c) and 9(e) of each 
balance sheet.
    Schedule VIII--Investments--other than those presented in 
Sec. Sec.  210.12-12, 12-12A, 12-12B, 12-13, 12-13A, 12-13B and 12-13C. 
The schedule prescribed by Sec.  210.12-13D shall be filed in support 
of captions 3(d) and 9(f) of each balance sheet.
    (2) When permitted by the applicable form, the schedule specified 
in this paragraph may be filed for management investment companies as 
of the dates of the most recent audited balance sheet and any 
subsequent unaudited statement being filed for each person or group.
    Schedule IX--Summary schedule of investments in securities of 
unaffiliated issuers. The schedule prescribed by Sec.  210.12-12B may 
be filed in support of caption 1 of each balance sheet.
    (c) Unit investment trusts. Except as otherwise provided in the 
applicable form:
    (1) Schedules I and II, specified below in this section, shall be 
filed for unit investment trusts as of the dates of the most recent 
audited balance sheet and any subsequent unaudited statement being 
filed for each person or group.
    (2) Schedule III, specified below in this section, shall be filed 
for unit investment trusts for each period for which a statement of 
operations is required to be filed for each person or group.
    Schedule I--Investment in securities. The schedule prescribed by 
Sec.  210.12-12 shall be filed in support of caption 1 of each balance 
sheet (Sec.  210.6-04).
    Schedule II--Allocation of trust assets to series of trust shares. 
If the trust assets are specifically allocated to different series of 
trust shares, and if such allocation is not shown in the balance sheet 
in columnar form or by the filing of separate statements for each

[[Page 33690]]

series of trust shares, a schedule shall be filed showing the amount of 
trust assets, indicated by each balance sheet filed, which is 
applicable to each series of trust shares.
    Schedule III--Allocation of trust income and distributable funds to 
series of trust shares. If the trust income and distributable funds are 
specifically allocated to different series of trust shares and if such 
allocation is not shown in the statement of operations in columnar form 
or by the filing of separate statements for each series of trust 
shares, a schedule shall be submitted showing the amount of income and 
distributable funds, indicated by each statement of operations filed, 
which is applicable to each series of trust shares.
    (d) Face-amount certificate investment companies. Except as 
otherwise provided in the applicable form:
    (1) Schedules I, V and X, specified below, shall be filed for face-
amount certificate investment companies as of the dates of the most 
recent audited balance sheet and any subsequent unaudited statement 
being filed for each person or group.
    (2) All other schedules specified below in this section shall be 
filed for face-amount certificate investment companies for each period 
for which a statement of operations is filed, except as indicated for 
Schedules III and IV.
    Schedule I--Investment in securities of unaffiliated issuers. The 
schedule prescribed by Sec.  210.12-21 shall be filed in support of 
caption 1 and, if applicable, caption 5(a) of each balance sheet. 
Separate schedules shall be furnished in support of each caption, if 
applicable.
    Schedule II--Investments in and advances to affiliates and income 
thereon. The schedule prescribed by Sec.  210.12-22 shall be filed in 
support of captions 1 and 5(b) of each balance sheet and caption 1 of 
each statement of operations. Separate schedules shall be furnished in 
support of each caption, if applicable.
    Schedule III--Mortgage loans on real estate and interest earned on 
mortgages. The schedule prescribed by Sec.  210.12-23 shall be filed in 
support of captions 1 and 5(c) of each balance sheet and caption 1 of 
each statement of operations, except that only the information required 
by column G and note 8 of the schedule need be furnished in support of 
statements of operations for years for which related balance sheets are 
not required.
    Schedule IV--Real estate owned and rental income. The schedule 
prescribed by Sec.  210.12-24 shall be filed in support of captions 1 
and 5(a) of each balance sheet and caption 1 of each statement of 
operations for rental income included therein, except that only the 
information required by columns H, I and J, and item ``Rent from 
properties sold during the period'' and note 4 of the schedule need be 
furnished in support of statements of operations for years for which 
related balance sheets are not required.
    Schedule V--Qualified assets on deposit. The schedule prescribed by 
Sec.  210.12-27 shall be filed in support of the information required 
by caption 4 of Sec.  210.6-06 as to total amount of qualified assets 
on deposit.
    Schedule VI--Certificate reserves. The schedule prescribed by Sec.  
210.12-26 shall be filed in support of caption 7 of each balance sheet.
    Schedule VII--Valuation and qualifying accounts. The schedule 
prescribed by Sec.  210.12-09 shall be filed in support of all other 
reserves included in the balance sheet.
0
10. Revise Sec.  210.12-12 to read as follows:
For Management Investment Companies


Sec.  210.12-12  Investments in securities of unaffiliated issuers.

               [For Management Investment Companies Only]
------------------------------------------------------------------------
             Col. A                     Col. B              Col. C
------------------------------------------------------------------------
Name of issuer and title of       Balance held at     Value of each item
 issue.1 2 3 4                     close of period.    at close of
                                   Number of shares--  period.5 6 8 9 10
                                   principal amount    11 12
                                   of bonds and
                                   notes.\7\
------------------------------------------------------------------------
\1\ Each issue shall be listed separately: Provided, however, that an
  amount not exceeding five percent of the total of Column C may be
  listed in one amount as ``Miscellaneous securities,'' provided the
  securities so listed are not restricted, have been held for not more
  than one year prior to the date of the related balance sheet, and have
  not previously been reported by name to the shareholders of the person
  for which the schedule is filed or to any exchange, or set forth in
  any registration statement, application, or annual report or otherwise
  made available to the public. If any securities are listed as
  ``Miscellaneous securities,'' briefly explain in a footnote what the
  term represents.
\2\ Categorize the schedule by (i) the type of investment (such as
  common stocks, preferred stocks, convertible securities, fixed income
  securities, government securities, options purchased, warrants, loan
  participations and assignments, commercial paper, bankers'
  acceptances, certificates of deposit, short-term securities,
  repurchase agreements, other investment companies, and so forth); (ii)
  the related industry of the investment; and (iii) the related country,
  or geographic region of the investment. Short-term debt instruments
  (i.e., debt instruments whose maturities or expiration dates at the
  time of acquisition are one year or less) of the same issuer may be
  aggregated, in which case the range of interest rates and maturity
  dates shall be indicated. For issuers of periodic payment plan
  certificates and unit investment trusts, list separately: (i) Trust
  shares in trusts created or serviced by the depositor or sponsor of
  this trust; (ii) trust shares in other trusts; and (iii) securities of
  other investment companies. Restricted securities shall not be
  combined with unrestricted securities of the same issuer. Repurchase
  agreements shall be stated separately showing for each the name of the
  party or parties to the agreement, the date of the agreement, the
  total amount to be received upon repurchase, the repurchase date and
  description of securities subject to the repurchase agreements.
\3\ For options purchased, all information required by Sec.   210.12-13
  for options contracts written should be shown. Options on underlying
  investments where the underlying investment would otherwise be
  presented in accordance with Sec.  Sec.   210.12-12, 12-13A, 12-13B,
  12-13C, or 12-13D should include the description of the underlying
  investment as would be required by Sec.  Sec.   210.12-12, 12-13A, 12-
  13B, 12-13C, or 12-13D as part of the description of the option.
\4\ Indicate the interest rate or preferential dividend rate and
  maturity date, as applicable, for preferred stocks, convertible
  securities, fixed income securities, government securities, loan
  participations and assignments, commercial paper, bankers'
  acceptances, certificates of deposit, short-term securities,
  repurchase agreements, or other instruments with a stated rate of
  income. For variable rate securities, indicate a description of the
  reference rate and spread. For securities with payment in kind income,
  disclose the rate paid in kind.
\5\ The subtotals for each category of investments, subdivided both by
  type of investment and industry, country, or geographic region, shall
  be shown together with their percentage value compared to net assets.
\6\ Column C shall be totaled. The total of column C shall agree with
  the correlative amounts shown on the related balance sheet.

[[Page 33691]]

 
\7\ Indicate by an appropriate symbol each issue of securities which is
  non-income producing. Evidences of indebtedness and preferred shares
  may be deemed to be income producing if, on the respective last
  interest payment date or date for the declaration of dividends prior
  to the date of the related balance sheet, there was only a partial
  payment of interest or a declaration of only a partial amount of the
  dividends payable; in such case, however, each such issue shall be
  indicated by an appropriate symbol referring to a note to the effect
  that, on the last interest or dividend date, only partial interest was
  paid or partial dividends declared. If, on such respective last
  interest or dividend date, no interest was paid or no cash or in kind
  dividends declared, the issue shall not be deemed to be income
  producing. Common shares shall not be deemed to be income producing
  unless, during the last year preceding the date of the related balance
  sheet, there was at least one dividend paid upon such common shares.
\8\ Indicate by an appropriate symbol each issue of restricted
  securities. State the following in a footnote: (a) As to each such
  issue: (1) Acquisition date, (2) carrying value per unit of investment
  at date of related balance sheet, e.g., a percentage of current market
  value of unrestricted securities of the same issuer, etc., and (3) the
  cost of such securities; (b) as to each issue acquired during the year
  preceding the date of the related balance sheet, the carrying value
  per unit of investment of unrestricted securities of the same issuer
  at: (1) The day the purchase price was agreed to; and (2) the day on
  which an enforceable right to acquire such securities was obtained;
  and (c) the aggregate value of all restricted securities and the
  percentage which the aggregate value bears to net assets.
\9\ Indicate by an appropriate symbol each issue of securities whose
  fair value was determined using significant unobservable inputs.
\10\ Indicate by an appropriate symbol each issue of illiquid
  securities.
\11\ Indicate by an appropriate symbol each issue of securities held in
  connection with open put or call option contracts, loans for short
  sales, or where any portion of the issue is on loan.
\12\ State in a footnote the following amounts based on cost for Federal
  income tax purposes: (a) Aggregate gross unrealized appreciation for
  all securities in which there is an excess of value over tax cost, (b)
  the aggregate gross unrealized depreciation for all securities in
  which there is an excess of tax cost over value, (c) the net
  unrealized appreciation or depreciation, and (d) the aggregate cost of
  securities for Federal income tax purposes.

0
11. Revise Sec.  210.12-12A to read as follows:


Sec.  210.12-12A  Investments--securities sold short.

               [For Management Investment Companies Only]
------------------------------------------------------------------------
             Col. A                     Col. B              Col. C
------------------------------------------------------------------------
Name of issuer and title of       Balance of short    Value of each open
 issue.1 2 3                       position at close   short position.4
                                   of period.          5 6 7 8.
                                   (number of
                                   shares).
------------------------------------------------------------------------
\1\ Each issue shall be listed separately.
\2\ Categorize the schedule as required by instruction 2 of Sec.
  210.12-12.
\3\ Indicate the interest rate or preferential dividend rate and
  maturity date, as applicable, as required by instruction 4 of Sec.
  210.12-12.
\4\ The subtotals for each category of investments, subdivided both by
  type of investment and industry, country, or geographic region, shall
  be shown together with their percentage value compared to net assets.
\5\ Column C shall be totaled. The total of column C shall agree with
  the correlative amounts shown on the related balance sheet.
\6\ Indicate by an appropriate symbol each issue of securities whose
  fair value was determined using significant unobservable inputs.
\7\ Indicate by an appropriate symbol each issue of securities held in
  connection with open put or call option contracts.
\8\ State in a footnote the following amounts based on cost for Federal
  income tax purposes: (a) Aggregate gross unrealized appreciation for
  all securities in which there is an excess of value over tax cost, (b)
  the aggregate gross unrealized depreciation for all securities in
  which there is an excess of tax cost over value, (c) the net
  unrealized appreciation or depreciation, and (d) the aggregate cost of
  securities for Federal income tax purposes.

0
12. Revise Sec.  210.12-12B to read as follows:


Sec.  210.12-12B  Summary schedule of investments in securities of 
unaffiliated issuers.

----------------------------------------------------------------------------------------------------------------
               Column A                        Column B                 Column C                 Column D
----------------------------------------------------------------------------------------------------------------
Name of issuer and title of issue.1 3  Balance held at close    Value of each item at    Percentage value
 4 5 6 7 8                              of period. Number of     close of period.2 9 11   compared to net
                                        shares--principal        12 13 14 15              assets.
                                        amount of bonds and
                                        notes.\10\
----------------------------------------------------------------------------------------------------------------
\1\ Categorize the schedule by (a) the type of investment (such as common stocks, preferred stocks, convertible
  securities, fixed income securities, government securities, options purchased, warrants, loan participations
  and assignments, commercial paper, bankers' acceptances, certificates of deposit, short-term securities,
  repurchase agreements, other investment companies, and so forth); (b) the related industry of the investment;
  and (c) the related country or geographic region of the investment.
\2\ The subtotals for each category of investments, subdivided both by type of investment and industry, country,
  or geographic region, shall be shown together with their percentage value compared to net assets.
\3\ Indicate the interest rate or preferential dividend rate and maturity date, as applicable, for preferred
  stocks, convertible securities, fixed income securities, government securities, loan participations and
  assignments, commercial paper, bankers' acceptances, certificates of deposit, short-term securities,
  repurchase agreements, or other instruments with a stated rate of income. For variable rate securities,
  indicate a description of the reference rate and spread. For securities with payment in kind income, disclose
  the rate paid in kind.
\4\ Except as provided in note 6, list separately the 50 largest issues and any other issue the value of which
  exceeded one percent of net asset value of the registrant as of the close of the period. For purposes of the
  list (including, in the case of short-term debt instruments, the first sentence of note 4), aggregate and
  treat as a single issue, respectively, (a) short-term debt instruments (i.e., debt instruments whose
  maturities or expiration dates at the time of acquisition are one year or less) of the same issuer (indicating
  the range of interest rates and maturity dates); and (b) fully collateralized repurchase agreements (indicate
  in a footnote the range of dates of the repurchase agreements, the total purchase price of the securities, the
  total amount to be received upon repurchase, the range of repurchase dates, and description of securities
  subject to the repurchase agreements). Restricted and unrestricted securities of the same issue should be
  aggregated for purposes of determining whether the issue is among the 50 largest issues, but should not be
  combined in the schedule. For purposes of determining whether the value of an issue exceeds one percent of net
  asset value, aggregate and treat as a single issue all securities of any one issuer, except that all fully
  collateralized repurchase agreements shall be aggregated and treated as a single issue. The U.S. Treasury and
  each agency, instrumentality, or corporation, including each government-sponsored entity, that issues U.S.
  government securities is a separate issuer.

[[Page 33692]]

 
\5\ For options purchased, all information required by Sec.   210.12-13 for options contracts written should be
  shown. Options on underlying investments where the underlying investment would otherwise be presented in
  accordance with Sec.  Sec.   210.12-12, 12-13A, 12-13B, 12-13C, or 12-13D should include the description of
  the underlying investment as would be required by Sec.  Sec.   210.12-12, 12-13A, 12-13B, 12-13C, or 12-13D as
  part of the description of the option.
\6\ If multiple securities of an issuer aggregate to greater than one percent of net asset value, list each
  issue of the issuer separately (including separate listing of restricted and unrestricted securities of the
  same issue) except that the following may be aggregated and listed as a single issue: (a) Fixed-income
  securities of the same issuer which are not among the 50 largest issues and whose value does not exceed one
  percent of net asset value of the registrant as of the close of the period (indicating the range of interest
  rates and maturity dates); and (b) U.S. government securities of a single agency, instrumentality, or
  corporation, which are not among the 50 largest issues and whose value does not exceed one percent of net
  asset value of the registrant as of the close of the period (indicating the range of interest rates and
  maturity dates). For each category identified pursuant to note 1, group all issues that are neither separately
  listed nor included in a group of securities that is listed in the aggregate as a single issue in a sub-
  category labeled ``Other securities,'' and provide the information for Columns C and D.
\7\ Any securities that would be required to be listed separately or included in a group of securities that is
  listed in the aggregate as a single issue may be listed in one amount as ``Miscellaneous securities,''
  provided the securities so listed are eligible to be, and are, categorized as ``Miscellaneous securities'' in
  the registrant's Schedule of Investments in Securities of Unaffiliated Issuers required under Sec.   210.12-
  12. However, if any security that is included in ``Miscellaneous securities'' would otherwise be required to
  be included in a group of securities that is listed in the aggregate as a single issue, the remaining
  securities of that group must nonetheless be listed as required by notes 4 and 5 even if the remaining
  securities alone would not otherwise be required to be listed in this manner (e.g., because the combined value
  of the security listed in ``Miscellaneous securities'' and the remaining securities of the same issuer exceeds
  one percent of net asset value, but the value of the remaining securities alone does not exceed one percent of
  net asset value).
\8\ If any securities are listed as ``Miscellaneous securities'' pursuant to note 6 or ``Other securities''
  pursuant to note 5, briefly explain in a footnote what those terms represent.
\9\ Total Column C. The total of column C should equal the total shown on the related balance sheet for
  investments in securities of unaffiliated issuers.
\10\ Indicate by an appropriate symbol each issue of securities which is non-income producing. Evidences of
  indebtedness and preferred shares may be deemed to be income producing if, on the respective last interest
  payment date or date for the declaration of dividends prior to the date of the related balance sheet, there
  was only a partial payment of interest or a declaration of only a partial amount of the dividends payable; in
  such case, however, each such issue shall be indicated by an appropriate symbol referring to a note to the
  effect that, on the last interest or dividend date, only partial interest was paid or partial dividends
  declared. If, on such respective last interest or dividend date, no interest was paid or no cash or in kind
  dividends declared, the issue shall not be deemed to be income producing. Common shares shall not be deemed to
  be income producing unless, during the last year preceding the date of the related balance sheet, there was at
  least one dividend paid upon such common shares.
\11\ Indicate by an appropriate symbol each issue of restricted securities. State the following in a footnote:
  (a) As to each such issue: (1) Acquisition date, (2) carrying value per unit of investment at date of related
  balance sheet, e.g., a percentage of current market value of unrestricted securities of the same issuer, etc.,
  and (3) the cost of such securities; (b) as to each issue acquired during the year preceding the date of the
  related balance sheet, the carrying value per unit of investment of unrestricted securities of the same issuer
  at: (1) The day the purchase price was agreed to; and (2) the day on which an enforceable right to acquire
  such securities was obtained; and (c) the aggregate value of all restricted securities and the percentage
  which the aggregate value bears to net assets.
\12\ Indicate by an appropriate symbol each issue of securities whose fair value was determined using
  significant unobservable inputs.
\13\ Indicate by an appropriate symbol each issue of illiquid securities.
\14\ Indicate by an appropriate symbol each issue of securities held in connection with open put or call option
  contracts, loans for short sales, or where any portion of the issue is on loan.
\15\ State in a footnote the following amounts based on cost for Federal income tax purposes: (a) Aggregate
  gross unrealized appreciation for all securities in which there is an excess of value over tax cost, (b) the
  aggregate gross unrealized depreciation for all securities in which there is an excess of tax cost over value,
  (c) the net unrealized appreciation or depreciation, and (d) the aggregate cost of securities for Federal
  income tax purposes.

Sec.  210.12-12C  [Removed and Reserved].

0
13. Remove and reserve Sec.  210.12-12C.
0
14. Revise Sec.  210.12-13 to read as follows:


Sec.  210.12-13  Open option contracts written.



                                                       [For Management Investment Companies Only]
--------------------------------------------------------------------------------------------------------------------------------------------------------
             Col. A                     Col. B              Col. C              Col. D              Col. E              Col. F              Col. G
--------------------------------------------------------------------------------------------------------------------------------------------------------
Description.1 2 3                 Counterparty.\4\    Number of           Notional amount...  Exercise price....  Expiration date...  Value.6 7 8 9 10
                                                       contracts.\5\
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Information as to put options shall be shown separately from information as to call options.
\2\ Options where descriptions, counterparties, exercise prices or expiration dates differ shall be listed separately.
\3\ Options on underlying investments where the underlying investment would otherwise be presented in accordance with Sec.  Sec.   210.12-12, 12-13A, 12-
  13B, 12-13C, or 12-13D should include the description of the underlying investment as would be required by Sec.  Sec.   210.12-12, 12-13A, 12-13B, 12-
  13C, or 12-13D as part of the description of the option.
If the underlying investment is an index or basket of investments, and the components are publicly available on a Web site as of the balance sheet date,
  identify the index or basket. If the underlying investment is an index or basket of investments, the components are not publicly available on a Web
  site as of the balance sheet date, and the notional amount of the option contract does not exceed one percent of the net asset value of the registrant
  as of the close of the period, identify the index or basket. If the underlying investment is an index or basket of investments, the components are not
  publicly available on a Web site as of the balance sheet date, and the notional amount of the option contract exceeds one percent of the net asset
  value of the registrant as of the close of the period, list separately each underlying investment in the index or basket. For each investment
  separately listed, include the description of the underlying investment as would be required by Sec.  Sec.   210.12-12, 12-13, 12-13A, 12-13B, or 12-
  13D as part of the description, the quantity held (e.g. the number of shares for common stocks, principal amount for fixed income securities), the
  value at the close of the period, and the percentage value when compared to the custom basket's net assets.
\4\ Not required for exchange-traded options.
\5\ If the number of shares subject to option is substituted for number of contracts, the column name shall reflect that change.
\6\ Indicate by an appropriate symbol each investment which cannot be sold because of restrictions or conditions applicable to the investment.
\7\ Indicate by an appropriate symbol each investment whose fair value was determined using significant unobservable inputs.
\8\ Indicate by an appropriate symbol each illiquid investment.
\9\ Column G shall be totaled and shall agree with the correlative amount shown on the related balance sheet.
\10\ State in a footnote the following amounts based on cost for Federal income tax purposes: (a) Aggregate gross unrealized appreciation for all
  investments in which there is an excess of value over tax cost, (b) the aggregate gross unrealized depreciation for all investments in which there is
  an excess of tax cost over value, (c) the net unrealized appreciation or depreciation, and (d) the aggregate cost of investments for Federal income
  tax purposes.


[[Page 33693]]

0
15. Add Sec.  210.12-13A to read as follows:


Sec.  210.12-13A  Open futures contracts.

                                                       [For Management Investment Companies Only]
--------------------------------------------------------------------------------------------------------------------------------------------------------
               Col. A                        Col. B                  Col. C                  Col. D                 Col. E                 Col. F
--------------------------------------------------------------------------------------------------------------------------------------------------------
Description.1 2                      Number of contracts...  Expiration date.......  Notional amount......  Value................  Unrealized
                                                                                                                                    appreciation/
                                                                                                                                    depreciation.4 5 6 7
                                                                                                                                    8
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Information as to long purchases of futures contracts shall be shown separately from information as to futures contracts sold short.
\2\ Futures contracts where descriptions or expiration dates differ shall be listed separately.
\3\ Description should include the name of the reference asset or index.
\4\ Indicate by an appropriate symbol each investment which cannot be sold because of restrictions or conditions applicable to the investment.
\5\ Indicate by an appropriate symbol each investment whose fair value was determined using significant unobservable inputs.
\6\ Indicate by an appropriate symbol each illiquid investment.
\7\ Column F shall be totaled and shall be reconciled to the total variation margin receivable or payable on the related balance sheet.
\8\ State in a footnote the following amounts based on cost for Federal income tax purposes: (a) Aggregate gross unrealized appreciation for all
  investments in which there is an excess of value over tax cost, (b) the aggregate gross unrealized depreciation for all investments in which there is
  an excess of tax cost over value, (c) the net unrealized appreciation or depreciation, and (d) the aggregate cost of investments for Federal income
  tax purposes.

0
16. Add Sec.  210.12-13B to read as follows:


Sec.  210.12-13B  Open forward foreign currency contracts.

                                   [For Management Investment Companies Only]
----------------------------------------------------------------------------------------------------------------
             Col. A                     Col. B              Col. C              Col. D              Col. E
----------------------------------------------------------------------------------------------------------------
Amount and description of         Amount and          Counterparty......  Settlement date...  Unrealized
 currency to be purchased.\1\      description of                                              appreciation/
                                   currency to be                                              depreciation.2 3
                                   sold.\1\                                                    4 5 6
----------------------------------------------------------------------------------------------------------------
\1\ Forward foreign currency contracts where description of currency purchased, description of currency sold,
  counterparty, or settlement dates differ shall be listed separately.
\2\ Indicate by an appropriate symbol each investment which cannot be sold because of restrictions or conditions
  applicable to the investment.
\3\ Indicate by an appropriate symbol each investment whose fair value was determined using significant
  unobservable inputs.
\4\ Indicate by an appropriate symbol each illiquid investment.
\5\ Column E shall be totaled and shall agree with the total of correlative amount(s) shown on the related
  balance sheet.
\6\ State in a footnote the following amounts based on cost for Federal income tax purposes: (a) Aggregate gross
  unrealized appreciation for all investments in which there is an excess of value over tax cost, (b) the
  aggregate gross unrealized depreciation for all investments in which there is an excess of tax cost over
  value, (c) the net unrealized appreciation or depreciation, and (d) the aggregate cost of investments for
  Federal income tax purposes.

0
17. Add Sec.  210.12-13C to read as follows:


Sec.  210.12-13C  Open swap contracts.

                                                       [For Management Investment Companies Only]
--------------------------------------------------------------------------------------------------------------------------------------------------------
            Col. A                  Col. B            Col. C            Col. D            Col. E            Col. F           Col. G           Col. H
--------------------------------------------------------------------------------------------------------------------------------------------------------
Description and terms of       Description and   Counterparty.\4\  Maturity date...  Notional amount.  Value..........  Upfront          Unrealized
 payments to be received from   terms of                                                                                 payments/        appreciation/
 another party.1 2 3            payments to be                                                                           receipts.        depreciation.5
                                paid to another                                                                                           6 7 8 9
                                party.1 2 3
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ List each major category of swaps by descriptive title (e.g., credit default swaps, interest rate swaps, total return swaps). Credit default swaps
  where protection is sold shall be listed separately from credit default swaps where protection is purchased.
\2\ Swaps where description, counterparty, or maturity dates differ shall be listed separately within each major category.
\3\ Description should include information sufficient for a user of financial information to understand the terms of payments to be received and paid.
  (e.g. For a credit default swap, including, among other things, description of reference obligation(s) or index, financing rate to be paid or
  received, and payment frequency. For an interest rate swap, this may include, among other things, whether floating rate is paid or received, fixed
  interest rate, floating interest rate, and payment frequency. For a total return swap, this may include, among other things, description of reference
  asset(s) or index, financing rate, and payment frequency.)
If the reference instrument is an index or basket of investments, and the components are publicly available on a Web site as of the balance sheet date,
  identify the index or basket. If the reference instrument is an index or basket of investments, the components are not publicly available on a Web
  site as of the balance sheet date, and the notional amount of the swap contract does not exceed one percent of the net asset value of the registrant
  as of the close of the period, identify the index or basket. If the reference instrument is an index or basket of investments, the components are not
  publicly available on a Web site as of the balance sheet date, and the notional amount of the swap contract exceeds one percent of the net asset value
  of the registrant as of the close of the period, list separately each underlying investment. For each investment separately listed, include the
  description of the underlying investment as would be required by Sec.  Sec.   210.12-12, 12-13, 12-13A, 12-13B, or 12-13D as part of the description,
  the quantity held (e.g. the number of shares for common stocks, principal amount for fixed income securities), the value at the close of the period,
  and the percentage value when compared to the custom basket's net assets.
\4\ Not required for exchange-traded swaps.
\5\ Indicate by an appropriate symbol each investment which cannot be sold because of restrictions or conditions applicable to the investment.
\6\ Indicate by an appropriate symbol each investment whose fair value was determined using significant unobservable inputs.
\7\ Indicate by an appropriate symbol each illiquid investment.
\8\ Columns F, G, and H shall be totaled and shall agree with the total of correlative amount(s) shown on the related balance sheet.

[[Page 33694]]

 
\9\ State in a footnote the following amounts based on cost for Federal income tax purposes: (a) Aggregate gross unrealized appreciation for all
  investments in which there is an excess of value over tax cost, (b) the aggregate gross unrealized depreciation for all investments in which there is
  an excess of tax cost over value, (c) the net unrealized appreciation or depreciation, and (d) the aggregate cost of investments for Federal income
  tax purposes.

0
18. Add Sec.  210.12-13D to read as follows:


Sec.  210.12-13D  Investments other than those presented in Sec. Sec.  
210.12-12, 12-12A, 12-12B, 12-13, 12-13A, 12-13B, and 12-13C.

               [For Management Investment Companies Only]
------------------------------------------------------------------------
             Col. A                     Col. B              Col. C
------------------------------------------------------------------------
Description.1 2 3                 Balance held at     Value of each item
                                   close of period--   at close of
                                   quantity.4 5        period.6 7 8 9 10
                                                       11
------------------------------------------------------------------------
\1\ Each investment where any portion of the description differs shall
  be listed separately.
\2\ Categorize the schedule by (i) the type of investment (such as real
  estate, commodities, and so forth); and, as applicable, (ii) the
  related industry of the investment and (iii) the related country, or
  geographic region of the investment.
\3\ Description should include information sufficient for a user of
  financial information to understand the nature and terms of the
  investment, which may include, among other things, reference security,
  asset or index, currency, geographic location, payment terms, payment
  rates, call or put feature, exercise price, expiration date, and
  counterparty for non-exchange-traded investments.
\4\ If practicable, indicate the quantity or measure in appropriate
  units.
\5\ Indicate by an appropriate symbol each investment which is non-
  income producing.
\6\ Indicate by an appropriate symbol each investment which cannot be
  sold because of restrictions or conditions applicable to the
  investment.
\7\ Indicate by an appropriate symbol each investment whose fair value
  was determined using significant unobservable inputs.
\8\ Indicate by an appropriate symbol each illiquid investment.
\9\ Indicate by an appropriate symbol each investment subject to option.
  State in a footnote: (a) The quantity subject to option, (b) nature of
  option contract, (c) option price, and (d) dates within which options
  may be exercised.
\10\ Column C shall be totaled and shall agree with the correlative
  amount shown on the related balance sheet.
\11\ State in a footnote the following amounts based on cost for Federal
  income tax purposes: (a) Aggregate gross unrealized appreciation for
  all investments in which there is an excess of value over tax cost,
  (b) the aggregate gross unrealized depreciation for all investments in
  which there is an excess of tax cost over value, (c) the net
  unrealized appreciation or depreciation, and (d) the aggregate cost of
  investments for Federal income tax purposes.

0
19. Revise Sec.  210.12-14 to read as follows:


Sec.  210.12-14  Investments in and advances to affiliates.

                                                       [For Management Investment Companies Only]
--------------------------------------------------------------------------------------------------------------------------------------------------------
               Col. A                        Col. B                  Col. C                  Col. D                 Col. E                 Col. F
--------------------------------------------------------------------------------------------------------------------------------------------------------
Name of issuer and title of issue    Number of shares--      Net realized gain or    Net increase or        Amount of dividends    Value of each item at
 or nature of indebtedness. 1 2 3     principal amount of     loss for the period.    decrease in            or interest. 4 6.      close of period 4 5
                                      bonds, notes and        \4 6\                   unrealized            (1) Credited to         7 8 9 10 11
                                      other indebtedness                              appreciation or        income.
                                      held at close of                                depreciation for the  (2) Other............
                                      period.                                         period. 4 6
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ (a) List each issue separately and group (1) Investments in majority-owned subsidiaries; (2) other controlled companies; and (3) other affiliates.
  (b) If during the period there has been any increase or decrease in the amount of investment in and advance to any affiliate, state in a footnote (or
  if there have been changes to numerous affiliates, in a supplementary schedule) (1) name of each issuer and title of issue or nature of indebtedness;
  (2) balance at beginning of period; (3) gross additions; (4) gross reductions; (5) balance at close of period as shown in Column E. Include in the
  footnote or schedule comparable information as to affiliates in which there was an investment at any time during the period even though there was no
  investment at the close of the period of report.
\2\ Categorize the schedule as required by instruction 2 of Sec.   210.12-12.
\3\ Indicate the interest rate or preferential dividend rate and maturity date, as applicable, as required by instruction 4 of Sec.   210.12-12.
\4\ Columns C, D, E, and F shall be totaled. The totals of Column F shall agree with the correlative amount shown on the related balance sheet.
\5\ (a) Indicate by an appropriate symbol each issue of restricted securities. The information required by instruction 8 of Sec.   210.12-12 shall be
  given in a footnote. (b) Indicate by an appropriate symbol each issue of securities subject to option. The information required by Sec.   210.12-13
  shall be given in a footnote.
\6\ (a) Include in Column E (1) as to each issue held at the close of the period, the dividends or interest included in caption 1 of the statement of
  operations. In addition, show as the final item in Column E (1) the aggregate of dividends and interest included in the statement of operations in
  respect of investments in affiliates not held at the close of the period. The total of this column shall agree with the correlative amount shown on
  the related statement of operations.
(b) Include in Column E (2) all other dividends and interest. Explain in an appropriate footnote the treatment accorded each item.
(c) Indicate by an appropriate symbol all non-cash dividends and interest and explain the circumstances in a footnote.
(d) Indicate by an appropriate symbol each issue of securities which is non-income producing. Evidences of indebtedness and preferred shares may be
  deemed to be income producing if, on the respective last interest payment date or date for the declaration of dividends prior to the date of the
  related balance sheet, there was only a partial payment of interest or a declaration of only a partial amount of the dividends payable; in such case,
  however, each such issue shall be indicated by an appropriate symbol referring to a note to the effect that, on the last interest or dividend date,
  only partial interest was paid or partial dividends declared. If, on such respective last interest or dividend date, no interest was paid or no cash
  or in kind dividends declared, the issue shall not be deemed to be income producing. Common shares shall not be deemed to be income producing unless,
  during the last year preceding the date of the related balance sheet, there was at least one dividend paid upon such common shares.
(e) Include in Column C (1) as to each issue held at the close of the period, the realized gain or loss included in caption 7 of the statement of
  operations. In addition, show as the final item in Column C (1) the aggregate of realized gain or loss included in the statement of operations in
  respect of investments in affiliates not held at the close of the period. The total of this column shall agree with the correlative amount shown on
  the related statement of operations.

[[Page 33695]]

 
(f) Include in Column D (1) as to each issue held at the close of the period, the net increase or decrease in unrealized appreciation or depreciation
  included in caption 7 of the statement of operations. In addition, show as the final item in Column D (1) the aggregate of increase or decrease in
  unrealized appreciation or depreciation included in the statement of operations in respect of investments in affiliates not held at the close of the
  period. The total of this column shall agree with the correlative amount shown on the related statement of operations.
\7\ The subtotals for each category of investments, subdivided both by type of investment and industry, country, or geographic region, shall be shown
  together with their percentage value compared to net assets.
\8\ Indicate by an appropriate symbol each issue of securities whose fair value was determined using significant unobservable inputs.
\9\ Indicate by an appropriate symbol each issue of illiquid securities.
\10\ Indicate by an appropriate symbol each issue of securities held in connection with open put or call option contracts, loans for short sales, or
  where any portion of the issue is on loan.
\11\ State in a footnote the following amounts based on cost for Federal income tax purposes: (a) Aggregate gross unrealized appreciation for all
  securities in which there is an excess of value over tax cost, (b) the aggregate gross unrealized depreciation for all securities in which there is an
  excess of tax cost over value, (c) the net unrealized appreciation or depreciation, and (d) the aggregate cost of securities for Federal income tax
  purposes.

* * * * *

PART 230--GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933

0
20. The authority citation for part 230 continues to read, in part, as 
follows:

    Authority:  15 U.S.C. 77b, 77b note, 77c, 77d, 77d note, 77f, 
77g, 77h, 77j, 77r, 77s, 77z-3, 77sss, 78c, 78d, 78j, 78l, 78m, 78n, 
78o, 78o-7 note, 78t, 78w, 78ll(d), 78mm, 80a-8, 80a-24, 80a-28, 
80a-29, 80a-30, and 80a-37, and Pub. L. 112-106, sec. 201(a), 126 
Stat. 313 (2012), unless otherwise noted.
* * * * *
0
21. Amend Sec.  230.498 by:
0
a. Adding to the end of paragraph (b)(1)(v)(A) ``If a Fund relies on 
Sec.  270.30e-3 of this chapter to transmit a report, the legend must 
also include the Web site address required by Sec.  270.30e-3(d)(1)(iv) 
of this chapter if different from the Web site address required by this 
paragraph (b)(1)(v)(A).''; and
0
b. In paragraph (f)(2), adding the phrase ``a Notice or Initial 
Statement under Sec.  270.30e-1 of this chapter,'' after ``Statutory 
Prospectuses,''.

PART 232--REGULATION S-T--GENERAL RULES AND REGULATIONS FOR 
ELECTRONIC FILINGS

0
22. The authority citation for part 232 continues to read, in part, as 
follows:

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s(a), 77z-3, 
77sss(a), 78c(b), 78l, 78m, 78n, 78o(d), 78w(a), 78ll, 80a-6(c), 
80a-8, 80a-29, 80a-30, 80a-37, and 7201 et seq.; and 18 U.S.C. 1350.
* * * * *
0
23. Amend Sec.  232.105 by removing paragraph (a) and redesignating 
paragraphs (b) and (c) as paragraphs (a) and (b).
0
24. Amend Sec.  232.301 by removing the fourth sentence ``Additional 
provisions applicable to Form N-SAR filers are set forth in the EDGAR 
Filer Manual, Volume III: ``N-SAR Supplement,'' Version 4 (October 
2014).''
0
25. Amend Sec.  232.401 paragraph (d)(2)(iii) by removing the phrase 
``, N-CSR (Sec.  274.128 of this chapter) or N-Q (Sec.  274.130 of this 
chapter)'' and adding in its place ``or N-CSR (Sec.  274.128 of this 
chapter)''.

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

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

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77z-2, 77z-3, 
77sss, 78c, 78l, 78m, 78n, 78o(d), 78o-7, 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, 80a-37, and Pub. L. 111-203, sec. 939A, 124 
Stat. 1376 (2010), unless otherwise noted.
* * * * *
0
27. Amend Form N-14 (referenced in Sec.  239.23) Item 14, subpart 1(ii) 
by removing the phrase ``the following schedules in support of the most 
recent balance sheet: (A) columns C and D of Schedule III [17 CFR 
210.12-14]; and (B) Schedule IV [17 CFR 210.12-03];'' and adding in its 
place ``columns C and D of Schedule III [17 CFR 210.12-14] in support 
of the most recent balance sheet''.

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF 
1934

0
28. The authority citation for part 240 continues to read, in part, as 
follows:

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3, 
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i, 
78j, 78j-1, 78k, 78k-1, 78l, 78m, 78n, 78n-1, 78o, 78o-4, 78p, 78q, 
78q-1, 78s, 78u-5, 78w, 78x, 78ll, 78mm, 80a-20, 80a-23, 80a-29, 
80a-37, 80b-3, 80b-4, 80b-11, and 7201 et seq.; 18 U.S.C. 1350; and 
12 U.S.C. 5221(e)(3) unless otherwise noted.
* * * * *
0
29. Amend Sec.  240.10A-1 paragraph (a)(4)(i) by removing the phrase 
``Form N-SAR'' and adding in its place ``Form N-CEN''.
0
30. Amend Sec.  240.12b-25 by:
0
a. In the section heading, removing the phrase ``Form N-SAR'' and 
adding in its place ``Form N-CEN'';
0
b. In paragraph (a), removing the phrase ``Form N-SAR'' and adding in 
its place ``Form N-CEN''; and
0
c. In paragraph (b)(2)(ii), removing the phrase ``N-SAR,'' and adding 
in its place ``N-CEN,''.
0
31. Amend Sec.  240.13a-10 paragraph (h) by removing the phrase ``Rule 
30b1-1 (Sec.  270.30b1-1 of this chapter)'' and adding in its place 
``Sec.  270.30a-1 of this chapter''.
0
32. Amend Sec.  240.13a-11 paragraph (b) by removing the phrase ``Sec.  
270.30b1-1'' and adding in its place ``Sec.  270.30a-1''.
0
33. Amend Sec.  240.13a-13 paragraph (b)(1) by removing the phrase 
``Sec.  270.30b1-1'' and adding in its place ``Sec.  270.30a-1 of this 
chapter''.
0
34. Amend Sec.  240.13a-16 paragraph (a)(1) by removing the phrase 
``Rule 30b1-1 (17 CFR 270.30b1-1)'' and adding in its place ``17 CFR 
270.30a-1 of this chapter'' .
0
35. Amend Sec.  240.14a-16 paragraph (f)(2)(iii) by adding the phrase 
``a Notice or Initial Statement under Sec.  270.30e-1 of this 
chapter,'' after ``Sec.  230.498(b) of this chapter,'' in.
0
36. Amend Sec.  240.15d-10 paragraph (h) by removing the phrase ``Rule 
30b1-1 (Sec.  270.30b1-1 of this chapter)'' and adding in its place 
``Sec.  270.30a-1 of this chapter''.
0
37. Amend Sec.  240.15d-11 paragraph (h) by removing the phrase ``Sec.  
270.30b1-1'' and adding in its place ``Sec.  270.30a-1''.
0
38. Amend Sec.  240.15d-13 paragraph (b)(1) by removing the phrase 
``Sec.  270.30b1-1'' and adding in its place ``Sec.  270.30a-1 of this 
chapter''.
0
39. Amend Sec.  240.15d-16 paragraph (a)(1) by removing the phrase 
``Rule 30b1-1 [17 CFR 270.30b1-1]'' and adding in its place ``17 CFR 
270.30a-1''.

PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934

0
40. The general authority citation for part 249 continues to read, and 
the sectional authority for Sec.  249.330 is revised to read as 
follows:

    Authority: 15 U.S.C. 78a et seq. and 7201 et seq.; 12 U.S.C. 
5461 et seq.; and 18 U.S.C. 1350, unless otherwise noted.
* * * * *


[[Page 33696]]


    Section 249.330 is also issued under 15 U.S.C. 80a-29(a).

* * * * *
0
41. Amend Sec.  249.322 in the first sentence of paragraph (a) by 
removing the phrase ``or a semi-annual, annual, or transition report on 
Form N-SAR (Sec. Sec.  249.330; 274.101) or'' and adding in its place 
``an annual report on Form N-CEN (Sec. Sec.  249.330; 274.101), or a 
semi-annual or annual report on''.
0
42. Section 249.330 is revised to read as follows:


Sec.  249.330  Form N-CEN, annual report of registered investment 
companies.

    This form shall be used by registered unit investment trusts and 
small business investment companies for annual reports to be filed 
pursuant to Sec.  270.30a-1 of this chapter in satisfaction of the 
requirement of section 30(a) of the Investment Company Act of 1940 (15 
U.S.C. 80a-29(a)) that every registered investment company must file 
annually with the Commission such information, documents, and reports 
as investment companies having securities registered on a national 
securities exchange are required to file annually pursuant to section 
13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a)) and the 
rules and regulations thereunder.

    Note: The text of Form N-CEN will not appear in the Code of 
Federal Regulations.

Sec.  249.332  [Removed and Reserved]

0
43. Section 249.332 is removed and reserved.

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

0
44. 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.
* * * * *
0
45. Amend Sec.  270.8b-16 paragraph (a) by removing the phrase ``a 
semi-annual report on Form N-SAR, as prescribed by rule 30b1-1 (17 CFR 
270.30b1-1)'' and adding in its place ``an annual report on Form N-CEN, 
as prescribed by 17 CFR 270.30a-1''.
0
46. Amend Sec.  270.8b-33 by:
0
a. In the first sentence, removing the phrase ``, Form N-CSR 
(Sec. Sec.  249.331 and 274.128 of this chapter), or Form N-Q 
(Sec. Sec.  249.332 and 274.130 of this chapter)'' and adding in its 
place the phrase ``or Form N-CSR (Sec. Sec.  249.331 and 274.128 of 
this chapter)''; and
0
b. In the third sentence, removing the phrase ``or Form N-Q''.
0
47. Amend Sec.  270.10f-3 by removing and reserving paragraph (c)(9).
0
48. Revise Sec.  270.30a-1 to read as follows:


Sec.  270.30a-1  Annual report for registered investment companies.

    Every registered investment company must file an annual report on 
Form N-CEN (Sec.  274.101 of this chapter) at least every twelve months 
and not more than sixty calendar days after the close of each fiscal 
year. A registered investment company that has filed a registration 
statement with the Commission registering its securities for the first 
time under the Securities Act of 1933 is relieved of this reporting 
obligation with respect to any reporting period or portion thereof 
prior to the date on which that registration statement becomes 
effective or is withdrawn.
0
49. Amend Sec.  270.30a-2 by:
0
a. In the section heading, removing the phrase ``and Form N-Q''; and
0
b. In the first sentence of paragraph (a), removing the phrases ``or 
Form N-Q (Sec. Sec.  249.332 and 274.130 of this chapter)'' and ``or 
Item 3 of Form N-Q, as applicable,''.
0
50. Amend Sec.  270.30a-3 by:
0
a. In paragraph (b), removing the phrase ``and Form N-Q (Sec. Sec.  
249.332 and 274.130 of this chapter)''.
0
b. In the first sentence of paragraph (c), removing the phrase ``and 
Form N-Q (Sec. Sec.  249.332 and 274.130 of this chapter)''.
0
c. In the second sentence of paragraph (c), removing the phrase ``and 
Form N-Q (Sec. Sec.  249.332 and 274.130 of this chapter)''.
0
51. Section 270.30a-4 is added to read as follows:


Sec.  270.30a-4  Annual report for wholly-owned registered management 
investment company subsidiary of registered management investment 
company.

    Notwithstanding the provisions of Sec.  270.30a-1, a registered 
management investment company that is a wholly-owned subsidiary of a 
registered management investment company need not file an annual report 
on Form N-CEN if financial information with respect to that subsidiary 
is reported in the parent's annual report on Form N-CEN.


Sec.  270.30b1-1  [Removed and Reserved]

0
52. Section 270.30b1-1 is removed and reserved.


Sec.  270.30b1-2  [Removed and Reserved]

0
53. Section 270.30b1-2 is removed and reserved.


Sec.  270.30b1-3  [Removed and Reserved]

0
54. Section 270.30b1-3 is removed and reserved.


Sec.  270.30b1-5  [Removed and Reserved]

0
55. Section 270.30b1-5 is removed and reserved.
0
56. Section 270.30b1-9 is added to read as follows:


Sec.  270.30b1-9  Monthly report.

    Each registered management investment company or exchange-traded 
fund organized as a unit investment trust, or series thereof, other 
than a registered open-end management investment company that is 
regulated as a money market fund under Sec.  270.2a-7 or a small 
business investment company registered on Form N-5 (Sec. Sec.  239.24 
and 274.5 of this chapter), must file a monthly report of portfolio 
holdings on Form N-PORT (Sec.  274.150 of this chapter), current as of 
the last business day, or last calendar day, of the month. A registered 
investment company that has filed a registration statement with the 
Commission registering its securities for the first time under the 
Securities Act of 1933 is relieved of this reporting obligation with 
respect to any reporting period or portion thereof prior to the date on 
which that registration statement becomes effective or is withdrawn. 
Reports on Form N-PORT must be filed with the Commission no later than 
30 days after the end of each month.
0
57. Amend Sec.  270.30d-1 by:
0
a. In the first sentence, removing the phrase ``and Form N-Q 
(Sec. Sec.  249.332 and 274.130 of this chapter)''; and
0
b. In the second sentence, removing the phrase ``Form N-SAR'' and 
adding in its place ``Form N-CEN''.
0
58. Section 270.30e-3 is added to read as follows:


Sec.  270.30e-3  Internet availability of reports to shareholders.

    (a) Web site Transmission. A report required by Sec.  270.30e-1 or 
Sec.  270.30e-2 will be considered transmitted to a shareholder of 
record if all of the conditions set forth in paragraphs (b) through (e) 
of this section are satisfied.
    (b) Availability of Report to Shareholders and Other Materials.
    (1) The following materials are publicly accessible, free of 
charge, at the Web site address specified in the Notice from the date 
of the transmission in reliance on paragraph (a) of this section until 
the Fund next transmits a report required by Sec.  270.30e-1 or Sec.  
270.30e-2:
    (i) The Fund's current report required by Sec.  270.30e-1 or Sec.  
270.30e-2.
    (ii) Any report required by Sec.  270.30e-1 or Sec.  270.30e-2 
transmitted to shareholders of record within the last 244 days.
    (iii) In the case of a Fund that is a management company, other 
than a

[[Page 33697]]

Fund that is regulated as a money market fund under Sec.  270.2a-7 or a 
small business investment company registered on Form N-5 (Sec. Sec.  
239.24 and 274.5 of this chapter), the Fund's complete portfolio 
holdings as of the close of the Fund's most recent first and third 
fiscal quarters, if any, after the date on which the Fund's 
registration statement became effective, presented in accordance with 
the schedules set forth in Sec. Sec.  210.12-12--12-14 of Regulation S-
X [17 CFR 210.12-12--12-14], which need not be audited.
    (2) In the case of a Fund that is a management company, other than 
a Fund that is regulated as a money market fund under Sec.  270.2a-7 or 
a small business investment company registered on Form N-5 (Sec. Sec.  
239.24 and 274.5 of this chapter), the Fund's complete portfolio 
holdings as of the close of the next fiscal quarter, presented in 
accordance with the schedules set forth in Sec. Sec.  210.12-12--12-14 
of Regulation S-X [17 CFR 210.12-12--12-14], which need not be audited, 
are publicly accessible, free of charge, at the Web site address 
specified in the Notice from a date not more than 60 days after the 
close of the fiscal period until the Fund next transmits a report 
required by Sec.  270.30e-1 or Sec.  270.30e-2.
    (3) The Web site address relied upon for compliance with this 
section may not be the address of the Commission's electronic filing 
system.
    (4) The materials that are accessible in accordance with paragraphs 
(b)(1) through (b)(2) of this section must be presented on the Web site 
in a format, or formats, that are convenient for both reading online 
and printing on paper.
    (5) Persons accessing the materials specified in paragraphs (b)(1) 
through (b)(2) of this section must be able to permanently retain, free 
of charge, an electronic version of such materials in a format, or 
formats, that meet the conditions of paragraph (b)(4) of this section.
    (6) The conditions set forth in paragraphs (b)(1) through (b)(5) of 
this section shall be deemed to be met, notwithstanding the fact that 
the materials specified in paragraphs (b)(1) through (b)(2) of this 
section are not available for a time in the manner required by 
paragraphs (b)(1) through (b)(5) of this section, provided that:
    (i) The Fund has reasonable procedures in place to ensure that the 
specified materials are available in the manner required by paragraphs 
(b)(1) through (b)(5) of this section; and
    (ii) The Fund takes prompt action to ensure that the specified 
documents become available in the manner required by paragraphs (b)(1) 
through (b)(5) of this section, as soon as practicable following the 
earlier of the time at which it knows or reasonably should have known 
that the documents are not available in the manner required by 
paragraphs (b)(1) through (b)(5) of this section.
    (c) Consent. The shareholder has previously consented to Web site 
transmission of shareholder reports or all of the following conditions 
are met:
    (1) The Fund has transmitted a separate written statement 
(``Initial Statement'') to the shareholder at least 60 days before the 
Fund begins to rely on this section concerning transmission of reports 
to that shareholder. The Initial Statement must be written using plain 
English principles pursuant to paragraph (e) of this section and:
    (i) State that future shareholder reports will be accessible, free 
of charge, at a Web site;
    (ii) Explain that the Fund will no longer mail printed copies of 
shareholder reports to the shareholder unless the shareholder notifies 
the Fund that he or she wishes to receive printed reports in the 
future;
    (iii) Include a toll-free telephone number and be accompanied by a 
reply form that is pre-addressed with postage provided and that 
includes the information the Fund would need to identify the 
shareholder, and explain that the shareholder can use either of those 
two methods at any time to notify the Fund that he or she wishes to 
receive printed reports in the future;
    (iv) State that the Fund will mail printed copies of future 
shareholder reports within 30 days after the Fund receives notice of 
the shareholder's preference; and
    (v) Contain a prominent legend in bold-face type that states: ``How 
to Continue Receiving Printed Copies of Shareholder Reports''. This 
legend must appear on the envelope in which the Initial Statement is 
delivered. Alternatively, if the Initial Statement is delivered 
separately from other communications to investors, this legend may 
appear either on the Initial Statement or on the envelope in which the 
Initial Statement is delivered.
    (2) The Initial Statement may not be incorporated into, or combined 
with, another document.
    (3) The Initial Statement must be sent separately from other types 
of shareholder communications and may not accompany any other document 
or materials; provided, however, that the Initial Statement may 
accompany the Fund's current Summary Prospectus, Statutory Prospectus, 
Statement of Additional Information, or Notice of Internet Availability 
of Proxy Materials under Sec.  240.14a-16 of this chapter.
    (4) The Fund has not received the reply form or other notification 
indicating that the shareholder wishes to continue to receive a print 
copy of the report, within 60 days after the Fund sent the Initial 
Statement.
    (d) Notice. The Fund must send a notice to shareholders 
(``Notice'') meeting the following conditions of this paragraph (d) 
within 60 days after the close of the period for which the report to 
shareholders transmitted in reliance on paragraph (a) of this section 
is being made:
    (1) The Notice must be written using plain English principles 
pursuant to paragraph (e) of this section and:
    (i) Contain a prominent legend in bold-face type that states ``[A]n 
Important Report[s] to Shareholders of [insert Fund name or fund 
complex name] [is/are] Now Available Online and In Print by Request'';
    (ii) State that each report to shareholders contains important 
information about their Fund, including its portfolio holdings, and is 
available on the Internet or, upon request, by mail, and that 
encourages the shareholder to access and review the report.
    (iii) Include a Web site address that leads directly to each report 
the Fund is transmitting to the recipient shareholder in reliance on 
this section.
    (iv) Include a Web site address where the report to shareholders 
and other materials specified in paragraphs (b)(1) through (b)(2) of 
this section are available. The Web site address must be specific 
enough to lead investors directly to the documents that are required to 
be accessible under paragraphs (b)(1) through (b)(2) of this section, 
rather than to the home page or section of the Web site other than on 
which the documents are posted. The Web site may be a central site with 
prominent links to each document.
    (v) Provide instructions describing how a shareholder may request a 
paper copy of the shareholder report and other materials specified in 
paragraphs (b)(1) through (b)(2) of this section at no charge, and an 
indication that they will not otherwise receive a paper or email copy.
    (vi) Include a toll-free telephone number and be accompanied by a 
reply form that is pre-addressed with postage provided and that 
includes the information the Fund would need to identify the 
shareholder, and explain that the shareholder can use either of those 
two methods at any time to notify the Fund that he or she wishes to 
receive printed reports in the future.

[[Page 33698]]

    (2) The Notice may not be incorporated into, or combined with, 
another document.
    (3) The Notice may contain only the information required by 
paragraph (d)(1) of this section.
    (4) The Notice must be sent separately from other types of 
shareholder communications and may not accompany any other document or 
materials; provided, however, that the Notice may accompany the Fund's 
current Summary Prospectus, Statutory Prospectus, Statement of 
Additional Information, or Notice of Internet Availability of Proxy 
Materials under Sec.  240.14a-16 of this chapter.
    (5) A Notice required by this paragraph (d) will be considered sent 
to a shareholder of record if the Fund satisfies the conditions set 
forth in Sec.  270.30e-1(f) with respect to that shareholder.
    (6) The Fund must file a form of the Notice with the Commission not 
later than 10 business days after it is sent to shareholders.
    (e) Plain English Requirements.
    (1) To enhance the readability of the Initial Statement and the 
Notice, the Fund must use plain English principles in the organization, 
language, and design of those materials.
    (2) The Fund must draft the language in the Initial Statement and 
the Notice so that, at a minimum, the materials substantially comply 
with each of the following plain English writing principles:
    (i) Short sentences;
    (ii) Definite, concrete, everyday words;
    (iii) Active voice;
    (iv) Tabular presentation or bullet lists for complex material, 
whenever possible;
    (v) No legal jargon or highly technical business terms; and
    (vi) No multiple negatives.
    (f) Delivery upon Request. The Fund (or a financial intermediary 
through which shares of the Fund may be purchased or sold) must send, 
at no cost to the requestor and by U.S. first class mail or other 
reasonably prompt means, a paper copy of any of the materials specified 
in paragraph (b)(1) through (b)(2) of this section to any person 
requesting such a copy within three business days after receiving a 
request for a paper copy.
    (g) A Fund may not rely on this section to transmit a copy of its 
currently effective Statutory Prospectus or Statement of Additional 
Information, or both, under the Securities Act as permitted by 
paragraph (d) of Sec.  270.30e-1.
    (h) Definitions. For purposes of this section:
    (1) Fund means a registered investment company and any series of 
the investment company.
    (2) Initial Statement means the statement described in paragraph 
(c)(1) of this section.
    (3) Notice means the notice described in paragraph (d) of this 
section.
    (4) Statement of Additional Information means the statement of 
additional information required by Part B of the registration form 
applicable to the Fund.
    (5) Statutory Prospectus means a prospectus that satisfies the 
requirements of section 10(a) of the Securities Act of 1933 (15 U.S.C. 
77(j)(a)).
    (6) Summary Prospectus means the summary prospectus described in 
paragraph (b) of Sec.  230.498 of this chapter.

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

0
59. The general authority citation for part 274 continues to read as 
follows, and the sectional authorities for Sec. Sec.  274.101 and 
274.130 are removed:

    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
60. Form N-1A (referenced in 274.11A) is amended by:
0
a. In Item 16(f), Instruction 3(b), removing the phrase ``or Form N-
Q'';
0
b. In Item 27(b)(1), Instruction 1, removing the phrase ``Schedule VI'' 
and adding in its place ``Schedule IX'', removing the phrase ``[17 CFR 
210.12-12C]'' and adding in its place ``17 CFR 210.12-12B]'', and 
removing the phrase ``(b)'' and adding in its place ``(b) the Fund is 
not relying upon rule 30e-3 [17 CFR 270.30e-3] to transmit reports to 
its shareholders; and (c)'';
0
c. In Item 27(b)(1), Instruction 2, removing the phrase `` ``[17 CFR 
210.12-12C]'' and adding in its place ``17 CFR 210.12-12B]'';
0
d. In Item 27(d), revising Instruction 4; and
0
e. Revising Item 33.
    The revisions to Item 27(d), Instruction 4, and Item 33 of Form N-
1A read as follows:

    Note: The text of Form N-1A does not, and this amendment will 
not, appear in the Code of Federal Regulations.

Form N-1A
* * * * *
Item 27. Financial Statements
* * * * *
    (d) Annual and Semi-Annual Reports.
* * * * *
Instructions
* * * * *
    4. Statement Regarding Availability of Quarterly Portfolio 
Schedule. A statement that: (i) The Fund files its complete schedule of 
portfolio holdings with the Commission for the first and third quarters 
of each fiscal year as an exhibit to its reports on Form N-PORT; (ii) 
the Fund's Form N-PORT reports are available on the Commission's Web 
site at http://www.sec.gov; and (iii) if the Fund makes the information 
on Form N-PORT available to shareholders on its Web site or upon 
request, a description of how the information may be obtained from the 
Fund; provided, however, that a Fund that makes its complete schedule 
of portfolio holdings for the first and third quarters of the fiscal 
year available on its Web site in accordance with rule 30e-3 under the 
Act should only provide a statement that describes how the information 
may be obtained from the Fund.
* * * * *
Item 33. Location of Accounts and Records
    State the name and address of each person maintaining physical 
possession of each account, book, or other document required to be 
maintained by section 31(a) [15 U.S.C. 80a-30(a)] and the rules under 
that section.
Instructions
    1. The instructions to Item 20.4 of this form shall also apply to 
this item.
    2. Information need not be provided for any service for which total 
payments of less than $5,000 were made during each of the last three 
fiscal years.
    3. A fund may omit this information to the extent it is provided in 
its most recent report on Form N-CEN [17 CFR 274.101].
* * * * *
0
61. Form N-2 (referenced in 274.11a-1) is amended by:
0
a. In Item 24, Instruction 6, revising paragraph (b);
0
b. In Item 24, revising Instruction 7; and
0
c. Revising Item 32.
    The revisions to Form N-2 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 24. Financial Statements
* * * * *

[[Page 33699]]

Instructions
* * * * *
    6. * * *
    b. Statement Regarding Availability of Quarterly Portfolio 
Schedule. A statement that: (i) The Registrant files its complete 
schedule of portfolio holdings with the Commission for the first and 
third quarters of each fiscal year as an exhibit to its reports on Form 
N-PORT; (ii) the Registrant's Form N-PORT reports are available on the 
Commission's Web site at http://www.sec.gov; (iii) if the Registrant 
makes the information on Form N-PORT available to shareholders on its 
Web site or upon request, a description of how the information may be 
obtained from the Registrant; provided, however, that a Fund that makes 
its complete schedule of portfolio holdings for the first and third 
quarters of the fiscal year available on its Web site in accordance 
with rule 30e-3 under the Act should only provide a statement that 
describes how the information may be obtained from the Fund.
* * * * *
    7. Schedule IX--Summary schedule of investments in securities of 
unaffiliated issuers [17 CFR 210.12-12B] may be included in the 
financial statements required under Instructions 4.a. and 5.a. of this 
Item in lieu of Schedule I--Investments in securities of unaffiliated 
issuers [17 CFR 210.12-12] if: (a) The Registrant states in the report 
that the Registrant's complete schedule of investments in securities of 
unaffiliated issuers is available (i) without charge, upon request, by 
calling a specified toll-free (or collect) telephone number; (ii) on 
the Registrant's Web site, if applicable; and (iii) on the Commission's 
Web site at http://www.sec.gov; (b) the Registrant is not relying upon 
rule 30e-3 [17 CFR 270.30e-3] to transmit reports to its shareholders; 
and (c) whenever the Registrant (or financial intermediary through 
which shares of the Registrant may be purchased or sold) receives a 
request for the Registrant's schedule of investments in securities of 
unaffiliated issuers, the Registrant (or financial intermediary) sends 
a copy of Schedule I--Investments in securities of unaffiliated issuers 
within 3 business days of receipt by first-class mail or other means 
designed to ensure equally prompt delivery.
* * * * *
Item 32. Location of Accounts and Records
    Furnish the name and address of each person maintaining physical 
possession of each account, book, or other document required to be 
maintained by Section 31(a) of the 1940 Act [15 U.S.C. 80a-30(a)] and 
the rules thereunder [17 CFR 270.31a-1 through 31a-3].
    Instruction. A fund may omit this information to the extent it is 
provided in its most recent report on Form N-CEN [17 CFR 274.101].
* * * * *
0
62. Form N-3 (referenced in 274.11b) is amended by:
0
a. In Item 28(a), Instruction 6, revising paragraph (ii);
0
b. In Item 28(a), revising Instruction 7(i);
0
c. In Item 28(a), Instruction 7(ii), removing the phrase ``[17 CFR 
210.12-12C]'' and adding in its place ``17 CFR 210.12-12]''; and
0
d. Revising Item 36.
    The revisions to Item 28(a), Instructions 6 and 7(i), and Item 36 
of Form N-3 read as follows:

    Note: The text of Form N-3 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

Form N-3
* * * * *
Item 28. Financial Statements
* * * * *
Instructions
* * * * *
    6. * * * *
* * * * *
    (ii) Statement Regarding Availability of Quarterly Portfolio 
Schedule. A statement that: (i) The Fund files its complete schedule of 
portfolio holdings with the Commission for the first and third quarters 
of each fiscal year as an exhibit to its reports on Form N-PORT; (ii) 
the Fund's Form N-PORT reports are available on the Commission's Web 
site at http://www.sec.gov; and (iii) if the Fund makes the information 
on Form N-PORT available to contractowners on its Web site or upon 
request, a description of how the information may be obtained from the 
Fund; provided, however, that a Fund that makes its complete schedule 
of portfolio holdings for the first and third quarters of the fiscal 
year available on its Web site in accordance with rule 30e-3 under the 
Act should only provide a statement that describes how the information 
may be obtained from the Fund.
* * * * *
    7. * * * *
    (i) Schedule IX--Summary schedule of investments in securities of 
unaffiliated issuers [17 CFR 210.12-12B] may be included in the 
financial statements required under Instructions 4.(i) and 5.(i) of 
this Item in lieu of Schedule I--Investments in securities of 
unaffiliated issuers [17 CFR 210.12-12] if: (A) The Registrant states 
in the report that the Registrant's complete schedule of investments in 
securities of unaffiliated issuers is available (1) without charge, 
upon request, by calling a specified toll-free (or collect) telephone 
number; (2) on the Registrant's Web site, if applicable; and (3) on the 
Commission's Web site at http://www.sec.gov; and (B) the Registrant is 
not relying upon rule 30e-3 [17 CFR 270.30e-3] to transmit reports to 
its contractowners; and (C) whenever the Registrant (or financial 
intermediary through which shares of the Registrant may be purchased or 
sold) receives a request for the Registrant's schedule of investments 
in securities of unaffiliated issuers, the Registrant (or financial 
intermediary) sends a copy of Schedule I--Investments in securities of 
unaffiliated issuers within 3 business days of receipt by first-class 
mail or other means designed to ensure equally prompt delivery.
* * * * *
Item 36. Location of Accounts and Records
    Give the name and address of each person who maintains physical 
possession of each account, book, or other document required to be 
maintained by Section 31(a) of the 1940 Act [15 U.S.C. 80a-30(a)] and 
Rules under it [17 CFR 270.31a-1 to 31a-3].
    Instruction. A fund may omit this information to the extent it is 
provided in its most recent report on Form N-CEN [17 CFR 274.101].
* * * * *
0
63. Form N-4 (referenced in 274.11c) is amended by adding to the end of 
Item 30 a new instruction ``Instruction. A fund may omit this 
information to the extent it is provided in its most recent report on 
Form N-CEN [17 CFR 274.101].''.
0
64. Form N-6 (referenced in 274.11d) is amended by adding to the end of 
Item 31 a new instruction ``Instruction. A fund may omit this 
information to the extent it is provided in its most recent report on 
Form N-CEN [17 CFR 274.101].''.
0
65. Section 274.101 and its heading are revised to read as follows:


Sec.  274.101  Form N-CEN, annual report of registered investment 
companies.

    This form shall be used by registered investment companies for 
annual reports to be filed pursuant to 17 CFR 270.30a-1.

    Note: The text of Form N-CEN will not appear in the Code of 
Federal Regulations.


[[Page 33700]]



FORM N-CEN

ANNUAL REPORT FOR REGISTERED INVESTMENT COMPANIES

    Form N-CEN is to be used by all registered investment companies, 
other than face amount certificate companies, to file annual reports 
with the Commission, not later than 60 days after the close of the 
fiscal year for which the report is being prepared, pursuant to rule 
30a-1 under the Investment Company Act of 1940 (``Act'') (17 CFR 
270.30a-1). Face amount certificate companies should continue to file 
periodic reports pursuant to section 13 or 15(d) of the Securities 
Exchange Act of 1934 (``Exchange Act''). The Commission may use the 
information provided on Form N-CEN in its regulatory, enforcement, 
examination, disclosure review, inspection, and policymaking roles.

GENERAL INSTRUCTIONS

A. Rule as to Use of Form N-CEN

    Form N-CEN is the reporting form that is to be used for annual 
reports filed pursuant to rule 30a-1 under the Act (17 CFR 270.30a-1) 
by registered investment companies, other than face amount certificate 
companies, under section 30(a) of the Act and, in the case of small 
business investment companies and registered unit investment trusts, 
under section 13 or 15(d) of the Exchange Act, if applicable.
    Registrants must respond to all items in the relevant Parts of Form 
N-CEN, as listed below in this General Instruction A. If an item within 
a required Part is inapplicable, the Registrant should respond ``N/A'' 
to that item. Registrants are not, however, required to respond to 
items in Parts of Form N-CEN that they are not required by this General 
Instruction A to respond to.
    Management investment companies: Management investment companies 
other than small business investment companies must complete Parts A, 
B, C, and G of this Form. Management investment companies that offer 
multiple series must complete Part C as to each series separately, even 
if some information is the same for two or more series. Closed-end 
management investment companies also must complete Part D of this Form. 
Small business investment companies must complete Parts A, B, D, and G 
of this Form. Management investment companies that are registered on 
Form N-3 also must complete certain items in Part F of this Form as 
directed by Item 7.c.i.
    Exchange-traded funds or exchange-traded managed funds: Funds that 
are exchange-traded funds or exchange-traded managed funds, as defined 
by this Form, must complete Part E of this Form in addition to any 
other required Parts.
    Unit investment trusts: Unit investment trusts must complete Parts 
A, B, F, and G of this Form.

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. Filing of Report

    All registered investment companies with shares outstanding (other 
than shares issued in connection with an initial investment to satisfy 
section 14(a) of the Investment Company Act) must file a report on Form 
N-CEN at least annually. If a Registrant changes its fiscal year, a 
report filed on Form N-CEN may cover a period shorter than 12 months, 
but in no event may a report filed on Form N-CEN cover a period longer 
than 12 months or a period that overlaps with a period covered by a 
previously filed report. For example, if in 2014 a Registrant with a 
September 30 fiscal year end changes its fiscal year end to December 
31, the Registrant could file a report on this Form for the fiscal 
period ending September 30, 2014 and a report for the period ending 
December 31, 2014. A Registrant could not, however, only file a report 
for the fiscal period ending December 31, 2014 if its last report was 
filed for the fiscal period ending September 30, 2013. An extension of 
time of up to 15 days for filing the form may be obtained by following 
the procedures specified in rule 12b-25 under the Exchange Act (17 CFR 
240.12b-25).
    Reports must be filed electronically using the Commission's 
Electronic Data Gathering, Analysis, and Retrieval (``EDGAR'') system 
in accordance with Regulation S-T. Consult the EDGAR Filer Manual and 
Appendices for EDGAR filing instructions.

D. Paperwork Reduction Act Information

    A registrant is required to disclose the information specified by 
Form N-CEN, and the Commission will make this information public. A 
registrant is not required to respond to the collection of information 
contained in Form N-CEN 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.

E. Signature and Filing of Report

    If the report is filed in paper pursuant to a hardship exemption 
from electronic filing (see Item 201 et seq. of Regulation S-T (17 CFR 
232.201 et seq.)), eight complete copies of the report shall be filed 
with the Commission. At least one complete copy of the report shall be 
filed with each exchange on which any class of securities of the 
registrant is registered. At least one complete copy of the report 
filed with the Commission and one such copy filed with each exchange 
must be manually signed. Copies not manually signed must bear typed or 
printed signatures.
    A registrant may file an amendment to a previously filed report at 
any time, including an amendment to correct a mistake or error in a 
previously filed report. A registrant that files an amendment to a 
previously filed report must provide information in response to all 
required items of Form N-CEN, regardless of why the amendment is filed.
    The report must be signed by the Registrant, and on behalf of the 
Registrant, by an authorized officer of the Registrant. The name of 
each person who signs the report shall be typed or printed beneath his 
or her signature. Attention is directed to rule 8b-11 under the Act (17 
CFR 270.8b-11) concerning manual signatures and signatures pursuant to 
powers of attorney.

F. Definitions

    Except as defined below or where the context clearly indicates the 
contrary, terms used in Form N-CEN have meanings as defined in the Act 
and the rules and regulations thereunder. Unless otherwise indicated, 
all references in the form or its instructions to statutory sections or 
to rules are sections of the Act and the rules and regulations 
thereunder.
    In addition, the following definitions apply:
    ``Class'' means a class of shares issued by a Multiple Class Fund 
that represents interest in the same portfolio of securities under rule 
18f-3 under the Act (17 CFR 270.18f-3) or under an

[[Page 33701]]

order exempting the Multiple Class Fund from sections 18(f), 18(g), and 
18(i) of the Act (15 U.S.C. 80a-18(f), 18(g), and 18(i)).
    ``CRD number'' means a central licensing and registration system 
number issued by the Financial Industry Regulatory Authority.
    ``Exchange-Traded Fund'' means an open-end management investment 
company (or Series or Class thereof) or unit investment trust, the 
shares of which are listed and traded on a national securities exchange 
at market prices, and that has formed and operates under an exemptive 
order under the Act granted by the Commission or in reliance on an 
exemptive rule under the Act adopted by the Commission.
    ``Exchange-Traded Managed Fund'' means an open-end management 
investment company (or Series or Class thereof) or unit investment 
trust, the shares of which are listed and traded on a national 
securities exchange at NAV-based prices, and that has formed and 
operates under an exemptive order under the Act granted by the 
Commission or in reliance on an exemptive rule under the Act adopted by 
the Commission.
    ``Fund'' means the Registrant or a separate Series of the 
Registrant. When an item of Form N-CEN specifically applies to a 
Registrant or Series, those terms will be used.
    ``LEI'' means, with respect to any company, the ``legal entity 
identifier'' as assigned or recognized by the Global LEI Regulatory 
Oversight Committee or the Global LEI Foundation. In the case of a 
financial institution, if a ``legal entity identifier'' has not been 
assigned, then provide the RSSD ID, if any, assigned by the National 
Information Center of the Board of Governors of the Federal Reserve 
System.
    ``Money Market Fund'' means an open-end management investment 
company registered under the Act, or Series thereof, that is regulated 
as a money market fund pursuant to rule 2a-7 under the Act (17 CFR 
270.2a-7).
    ``Multiple Class Fund'' means a Fund that has more than one Class.
    ``PCAOB number'' means the registration number issued to an 
independent public accountant registered with the Public Company 
Accounting Oversight Board.
    ``Registrant'' means the investment company filing this report or 
on whose behalf the report is filed.
    ``SEC File number'' means the number assigned to an entity by the 
Commission when that entity registered with the Commission in the 
capacity in which it is named in Form N-CEN.
    ``Series'' means shares offered by a Registrant that represent 
undivided interests in a portfolio of investments and that are 
preferred over all other Series of shares for assets specifically 
allocated to that Series in accordance with rule 18f-2(a) (17 CFR 
270.18f-2(a)).

FORM N-CEN

ANNUAL REPORT FOR REGISTERED INVESTMENT COMPANIES

Part A: General Information

Item 1. Reporting period covered.
    a. Report for period ending: [month/day/year]
    b. Does this report cover a period of less than 12 months? [Y/N]

Part B: Information About the Registrant

    Instruction. If the response to an item in Part B differs between 
Series of the Registrant, provide a response for each Series, as 
applicable, and label the response with the name and Series 
identification number of the Series to which a response relates.

Item 2. Background information.
    a. Full name of Registrant: __
    b. Investment Company Act file number (e.g., 811-): __
    c. CIK: __
    d. LEI: __
Item 3. Address and telephone number of Registrant.
    a. Street: __
    b. City: __
    c. State, if applicable: __
    d. Foreign country, if applicable: __
    e. Zip code and zip code extension, or foreign postal code: __
    f. Telephone number (including country code if foreign): __
    g. Public Web site, if any: __
Item 4. Location of books and records.
    a. Name of person (e.g., a custodian of records): __
    b. Street: __
    c. City: __
    d. State, if applicable
    e. Foreign country, if applicable: __
    f. Zip code and zip code extension, or foreign postal code: __
    g. Telephone number (including country code if foreign): __
    h. Briefly describe the books and records kept at this location: __

    Instruction. Provide the requested information for each person 
maintaining physical possession of each account, book, or other 
document required to be maintained by section 31(a) of the Act (15 
U.S.C. 80a-30(a)) and the rules under that section.

Item 5. Initial or final filings.
    a. Is this the first filing on this form by the Registrant? [Y/N]
    b. Is this the last filing on this form by the Registrant? [Y/N]

    Instruction. Respond ``yes'' to Item 5(b) only if the Registrant 
has filed an application to deregister on Form N-8F or otherwise.
Item 6. Family of investment companies.
    a. Is the Registrant part of a family of investment companies? [Y/
N]
    i. Full name of family of investment companies: __

    Instruction. ``Family of investment companies'' means, except for 
insurance company separate accounts, any two or more registered 
investment companies that (i) share the same investment adviser or 
principal underwriter; and (ii) hold themselves out to investors as 
related companies for purposes of investment and investor services. In 
responding to this item, all Registrants in the family of investment 
companies should report the name of the family of investment companies 
identically.
    Insurance company separate accounts that may not hold themselves 
out to investors as related companies (products) for purposes of 
investment and investor services should consider themselves part of the 
same family if the operational or accounting or control systems under 
which these entities function are substantially similar.

Item 7. Organization. Indicate the classification of the Registrant by 
checking the applicable item below.
    a. Open end management investment company registered under the Act 
on Form N-1A: __
    i. Total number of Series of the Registrant: __
    ii. If a Series of the Registrant was terminated during the 
reporting period, provide the following information:
    1. Name of the Series: __
    2. Series identification number: __
    3. Date of termination (month/year): __
    b. Closed-end management investment company registered under the 
Act on Form N-2: __
    c. Separate account offering variable annuity contracts which is 
registered under the Act as a management investment company on Form N-
3: __
    i. Registrants that indicate they are a management investment 
company registered under the Act on Form N-3, should respond to Item 74 
through Item 77 of this Form in addition to the items discussed in 
General Instruction A of this Form.
    d. Separate account offering variable annuity contracts which is

[[Page 33702]]

registered under the Act as a unit investment trust on Form N-4: __
    e. Small business investment company registered under the Act on 
Form N-5: __
    f. Separate account offering variable life insurance contracts 
which is registered under the Act as a unit investment trust on Form N-
6: __
    g. Unit investment trust registered under the Act on Form N-8B-2: 
__

    __Instruction. For Item 7.a.i, the Registrant should include all 
Series that have been established by the Registrant and have shares 
outstanding (other than shares issued in connection with an initial 
investment to satisfy section 14(a) of the Act).
Item 8. Securities Act registration. Is the Registrant the issuer of a 
class of securities registered under the Securities Act of 1933 
(``Securities Act'')? [Y/N]
Item 9. Directors. Provide for each director the information below 
(management investment companies only):
    a. Full name: __
    b. Is the director an ``interested person'' of the Registrant as 
that term is defined in section 2(a)(19) of the Act (15 U.S.C. 80a-
2(a)(19))? [Y/N]
    c. Investment Company Act file number of any other registered 
investment company for which the director also serves as a director 
(e.g., 811-): __
Item 10. Chief compliance officer. Provide the information requested 
below about the person serving as chief compliance officer of the 
Registrant for purposes of rule 38a-1 (17 CFR 270.38a-1):
    a. Full name: __
    b. CRD number, if any: __
    c. Street: __
    d. City: __
    e. State, if applicable: __
    f. Foreign country, if applicable: __
    g. Zip code and zip code extension, or foreign postal code: __
    h. Telephone number (including country code if foreign): __
    i. Has the chief compliance officer changed since the last filing? 
[Y/N]
    j. If the chief compliance officer is compensated or employed by 
any person other than the Registrant, or an affiliated person of the 
Registrant, for providing chief compliance officer services, provide:
    i. Name of the person: __
    ii. Person's Employer Identification Number: __
Item 11. Matters for security holder vote. Were any matters submitted 
by the Registrant for its security holders' vote during the reporting 
period? [Y/N]
Item 12. Legal proceedings.
    a. Have there been any material legal proceedings, other than 
routine litigation incidental to the business, to which the Registrant 
or any of its subsidiaries was a party or of which any of their 
property was the subject during the reporting period? [Y/N] If yes, 
include the attachment required by Item 79.a.i.
    b. Has any proceeding previously reported been terminated? [Y/N] If 
yes, include the attachment required by Item 79.a.i.

    Instruction. For purposes of this Item, the following proceedings 
should be described: (1) any bankruptcy, receivership or similar 
proceeding with respect to the Registrant or any of its significant 
subsidiaries; (2) any proceeding to which any director, officer or 
other affiliated person of the Registrant is a party adverse to the 
Registrant or any of its subsidiaries; and (3) any proceeding involving 
the revocation or suspension of the right of the Registrant to sell 
securities.

Item 13. Fidelity bond and insurance (management investment companies 
only).
    a. Were any claims with respect to the Registrant filed under a 
fidelity bond (including, but not limited to, the fidelity insuring 
agreement of the bond) during the reporting period? [Y/N]
    i. If yes, enter the aggregate dollar amount of claims filed: __
Item 14. Directors and officers/errors and omissions insurance 
(management investment companies only).
    a. Are the Registrant's officers or directors covered in their 
capacities as officers or directors under any directors and officers/
errors and omissions insurance policy owned by the Registrant or anyone 
else? [Y/N]
    i. If yes, were any claims filed under the policy during the 
reporting period with respect to the Registrant? [Y/N]
Item 15. Provision of financial support. Did an affiliated person, 
promoter, or principal underwriter of the Registrant, or an affiliated 
person of such a person, provide any form of financial support to the 
Registrant during the reporting period? [Y/N] If yes, include the 
attachment required by Item 79.a.ii, unless the Registrant is a Money 
Market Fund.

    Instruction. For purposes of this Item, a provision of financial 
support includes any (1) capital contribution, (2) purchase of a 
security from a Money Market Fund in reliance on rule 17a-9 under the 
Act (17 CFR 270.17a-9), (3) purchase of any defaulted or devalued 
security at fair value, (4) execution of letter of credit or letter of 
indemnity, (5) capital support agreement (whether or not the Registrant 
ultimately received support), (6) performance guarantee, or (7) other 
similar action reasonably intended to increase or stabilize the value 
or liquidity of the Registrant's portfolio. Provision of financial 
support does not include any (1) routine waiver of fees or 
reimbursement of Registrant's expenses, (2) routine inter-fund lending, 
(3) routine inter-fund purchases of Registrant's shares, or (4) action 
that would qualify as financial support as defined above, that the 
board of directors has otherwise determined not to be reasonably 
intended to increase or stabilize the value or liquidity of the 
Registrant's portfolio.

Item 16. Exemptive orders.
    a. During the reporting period, did the Registrant rely on any 
orders from the Commission granting an exemption from one or more 
provisions of the Act, Securities Act or Exchange Act? [Y/N]
    i. If yes, provide below the release number for each order: ____
Item 17. Principal underwriters.
    a. Provide the information requested below about each principal 
underwriter:
    i. Full name: ____
    ii. SEC file number (e.g., 8-): ____
    iii. CRD number: ____
    iv. LEI, if any: ____
    v. State, if applicable: ____
    vi. Foreign country, if applicable: ____
    vii. Is the principal underwriter an affiliated person of the 
Registrant, or its investment adviser(s) or depositor? [Y/N]
    b. Have any principal underwriters been hired or terminated during 
the reporting period? [Y/N]
Item 18. Independent public accountant. Provide the following 
information about the independent public accountant:
    a. Full name: ____
    b. PCAOB number: ____
    c. LEI, if any: ____
    d. State, if applicable: ____
    e. Foreign country, if applicable: ____
    f. Has the independent public accountant changed since the last 
filing? [Y/N] If yes, include the attachment required by Item 79.a.iii.
Item 19. Report on internal control (management investment companies 
only). For the reporting

[[Page 33703]]

period, did an independent public accountant's report on internal 
control find any material weaknesses? [Y/N]

    Instruction. Small business investment companies are not required 
to respond to this item.

Item 20. Audit opinion. For the reporting period, did an independent 
public accountant issue an opinion other than an unqualified opinion 
with respect to its audit of the Registrant's financial statements? [Y/
N]
Item 21. Change in valuation methods. Have there been material changes 
in the method of valuation (e.g., change from use of bid price to mid 
price for fixed income securities or change in trigger threshold for 
use of fair value factors on international equity securities) of the 
Registrant's assets during the reporting period? [Y/N] If yes, provide 
the following:
    a. Date of change: ___
    b. Explanation of the change: ____
    c. Type of investments involved: ____
    d. Statutory or regulatory basis, if any: ____
    e. Fund(s) involved:
    i. Fund name: _____
    ii. Series identification number: ____
    Instruction. Responses to this item need not include changes to 
valuation techniques used for individual securities (e.g., changing 
from market approach to income approach for a private equity security).

Item 22. Change in accounting principles and practices. Have there been 
any changes in accounting principles or practices, or any change in the 
method of applying any such accounting principles or practices, which 
will materially affect the financial statements filed or to be filed 
for the current year with the Commission and which has not been 
previously reported? [Y/N] If yes, include the attachment required by 
Item 79.a.v.
Item 23. Net asset value error corrections (open-end management 
investment companies only).
    a. During the reporting period, did the Registrant make any 
payments to shareholders or reprocess shareholder accounts as a result 
of an error in calculating the Registrant's net asset value (or net 
asset value per share)? [Y/N]
Item 24. Rule 19a-1 notice (management investment companies only). 
During the reporting period, did the Registrant pay any dividend or 
make any distribution in the nature of a dividend payment, required to 
be accompanied by a written statement pursuant to section 19(a) of the 
Act (15 U.S.C. 80a-19(a)) and rule 19a-1 thereunder (17 CFR 270.19a-1)? 
[Y/N]

Part C: Additional Questions for Management Investment Companies

Item 25. Background information.
    a. Full name of the Fund: ____
    b. Series identification number, if any: ____
    c. LEI: ____
    d. Is this the first filing on this form by the Fund? [Y/N]
Item 26. Classes of open-end management investment companies.
    a. How many Classes of shares of the Fund (if any) are authorized? 
____
    b. How many new Classes of shares of the Fund were added during the 
reporting period? ____
    c. How many Classes of shares of the Fund were terminated during 
the reporting period? ___
    d. For each Class with shares outstanding, provide the information 
requested below:
    i. Full name of Class: ____
    ii. Class identification number, if any: ____
    iii. Ticker symbol, if any: ____
Item 27. Type of fund. Indicate if the Fund is any one of the types 
listed below. Check all that apply.
    a. Exchange-Traded Fund or Exchange-Traded Managed Fund or offers a 
Class that itself is an Exchange-Traded Fund or Exchange-Traded Managed 
Fund:
    i. Exchange-Traded Fund: ____
    ii. Exchange-Traded Managed Fund: ____
    b. Index Fund: ____
    i. If the Fund is an index fund, provide the annualized difference 
between the Fund's total return during the reporting period and the 
index's return during the reporting period (i.e., the Fund's total 
return less the index's return):
    1. Before Fund fees and expenses: ____
    2. After Fund fees and expenses (i.e., net asset value): ____
    ii. If the Fund is an index fund, provide the annualized standard 
deviation of the daily difference between the Fund's total return and 
the index's return during the reporting period:
    1. Before Fund fees and expenses: ____
    2. After Fund fees and expenses (i.e., net asset value): ____
    c. Seeks to achieve performance results that are a multiple of a 
benchmark, the inverse of a benchmark, or a multiple of the inverse of 
a benchmark: ____
    d. Interval Fund: ____
    e. Fund of Funds: ____
    f. Master-Feeder Fund: ____
    i. If the Registrant is a master fund, then provide the information 
requested below with respect to each feeder fund:
    1. Full name: ____
    2. For registered feeder funds:
    a. Investment Company Act file number (e.g., 811-): ____
    b. Series identification number, if any: ____
    c. LEI of feeder Fund: ____
    3. For unregistered feeder funds:
    a. SEC file number of the feeder fund's investment adviser (e.g., 
801-): ____
    b. LEI of feeder fund, if any: ___
    ii. If the Registrant is a feeder fund, then provide the 
information requested below with respect to a master fund registered 
under the Act:
    1. Full name: ____
    2. Investment Company Act file number (e.g., 811-): ____
    3. SEC file number of the master fund's investment adviser (e.g., 
801-): ___
    4. LEI: ___
    g. Money Market Fund: ____
    h. Target Date Fund: ___
    i. Underlying fund to a variable annuity or variable life insurance 
contract: ____

    Instructions.
    1. ``Fund of Funds'' means a fund that acquires securities issued 
by any other investment company in excess of the amounts permitted 
under paragraph (A) of section 12(d)(1) of the Act (15 U.S.C. 80a-
12(d)(1)(A)).
    2. ``Index Fund'' means an investment company, including an 
Exchange-Traded Fund, that seeks to track the performance of a 
specified index.
    3. ``Interval Fund'' means a closed-end management investment 
company that makes periodic repurchases of its shares pursuant to rule 
23c-3 under the Act (17 CFR 270.23c-3).
    4. ``Master-Feeder Fund'' means a two-tiered arrangement in which 
one or more funds (each a feeder fund) holds shares of a single Fund 
(the master fund) in accordance with section 12(d)(1)(E) of the Act (15 
U.S.C. 80a-12(d)(1)(E)).
    5. ``Target Date Fund'' means an investment company that has an 
investment objective or strategy of providing varying degrees of long-
term appreciation and capital preservation through a mix of equity and 
fixed income exposures that changes over time based on an investor's 
age, target retirement date, or life expectancy.


[[Page 33704]]


Item 28. Diversification. Does the Fund seek to operate as a ``non-
diversified company'' as such term is defined in section 5(b)(2) of the 
Act (15 U.S.C. 80a-5(b)(2))? [Y/N]
Item 29. Investments in certain foreign corporations.
    a. Does the fund invest in a controlled foreign corporation for the 
purpose of investing in certain types of instruments such as, but not 
limited to, commodities? [Y/N]
    b. If yes, provide the following information:
    i. Full name of subsidiary: __
    ii. LEI of subsidiary, if any: __

    Instruction. ``Controlled foreign corporation'' has the meaning 
provided in section 957 of the Internal Revenue Code [26 U.S.C. 957].

Item 30. Securities lending.
    a. Is the Fund authorized to engage in securities lending 
transactions? [Y/N]
    b. Did the Fund lend any of its securities during the reporting 
period? [Y/N]
    i. If yes, has any borrower of fund securities defaulted during the 
reporting period? [Y/N]
    c. Provide the information requested below about each securities 
lending agent, if any, retained by the Fund:
    i. Full name of securities lending agent: __
    ii. LEI, if any: __
    iii. Is the securities lending agent an affiliated person, or an 
affiliated person of an affiliated person, of the Fund? [Y/N]
    iv. Does the securities lending agent or any other entity indemnify 
the fund against borrower default on loans administered by this agent? 
[Y/N]
    v. If the entity providing the indemnification is not the 
securities lending agent, provide the following information:
    1. Name of person providing indemnification: __
    2. LEI, if any, of person providing indemnification: __
    d. If a person providing cash collateral management services to the 
Fund in connection with the Fund's securities lending activities does 
not also serve as securities lending agent, provide the following 
information about each cash collateral manager:
    i. Full name of cash collateral manager: __
    ii. LEI, if any: __
    iii. Is the cash collateral manager an affiliated person, or an 
affiliated person of an affiliated person, of a securities lending 
agent retained by the Fund? [Y/N]
    iv. Is the cash collateral manager an affiliated person, or an 
affiliated person of an affiliated person, of the Fund? [Y/N]
    e. Types of payments made to one or more securities lending agents 
and cash collateral managers (check all that apply):
    i. revenue sharing split: __
    ii. non-revenue sharing split (other than administrative fee): __
    iii. administrative fee: __
    iv. cash collateral reinvestment fee: __
    v. indemnification fee: __
    vi. other: __. If other, describe: __.
Item 31. Reliance on certain rules. Did the Fund rely on any of the 
following rules under the Act during the reporting period? (check all 
that apply)
    a. Rule 10f-3 (17 CFR 270.10f-3): __
    b. Rule 12d1-1 (17 CFR 270.12d1-1): __
    c. Rule 15a&4 (17 CFR 270.15a-4): __
    d. Rule 17a-6 (17 CFR 270.17a-6): __
    e. Rule 17a-7 (17 CFR 270.17a-7): __
    f. Rule 17a-8 (17 CFR 270.17a-8): __
    g. Rule 17e-1 (17 CFR 270.17e-1): __
    h. Rule 22d-1 (17 CFR 270.22d-1): __
    i. Rule 23c-1 (17 CFR 270.23c-1): __
    j. Rule 32a-4 (17 CFR 270.32a-4): __
Item 32. Expense limitations.
    a. Did the Fund have an expense limitation arrangement in place 
during the reporting period? [Y/N]
    b. Were any expenses of the Fund reduced or waived pursuant to an 
expense limitation arrangement during the reporting period? [Y/N]
    c. Are the fees waived subject to recoupment? [Y/N]
    d. Were any expenses previously waived recouped during the period? 
[Y/N]

    Instruction. Provide information concerning any direct or indirect 
limitations, waivers or reductions, on the level of expenses incurred 
by the fund during the reporting period. A limitation, for example, may 
be applied indirectly (such as when an adviser agrees to accept a 
reduced fee pursuant to a voluntary fee waiver) or it may apply only 
for a temporary period such as for a new fund in its start-up phase.

Item 33. Investment advisers.
    a. Provide the following information about each investment adviser 
(other than a sub-adviser) of the Fund:
    i. Full name: __
    ii. SEC file number (e.g., 801-): __
    iii. CRD number: __
    iv. LEI, if any: __
    v. State, if applicable: __
    vi. Foreign country, if applicable: __
    vii. Was the investment adviser hired during the reporting period? 
[Y/N]
    1. If the investment adviser was hired during the reporting period, 
indicate the investment adviser's start date: __
    b. If an investment adviser (other than a sub-adviser) to the Fund 
was terminated during the reporting period, provide the following with 
respect to each investment adviser:
    i. Full name: __
    ii. SEC file number (e.g., 801-): __
    iii. CRD number: __
    iv. LEI, if any: __
    v. State, if applicable: __
    vi. Foreign country, if applicable: __
    vii. Termination date: __
    c. For each sub-adviser to the Fund, provide the information 
requested:
    i. Full name: __
    ii. SEC file number (e.g., 801-), if applicable: __
    iii. CRD number: ___
    iv. LEI, if any: ___
    v. State, if applicable: __
    vi. Foreign country, if applicable: __
    vii. Is the sub-adviser an affiliated person of the Fund's 
investment adviser(s)? [Y/N]
    viii. Was the sub-adviser hired during the reporting period? [Y/N]
    1. If the sub-adviser was hired during the reporting period, 
indicate the sub-adviser's start date: __
    d. If a sub-adviser was terminated during the reporting period, 
provide the following with respect to such sub-adviser:
    i. Full name: __
    ii. SEC file number (e.g., 801-): __
    iii. CRD number: __
    iv. LEI, if any: __
    v. State, if applicable: __
    vi. Foreign country, if applicable: __
    vii. Termination date: __
Item 34. Transfer agents.
    a. Provide the following information about each person providing 
transfer agency services to the Fund:
    i. Full name: __
    ii. SEC file number (e.g., 84- or 85-): __
    iii. LEI, if any: __
    iv. State, if applicable: __
    v. Foreign country, if applicable: __
    vi. Is the transfer agent an affiliated person of the Fund or its 
investment adviser(s)? [Y/N]
    b. Has a transfer agent been hired or

[[Page 33705]]

terminated during the reporting period? [Y/N]
Item 35. Pricing services. Provide the following information about each 
person that provided pricing services to the Fund during the reporting 
period:
    a. Full name: __
    b. LEI, if any, or provide and describe other identifying number: 
__
    c. State, if applicable: ___
    d. Foreign country, if applicable: __
    e. Is the pricing service an affiliated person of the Fund or its 
investment adviser(s)? [Y/N]
    f. Was the pricing service first retained by the Fund to provide 
pricing services during the current reporting period? [Y/N]
Item 36. Pricing services no longer retained. Provide the following 
information about each person that formerly provided pricing services 
to the Fund during the current or immediately prior reporting period 
that no longer provides such services to the Fund:
    a. Full name: __
    b. LEI, if any, or provide and describe other identifying number: 
__
    c. State, if applicable: ___
    d. Foreign country, if applicable: __
    e. Termination date: __
Item 37. Custodians.
    a. Provide the following information about each person that 
provided custodial services to the Fund during the reporting period:
    i. Full name: __
    ii. LEI, if any: __
    iii. State, if applicable: __
    iv. Foreign country, if applicable: __
    v. Is the custodian an affiliated person of the Fund or its 
investment adviser(s)? [Y/N]
    vi. Is the custodian a sub-custodian? [Y/N]
    vii. With respect to the custodian, check below to indicate the 
type of custody:
    1. Bank--section 17(f)(1) (15 U.S.C. 80a-17(f)(1)): __
    2. Member national securities exchange--rule 17f-1 (17 CFR 270.17f-
1): __
    3. Self --rule 17f&2 (17 CFR 270.17f-2): __
    4. Securities depository--rule 17f-4 (17 CFR 270.17f-4): __
    5. Foreign custodian--rule 17f-5 (17 CFR 270.17f-5): __
    6. Futures commission merchants and commodity clearing 
organizations--rule 17f-6 (17 CFR 270.17f-6): __
    7. Foreign securities depository--rule 17f-7 (17 CFR 270.17f-7): __
    8. Insurance company sponsor--rule 26a-2 (17 CFR 270.26a-2): __
    9. Other: __. If other, describe: __.
    b. Has a custodian been hired or terminated during the reporting 
period? [Y/N]
Item 38. Shareholder servicing agents.
    a. Provide the following information about each shareholder 
servicing agent of the Fund:
    i. Full name: __
    ii. LEI, if any, or provide and describe other identifying number: 
__
    iii. State, if applicable: ___
    iv. Foreign country, if applicable: __
    v. Is the shareholder servicing agent an affiliated person of the 
Fund or its investment adviser(s)? [Y/N]
    b. Has a shareholder servicing agent been hired or terminated 
during the reporting period? [Y/N]
Item 39. Third-party administrators.
    a. Provide the following information about each third-party 
administrator of the Fund:
    i. Full name: __
    ii. LEI, if any, or provide and describe other identifying number: 
__
    iii. State, if applicable: ___
    iv. Foreign country, if applicable: ___
    v. Is the third-party administrator an affiliated person of the 
Fund or its investment adviser(s)? [Y/N]
    b. Has a third-party administrator been hired or terminated during 
the reporting period? [Y/N]
Item 40. Affiliated broker-dealers. Provide the following information 
about each affiliated broker-dealer:
    a. Full name: __
    b. SEC file number: __
    c. CRD number: __
    d. LEI, if any: __
    e. State, if applicable: ___
    f. Foreign country, if applicable: __
    g. Total commissions paid to the affiliated broker-dealer for the 
reporting period: __
Item 41. Brokers.
    a. For each of the ten brokers that received the largest dollar 
amount of brokerage commissions (excluding dealer concessions in 
underwritings) by virtue of direct or indirect participation in the 
Fund's portfolio transactions, provide the information below:
    i. Full name of broker: __
    ii. SEC file number: __
    iii. CRD number: __
    iv. LEI, if any: __
    v. State, if applicable: ___
    vi. Foreign country, if applicable: __
    vii. Gross commissions paid by the Fund for the reporting period: 
__
    b. Aggregate brokerage commissions paid by Fund during the 
reporting period: __
Item 42. Principal transactions.
    a. For each of the ten entities acting as principals with which the 
Fund did the largest dollar amount of principal transactions (include 
all short-term obligations, and U.S. government and tax-free 
securities) in both the secondary market and in underwritten offerings, 
provide the information below:
    i. Full name of dealer: ____
    ii. SEC file number: ____
    iii. CRD number: ____
    iv. LEI, if any: ____
    v. State, if applicable: _____
    vi. Foreign country, if applicable: ____
    vii. Total value of purchases and sales (excluding maturing 
securities) with Fund: ____
    b. Aggregate value of principal purchase/sale transactions of Fund 
during the reporting period: ____

    Instructions to Item 41 and Item 42.
    To help Registrants distinguish between agency and principal 
transactions, and to promote consistent reporting of the information 
required by these items, the following criteria should be used:
    1. If a security is purchased or sold in a transaction for which 
the confirmation specifies the amount of the commission to be paid by 
the Registrant, the transaction should be considered an agency 
transaction and included in determining the answers to Item 41.
    2. If a security is purchased or sold in a transaction for which 
the confirmation specifies only the net amount to be paid or received 
by the Registrant and such net amount is equal to the market value of 
the security at the time of the transaction, the transaction should be 
considered a principal transaction and included in determining the 
amounts in Item 42.
    3. If a security is purchased by the Registrant in an underwritten 
offering, the acquisition should be considered a principal transaction 
and included in answering Item 42 even though the Registrant has 
knowledge of the amount the underwriters are receiving from the issuer.
    4. If a security is sold by the Registrant in a tender offer, the 
sale should be considered a principal transaction and included in 
answering Item 42 even though the Registrant has knowledge of the 
amount the offeror is paying to soliciting brokers or dealers.
    5. If a security is purchased directly from the issuer (such as a 
bank CD), the purchase should be considered a principal transaction and 
included in answering Item 42.
    6. The value of called or maturing securities should not be counted 
in either agency or principal transactions and should not be included 
in determining the amounts shown in Item 41 and Item 42. This means 
that the

[[Page 33706]]

acquisition of a security may be included, but it is possible that its 
disposition may not be included. Disposition of a repurchase agreement 
at its expiration date should not be included.
    7. The purchase or sales of securities in transactions not 
described in paragraphs (1) through (6) above should be evaluated by 
the Fund based upon the guidelines established in those paragraphs and 
classified accordingly. The agents considered in Item 41 may be persons 
or companies not registered under the Exchange Act as securities 
brokers. The persons or companies from whom the investment company 
purchased or to whom it sold portfolio instruments on a principal basis 
may be persons or entities not registered under the Exchange Act as 
securities dealers.

Item 43. Payments for brokerage and research. During the reporting 
period, did the Fund pay commissions to broker-dealers for ``brokerage 
and research services'' within the meaning of section 28(e) of the 
Exchange Act (15 U.S.C. 78bb)? [Y/N]

Part D: Additional Questions for Closed-End Management Investment 
Companies and Small Business Investment Companies

Item 44. Securities issued by Registrant. Indicate by checking below 
which of the following securities have been issued by the Registrant. 
Indicate all that apply.
    a. Common stock: ____
    i. Title of class: ____
    ii. Exchange where listed: ____
    iii. Ticker symbol: ____
    b. Preferred stock: ____
    1. Title of class: ____
    2. Exchange where listed: ____
    3. Ticker symbol: ____
    c. Warrants: ____
    i. Title of class: ____
    ii. Exchange where listed: ____
    iii. Ticker symbol: ____
    d. Convertible securities: ____
    i. Title of class: ____
    ii. Exchange where listed: ____
    iii. Ticker symbol: ____
    e. Bonds: ____
    i. Title of class: ____
    ii. Exchange where listed: ____
    iii. Ticker symbol: ____
    f. Other: ___. If other, describe: ____.
    i. Title of class: ____
    ii. Exchange where listed: ____
    iii. Ticker symbol: ____

    Instruction. For any security issued by the Fund that is not listed 
on a securities exchange but that has a ticker symbol, provide that 
ticker symbol.

Item 45. Rights offerings.
    a. Did the Fund make a rights offering with respect to any type of 
security during the reporting period? [Y/N] If yes, answer the 
following as to each rights offering made by the Fund:
    b. Type of security.
    i. Common stock: ____
    ii. Preferred stock: ____
    iii. Warrants: ____
    iv. Convertible securities: ____
    v. Bonds: ____
    vi. Other: ____. If other, describe: ______.
    c. Percentage of participation in primary rights offering: __

    Instruction. For Item 45.c, the ``percentage of participation in 
primary rights offering'' is calculated as the percentage of 
subscriptions exercised during the primary rights offering relative to 
the amount of securities available for primary subscription.

Item 46. Secondary offerings.
    a. Did the Fund make a secondary offering during the reporting 
period? [Y/N]
    b. If yes, indicate by checking below the type(s) of security. 
Indicate all that apply.
    i. Common stock: __
    ii. Preferred stock: __
    iii. Warrants: __
    iv. Convertible security: __
    v. Bonds: __
    vi. Other: __. If other, describe: __.
Item 47. Repurchases.
    a. Did the Fund repurchase any outstanding securities issued by the 
Fund during the reporting period? [Y/N]
    b. If yes, indicate by checking below the type(s) of security. 
Indicate all that apply:
    i. Common stock: __
    ii. Preferred stock: __
    iii. Warrants: __
    iv. Convertible securities: __
    v. Bonds: __
    vi. Other: __. If other, describe: __.
Item 48. Default on long-term debt.
    a. Were any issues of the Fund's long-term debt in default at the 
close of the reporting period with respect to the payment of principal, 
interest, or amortization? [Y/N] If yes, provide the following:
    i. Nature of default: __
    ii. Date of default: __
    iii. Amount of default per $1,000 face amount: __
iv. Total amount of default: __

    Instruction. The term ``long-term debt'' means debt with a period 
of time from date of initial issuance to maturity of one year or 
greater.

Item 49. Dividends in arrears.
    a. Were any accumulated dividends in arrears on securities issued 
by the Fund at the close of the reporting period? [Y/N] If yes, provide 
the following:
    i. Title of issue: __
    ii. Amount per share in arrears: __

    Instruction. The term ``dividends in arrears'' means dividends that 
have not been declared by the board of directors or other governing 
body of the Fund at the end of each relevant dividend period set forth 
in the constituent instruments establishing the rights of the 
stockholders.

Item 50. Modification of securities. Have the terms of any constituent 
instruments defining the rights of the holders of any class of the 
Registrant's securities been materially modified? [Y/N] If yes, provide 
the attachment required by Item 79.b.ii.
Item 51. Management fee (closed-end companies only). Provide the Fund's 
advisory fee as of the end of the reporting period as percentage of net 
assets: __

    Instruction. Base the percentage on amounts incurred during the 
reporting period.

Item 52. Net annual operating expenses. Provide the Fund's net annual 
operating expenses as of the end of the reporting period (net of any 
waivers or reimbursements) as a percentage of net assets: __
Item 53. Market price. Market price per share at end of reporting 
period: __

    Instruction. Respond to this item with respect to common stock 
issued by the Registrant only.

Item 54. Net asset value. Net asset value per share at end of reporting 
period: __

    Instruction. Respond to this item with respect to common stock 
issued by the Registrant only.

Item 55. Investment advisers (small business investment companies 
only).
    a. Provide the following information about each investment adviser 
(other than a sub-adviser) of the Fund:
    i. Full name: __
    ii. SEC file number (e.g., 801-): __
    iii. CRD number: __
    iv. LEI, if any: __
    v. State, if applicable: __
    vi. Foreign country, if applicable: __
    vii. Was the investment adviser hired during the reporting period? 
[Y/N]
    1. If the investment adviser was hired during the reporting period,

[[Page 33707]]

indicate the investment adviser's start date: __
    b. If an investment adviser (other than a sub-adviser) to the Fund 
was terminated during the reporting period, provide the following with 
respect to each investment adviser:
    i. Full name: __
    ii. SEC file number (e.g., 801-): __
    iii. CRD number: __
    iv. LEI, if any: __
    v. State, if applicable: __
    vi. Foreign country, if applicable: __
    vii. Termination date: __
    c. For each sub-adviser to the Fund, provide the information 
requested:
    i. Full name: __
    ii. SEC file number (e.g., 801-), if applicable: __
    iii. CRD number: __
    iv. LEI, if any: __
    v. State, if applicable: __
    vi. Foreign country, if applicable: __
    vii. Is the sub-adviser an affiliated person of the Fund's 
investment adviser(s)? [Y/N]
    viii. Was the sub-adviser hired during the reporting period? [Y/N]
    1. If the sub-adviser was hired during the reporting period, 
indicate the sub-adviser's start date: __
    d. If a sub-adviser was terminated during the reporting period, 
provide the following with respect to such sub-adviser:
    i. Full name: __
    ii. SEC file number (e.g., 801-): __
    iii. CRD number: __
    iv. LEI, if any: __
    v. State, if applicable: __
    vi. Foreign country, if applicable: __
    vii. Termination date: __
Item 56. Transfer agents (small business investment companies only).
    a. Provide the following information about each person providing 
transfer agency services to the Fund:
    i. Full name: __
    ii. SEC file number (e.g., 84- or 85-):
    iii. LEI, if any: __
    iv. State, if applicable: __
    v. Foreign country, if applicable: __
    vi. Is the transfer agent an affiliated person of the Fund or its 
investment adviser(s)? [Y/N]
    b. Has a transfer agent been hired or terminated during the 
reporting period? [Y/N]
Item 57. Custodians (small business investment companies only).
    a. Provide the following information about each person that 
provided custodial services to the Fund during the reporting period:
    i. Full name: __
    ii. LEI, if any: __
    iii. State, if applicable: __
    iv. Foreign country, if applicable: __
    v. Is the custodian an affiliated person of the Fund or its 
investment adviser(s)? [Y/N]
    vi. Is the custodian a sub-custodian? [Y/N]
    vii. With respect to the custodian, check below to indicate the 
type of custody:
    1. Bank--section 17(f)(1) (15 U.S.C. 80a-17(f)(1)): __
    2. Member national securities exchange--rule 17f-1 (17 CFR 270.17f-
1): __
    3. Self--rule 17f-2 (17 CFR 270.17f-2): __
    4. Securities depository--rule 17f-4 (17 CFR 270.17f-4): __
    5. Foreign custodian--rule 17f-5 (17 CFR 270.17f-5): __
    6. Futures commission merchants and commodity clearing 
organizations--rule 17f-6 (17 CFR 270.17f-6): __
    7. Foreign securities depository--rule 17f-7 (17 CFR 270.17f-7): __
    8. Insurance company sponsor--rule 26a-2 (17 CFR 270.26a-2): __
    9. Other: __. If other, describe: __.
    b. Has a custodian been hired or terminated during the reporting 
period? [Y/N]

Part E: Additional Questions for Exchange-Traded Funds and Exchange-
Traded Managed Funds

Item 58. Exchange where listed. Provide the securities exchange on 
which the Fund is listed: __
Item 59. Authorized participants. For each authorized participant of 
the Fund, provide the following information:
    a. Full name: __
    b. SEC file number: __
    c. CRD number: __
    d. LEI, if any: __
    e. The dollar value of the Fund shares the authorized participant 
purchased from the Fund during the reporting period: __
    f. The dollar value of the Fund shares the authorized participant 
redeemed during the reporting period: __

    Instruction. The term ``authorized participant'' means a broker-
dealer that is also a member of a clearing agency registered with the 
Commission, and which has a written agreement with the Exchange-Traded 
Fund or Exchange-Traded Managed Fund or one of its designated service 
providers that allows it place orders to purchase or redeem creation 
units of the Exchange-Traded Fund or Exchange-Traded Managed Fund.

Item 60. Creation units. Number of Fund shares required to form a 
creation unit as of the last business day of the reporting period: __
    a. Total value of creation units that were purchased primarily with 
in-kind securities during the reporting period: __
    b. Total value of creation units that were purchased primarily with 
cash during the reporting period: __
    c. Total value of creation units that were redeemed primarily with 
in-kind securities during the reporting period: __
    d. Total value of creation units that were redeemed primarily with 
cash during the reporting period: __
    e. For the last creation unit purchased during the reporting period 
of which some or all was purchased on an in-kind basis, provide:
    i. Any applicable ``fixed'' transaction fee expressed as dollars 
per creation unit: $__
    ii. Any applicable ``fixed'' transaction fee expressed as dollars 
per order of one or more creation units: $__
    iii. Any applicable ``variable'' transaction fee expressed as a 
percentage of the value of the in-kind portion of the creation unit: __
    iv. Any applicable ``variable'' transaction fee expressed as 
dollars per creation unit: $__
    f. For the last creation unit purchased during the reporting period 
of which some or all was purchased on a cash basis, provide:
    i. Any applicable ``fixed'' transaction fee expressed as dollars 
per creation unit: $__
    ii. Any applicable ``fixed'' transaction fee expressed as dollars 
per order of one or more creation units: $__
    iii. Any applicable ``variable'' transaction fee expressed as a 
percentage of the cash portion of the creation unit: ___%
    iv. Any applicable ``variable'' transaction fee expressed as 
dollars per creation unit: $__
    g. For the last creation unit redeemed during the reporting period 
of which some or all was redeemed on an in-kind basis, provide:
    i. Any applicable ``fixed'' transaction fee expressed as dollars 
per creation unit: $__
    ii. Any applicable ``fixed'' transaction fee expressed as dollars 
per order of one or more creation units: $__
    iii. Any applicable ``variable'' transaction fee expressed as a 
percentage of the value of the in-kind portion of the creation unit: _%
    iv. Any applicable ``variable'' transaction fee expressed as 
dollars per creation unit: $__

[[Page 33708]]

    h. For the last creation unit redeemed during the reporting period 
of which some or all was redeemed on a cash basis, provide:
    i. Any applicable ``fixed'' transaction fee expressed as dollars 
per creation unit: $__
    ii. Any applicable ``fixed'' transaction fee expressed as dollars 
per order of one or more creation units: $__
    iii. Any applicable ``variable'' transaction fee expressed as a 
percentage of the value of the cash portion of the creation unit: _%
    iv. Any applicable ``variable'' transaction fee expressed as 
dollars per creation unit: $__

    Instructions.
    8. The term ``creation unit'' means a specified number of Exchange-
Traded Fund or Exchange-Traded Managed Fund shares that the fund will 
issue to (or redeem from) an authorized participant in exchange for the 
deposit (or delivery) of specified securities, cash, and other assets.
    9. For this item, the term ``primarily'' means greater than 50%.

Item 61. Benchmark return difference (unit investment trusts only).
    a. If the Fund is an Index Fund as defined in Item 27 of this Form, 
provide the following information:
    i. The annualized difference between the Fund's total return during 
the reporting period and the index's return during the reporting period 
(i.e., the Fund's total return less the index's return):
    1. Before Fund fees and expenses: __
    2. After Fund fees and expenses (i.e., net asset value): __
    ii. The annualized standard deviation of the daily difference 
between the Fund's total return and the index's return during the 
reporting period:
    1. Before Fund fees and expenses: __
    2. After Fund fees and expenses (i.e., net asset value): __

Part F: Additional Questions for Unit Investment Trusts

Item 62. Depositor. Provide the following information about the 
depositor:
    a. Full name: __
    b. CRD number, if any: __
    c. LEI, if any: __
    d. State, if applicable: __
    e. Foreign country, if applicable: __
    f. Full name of ultimate parent of depositor: __
Item 63. Third-party administrators.
    a. Provide the following information about each third-party 
administrator of the Fund:
    i. Full name: __
    ii. LEI, if any, or provide and describe other identifying number: 
__
    iii. State, if applicable: __
    iv. Foreign country, if applicable: __
    v. Is the third-party administrator an affiliated person of the 
Fund or depositor? [Y/N]
    b. Has a third-party administrator been hired or terminated during 
the reporting period? [Y/N]
Item 64. Insurance company separate accounts. Is the Registrant a 
separate account of an insurance company? [Y/N]

    Instruction. If the answer to Item 64 is yes, respond to Item 73 
through Item 78. If the answer to Item 64 is no, respond to Item 65 
through Item 72, and Item 78.

Item 65. Sponsor. Provide the following information about the sponsor:
    a. Full name: __
    b. CRD number, if any: __
    c. LEI, if any: __
    d. State, if applicable: __
    e. Foreign country, if applicable: __

Item 66. Trustees. Provide the following information about each 
trustee:
    a. Full name: __
    b. State, if applicable: __
    c. Foreign country, if applicable: __
Item 67. Securities Act registration. Provide the number of series 
existing at the end of the reporting period that had outstanding 
securities registered under the Securities Act: __
Item 68. New series.
    a. Number of new series for which registration statements under the 
Securities Act became effective during the reporting period: __
    b. Total aggregate value of the portfolio securities on the date of 
deposit for the new series: __
Item 69. Series with a current prospectus. Number of series for which a 
current prospectus was in existence at the end of the reporting period: 
__
Item 70. Number of existing series for which additional units were 
registered under the Securities Act.
    a. Number of existing series for which additional units were 
registered under the Securities Act during the reporting period: __
    b. Total value of additional units: __
Item 71. Value of units placed in portfolios of subsequent series. 
Total value of units of prior series that were placed in the portfolios 
of subsequent series during the reporting period (the value of these 
units is to be measured on the date they were placed in the subsequent 
series): __
Item 72. Assets. Provide the total assets of all series of the 
Registrant combined as of the end of the reporting period: __
Item 73. Series ID of separate account. Series identification number: 
__
Item 74. Number of contracts. For each security that has a contract 
identification number assigned pursuant to rule 313 of Regulation S-T 
(17 CFR 232.313), provide the number of individual contracts that are 
in force at the end of the reporting period: __

    Instruction. In the case of group contracts, each participant 
certificate should be counted as an individual contract.

Item 75. Information on the security issued through the separate 
account. For each security that has a contract identification number 
assigned pursuant to rule 313 of Regulation S-T (17 CFR 232.313), 
provide the following information as of the end of the reporting 
period:
    a. Full name of the security: __
    b. Contract identification number: __
    c. Total assets attributable to the security: __
    d. Number of contracts sold during the reporting period: __
    e. Gross premiums received during the reporting period: __
    f. Gross premiums received pursuant to section 1035 exchanges: __
    g. Number of contracts affected in connection with premiums paid in 
pursuant to section 1035 exchanges: __
    h. Amount of contract value redeemed during the reporting period: 
__
    i. Amount of contract value redeemed pursuant to section 1035 
exchanges: __
    j. Number of contracts affected in connection with contract value 
redeemed pursuant to section 1035 exchanges: __

    Instruction. In the case of group contracts, each participant 
certificate should be counted as an individual contract.

Item 76. Reliance on rule 6c-7. Did the Registrant rely on rule 6c-7 
under the Act (17 CFR 270.6c-7) during the reporting period? [Y/N]
Item 77. Reliance on rule 11a-2. Did the Registrant rely on rule 11a-2 
under the Act (17 CFR 270.11a-2) during the reporting period? [Y/N]
Item 78. Divestments under section 13(c) of the Act.
    a. If the Registrant has divested itself of securities in 
accordance with section 13(c) of the Act (15 U.S.C.

[[Page 33709]]

80a-13(c)) since the end of the reporting period immediately prior to 
the current reporting period and before filing of the current report, 
disclose the information requested below for each such divested 
security:
    i. Full name of the issuer: __
    ii. Ticker symbol: __
    iii. CUSIP number: __
    iv. Total number of shares or, for debt securities, principal 
amount divested: __
    v. Date that the securities were divested: __
    vi.. Name of the statute that added the provision of section 13(c) 
in accordance with which the securities were divested: __
    b. If the Registrant holds any securities of the issuer on the date 
of the filing, provide the information requested below:
    i. Ticker symbol: __
    ii. CUSIP number: __
    iii. Total number of shares or, for debt securities, principal 
amount held on the date of the filing: __

    Instructions.
    This item may be used by a unit investment trust that divested 
itself of securities in accordance with section 13(c). A unit 
investment trust is not required to include disclosure under this item; 
however, the limitation on civil, criminal, and administrative actions 
under section 13(c) does not apply with respect to a divestment that is 
not disclosed under this item.
    If a unit investment trust divests itself of securities in 
accordance with section 13(c) during the period that begins on the 
fifth business day before the date of filing a report on Form N-CEN and 
ends on the date of filing, the unit investment trust may disclose the 
divestment in either the report or an amendment thereto that is filed 
not later than five business days after the date of filing the report.
    For purposes of determining when a divestment should be reported 
under this item, if a unit investment trust divests its holdings in a 
particular security in a related series of transactions, the unit 
investment trust may deem the divestment to occur at the time of the 
final transaction in the series. In that case, the unit investment 
trust should report each transaction in the series on a single report 
on Form N-CEN, but should separately state each date on which 
securities were divested and the total number of shares or, for debt 
securities, principal amount divested, on each such date.

Item 78 shall terminate one year after the first date on which all 
statutory provisions that underlie section 13(c) have terminated.

Part G: Attachments

Item 79. Attachments
    a. Attachments applicable to all Registrants. All Registrants shall 
file the following attachments, as applicable, with the current report. 
Indicate the attachments filed with the current report by checking the 
applicable items below:
    i. Legal proceedings: __
    ii. Provision of financial support: __
    iii. Change in the Registrant's independent public accountant: __
    iv. Independent public accountant's report on internal control 
(management investment companies only): __
    v. Change in accounting principles and practices: __
    vi. Information required to be filed pursuant to exemptive orders: 
__
    vii. Other information required to be included as an attachment 
pursuant to Commission rules and regulations: __

    Instructions.
    10. Item 79.a.i. Legal proceedings.
    (a) If the Registrant responded ``YES'' to Item 12.a., provide a 
brief description of the proceedings. As part of the description, 
provide the case or docket number (if any), and the full names of the 
principal parties to the proceeding.
    (b) If the Registrant responded ``YES'' to Item 12.b., identify the 
proceeding and give its date of termination.
    11. Item 79.a.ii. Provision of financial support. If the Registrant 
responded ``YES'' to Item 15, provide the following information (unless 
the Registrant is a Money Market Fund):
    (a) Description of nature of support.
    (b) Person providing support.
    (c) Brief description of relationship between the person providing 
support and the Registrant.
    (d) Date support provided.
    (e) Amount of support.
    (f) Security supported (if applicable). Disclose the full name of 
the issuer, the title of the issue (including coupon or yield, if 
applicable) and at least two identifiers, if available (e.g., CIK, 
CUSIP, ISIN, LEI).
    (g) Value of security supported on date support was initiated (if 
applicable).
    (h) Brief description of reason for support.
    (i) Term of support.
    (j) Brief description of any contractual restrictions relating to 
support.
    12. Item 79.a.iii. Change in the Registrant's independent public 
accountant. If the Registrant responded ``YES'' to Item 18.f., provide 
the information called for by Item 4 of Form 8-K under the Exchange Act 
(17 CFR 249.308). Unless otherwise specified by Item 4, or related to 
and necessary for a complete understanding of information not 
previously disclosed, the information should relate to events occurring 
during the reporting period. Notwithstanding requirements in Item 4 of 
Form 8-K to file more frequently, Registrants need only file reports on 
Form N-CEN annually in accordance with the requirements of this form.
    13. Item 79.a.iv. Independent public accountant's report on 
internal control (management investment companies only). Small business 
investment companies are not required to respond to this item. Each 
management investment company shall furnish a report of its independent 
public accountant on the company's system of internal accounting 
controls. The accountant's report shall be based on the review, study 
and evaluation of the accounting system, internal accounting controls, 
and procedures for safeguarding securities made during the audit of the 
financial statements for the reporting period. The report should 
disclose any material weaknesses in: (a) The accounting system; (b) 
system of internal accounting control; or (c) procedures for 
safeguarding securities which exist as of the end of the Registrant's 
fiscal year. The accountant's report shall be furnished as an exhibit 
to the form and shall: (1) Be addressed to the Registrant's 
shareholders and board of directors; (2) be dated; (3) be signed 
manually; and (4) indicate the city and state where issued.
    Attachments that include a report that discloses a material 
weakness should include an indication by the Registrant of any 
corrective action taken or proposed.
    The fact that an accountant's report is attached to this form shall 
not be regarded as acknowledging any review of this form by the 
independent public accountant.
    14. Item 79.a.v. Change in accounting principles and practices. If 
the Registrant responded ``YES'' to Item 22, provide an attachment that 
describes the change in accounting principles or practices, or the 
change in the method of applying any such accounting principles or 
practices. State the date of the change and the reasons therefor. A 
letter from the Registrant's independent accountants, approving or 
otherwise commenting on the change, shall accompany the description.
    15. Item 79.a.vi. Information required to be filed pursuant to 
exemptive orders. File as an attachment any information

[[Page 33710]]

required to be reported on Form N-CEN or any predecessor form to Form 
N-CEN (e.g., Form N-SAR) pursuant to exemptive orders issued by the 
Commission and relied on by the Registrant.
    16. Item 79.a.vii. Other information required to be included as an 
attachment pursuant to Commission rules and regulations. File as an 
attachment any other information required to be included as an 
attachment pursuant to Commission rules and regulations.

    b. Attachments to be filed by closed-end management investment 
companies and small business investment companies. Registrants shall 
file the following attachments, as applicable, with the current report. 
Indicate the attachments filed with the current report by checking the 
applicable items bellow.
    i. Material amendments to organizational documents: __
    ii. Instruments defining the rights of the holders of any new or 
amended class of securities: __
    iii. New or amended investment advisory contracts: __
    iv. Information called for by Item 405 of Regulation S-K: __
    v. Code of ethics (small business investment companies only): __

    Instructions.
    17. Item 79.b.i. Material amendments to organizational documents. 
Provide copies of all material amendments to the Registrant's charters, 
by-laws, or other similar organizational documents that occurred during 
the reporting period.
    18. Item 79.b.ii. Instruments defining the rights of the holders of 
any new or amended class of securities. Provide copies of all 
constituent instruments defining the rights of the holders of any new 
or amended class of securities for the current reporting period. If the 
Registrant has issued a new class of securities other than short-term 
paper, furnish a description of the class called for by the applicable 
item of Form N-2. If the constituent instruments defining the rights of 
the holders of any class of the Registrant's securities have been 
materially modified during the reporting period, give the title of the 
class involved and state briefly the general effect of the modification 
upon the rights of the holders of such securities.
    19. Item 79.b.iii. New or amended investment advisory contracts. 
Provide copies of any new or amended investment advisory contracts that 
became effective during the reporting period.
    20. Item 79.b.iv. Information called for by Item 405 of Regulation 
S-K. Provide the information called for by Item 405 of Regulation S-K 
concerning failure of certain closed-end management investment company 
and small business investment company shareholders to file certain 
ownership reports.
    21. Item 79.b.v. Code of ethics (small business investment 
companies only).
    (a)(1) Disclose whether, as of the end of the period covered by the 
report, the Registrant has adopted a code of ethics that applies to the 
Registrant's principal executive officer, principal financial officer, 
principal accounting officer or controller, or persons performing 
similar functions, regardless of whether these individuals are employed 
by the Registrant or a third party. If the Registrant has not adopted 
such a code of ethics, explain why it has not done so.
    (2) For purposes of this instruction, the term ``code of ethics'' 
means written standards that are reasonably designed to deter 
wrongdoing and to promote: (i) honest and ethical conduct, including 
the ethical handling of actual or apparent conflicts of interest 
between personal and professional relationships; (ii) full, fair, 
accurate, timely, and understandable disclosure in reports and 
documents that a Registrant files with, or submits to, the Commission 
and in other public communications made by the Registrant; (iii) 
compliance with applicable governmental laws, rules, and regulations; 
(iv) the prompt internal reporting of violations of the code to an 
appropriate person or persons identified in the code; and (v) 
accountability for adherence to the code.
    (3) The Registrant must briefly describe the nature of any 
amendment, during the period covered by the report, to a provision of 
its code of ethics that applies to the Registrant's principal executive 
officer, principal financial officer, principal accounting officer or 
controller, or persons performing similar functions, regardless of 
whether these individuals are employed by the Registrant or a third 
party, and that relates to any element of the code of ethics definition 
enumerated in paragraph (a)(2) of this instruction. The Registrant must 
file a copy of any such amendment as an exhibit to this report on Form 
N-CEN, unless the Registrant has elected to satisfy paragraph (a)(6) of 
this instruction by posting its code of ethics on its Web site pursuant 
to paragraph (a)(6)(ii) of this Instruction, or by undertaking to 
provide its code of ethics to any person without charge, upon request, 
pursuant to paragraph (a)(6)(iii) of this instruction.
    (4) If the Registrant has, during the period covered by the report, 
granted a waiver, including an implicit waiver, from a provision of the 
code of ethics to the Registrant's principal executive officer, 
principal financial officer, principal accounting officer or 
controller, or persons performing similar functions, regardless of 
whether these individuals are employed by the Registrant or a third 
party, that relates to one or more of the items set forth in paragraph 
(a)(2) of this instruction, the Registrant must briefly describe the 
nature of the waiver, the name of the person to whom the waiver was 
granted, and the date of the waiver.
    (5) If the Registrant intends to satisfy the disclosure requirement 
under paragraph (a)(3) or (4) of this instruction regarding an 
amendment to, or a waiver from, a provision of its code of ethics that 
applies to the Registrant's principal executive officer, principal 
financial officer, principal accounting officer or controller, or 
persons performing similar functions and that relates to any element of 
the code of ethics definition enumerated in paragraph (a)(2) of this 
instruction by posting such information on its Internet Web site, 
disclose the Registrant's Internet address and such intention.
    (6) The Registrant must: (i) file with the Commission a copy of its 
code of ethics that applies to the Registrant's principal executive 
officer, principal financial officer, principal accounting officer or 
controller, or persons performing similar functions, as an exhibit to 
its report on this Form N-CEN; (ii) post the text of such code of 
ethics on its Internet Web site and disclose, in its most recent report 
on this Form N-CEN, its Internet address and the fact that it has 
posted such code of ethics on its Internet Web site; or (iii) undertake 
in its most recent report on this Form N-CEN to provide to any person 
without charge, upon request, a copy of such code of ethics and explain 
the manner in which such request may be made.
    (7) A Registrant may have separate codes of ethics for different 
types of officers. Furthermore, a ``code of ethics'' within the meaning 
of paragraph (a)(2) of this instruction may be a portion of a broader 
document that addresses additional topics or that applies to more 
persons than those specified in paragraph (a)(1) of this instruction. 
In satisfying the requirements of paragraph (a)(6) of this instruction, 
a Registrant need only file, post, or provide the portions of a broader 
document that constitutes a ``code of ethics'' as defined in paragraph 
(a)(2) of this instruction

[[Page 33711]]

and that apply to the persons specified in paragraph (a)(1) of this 
instruction.
    (8) If a Registrant elects to satisfy paragraph (a)(6) of this 
instruction by posting its code of ethics on its Internet Web site 
pursuant to paragraph (a)(6)(ii), the code of ethics must remain 
accessible on its Web site for as long as the Registrant remains 
subject to the requirements of this instruction and chooses to comply 
with this instruction by posting its code on its Internet Web site 
pursuant to paragraph (a)(6)(ii).
    (9) The Registrant does not need to provide any information 
pursuant to paragraphs (a)(3) and (4) of this instruction if it 
discloses the required information on its Internet Web site within five 
business days following the date of the amendment or waiver and the 
Registrant has disclosed in its most recently filed report on this Form 
N-CEN its Internet Web site address and intention to provide disclosure 
in this manner. If the amendment or waiver occurs on a Saturday, 
Sunday, or holiday on which the Commission is not open for business, 
then the five business day period shall begin to run on and include the 
first business day thereafter. If the Registrant elects to disclose 
this information through its Web site, such information must remain 
available on the Web site for at least a 12-month period. The 
Registrant must retain the information for a period of not less than 
six years following the end of the fiscal year in which the amendment 
or waiver occurred. Upon request, the Registrant must furnish to the 
Commission or its staff a copy of any or all information retained 
pursuant to this requirement.
    (10) The Registrant does not need to disclose technical, 
administrative, or other non-substantive amendments to its code of 
ethics.
    (11) For purposes of this instruction: (i) the term ``waiver'' 
means the approval by the Registrant of a material departure from a 
provision of the code of ethics; and (ii) the term ``implicit waiver'' 
means the Registrant's failure to take action within a reasonable 
period of time regarding a material departure from a provision of the 
code of ethics that has been made known to an executive officer, as 
defined in rule 3b-7 under the Exchange Act (17 CFR 240.3b-7), of the 
Registrant.
    (b)(1) Disclose that the Registrant's board of directors has 
determined that the Registrant either: (i) has at least one audit 
committee financial expert serving on its audit committee; or (ii) does 
not have an audit committee financial expert serving on its audit 
committee.
    (2) If the Registrant provides the disclosure required by paragraph 
(b)(1)(i) of this instruction, it must disclose the name of the audit 
committee financial expert and whether that person is ``independent.'' 
In order to be considered ``independent'' for purposes of this 
instruction, a member of an audit committee may not, other than in his 
or her capacity as a member of the audit committee, the board of 
directors, or any other board committee: (i) accept directly or 
indirectly any consulting, advisory, or other compensatory fee from the 
issuer; or (ii) be an ``interested person'' of the investment company 
as defined in Section 2(a)(19) of the Act (15 U.S.C. 80a-2(a)(19)).
    (3) If the Registrant provides the disclosure required by paragraph 
(b)(1)(ii) of this instruction, it must explain why it does not have an 
audit committee financial expert.
    (4) If the Registrant's board of directors has determined that the 
Registrant has more than one audit committee financial expert serving 
on its audit committee, the Registrant may, but is not required to, 
disclose the names of those additional persons. A Registrant choosing 
to identify such persons must indicate whether they are independent 
pursuant to paragraph (b)(2) of this instruction.
    (5) For purposes of this instruction, an ``audit committee 
financial expert'' means a person who has the following attributes: (i) 
an understanding of generally accepted accounting principles and 
financial statements; (ii) the ability to assess the general 
application of such principles in connection with the accounting for 
estimates, accruals, and reserves; (iii) experience preparing, 
auditing, analyzing, or evaluating financial statements that present a 
breadth and level of complexity of accounting issues that are generally 
comparable to the breadth and complexity of issues that can reasonably 
be expected to be raised by the Registrant's financial statements, or 
experience actively supervising one or more persons engaged in such 
activities; (iv) an understanding of internal controls and procedures 
for financial reporting; and (v) an understanding of audit committee 
functions.
    (6) A person shall have acquired such attributes through: (i) 
education and experience as a principal financial officer, principal 
accounting officer, controller, public accountant, or auditor or 
experience in one or more positions that involve the performance of 
similar functions; (ii) experience actively supervising a principal 
financial officer, principal accounting officer, controller, public 
accountant, auditor, or person performing similar functions; (iii) 
experience overseeing or assessing the performance of companies or 
public accountants with respect to the preparation, auditing, or 
evaluation of financial statements; or (iv) other relevant experience.
    (7)(i) A person who is determined to be an audit committee 
financial expert will not be deemed an ``expert'' for any purpose, 
including without limitation for purposes of Section 11 of the 
Securities Act (15 U.S.C. 77k), as a result of being designated or 
identified as an audit committee financial expert pursuant to this 
instruction; (ii) the designation or identification of a person as an 
audit committee financial expert pursuant to this instruction does not 
impose on such person any duties, obligations, or liability that are 
greater than the duties, obligations, and liability imposed on such 
person as a member of the audit committee and board of directors in the 
absence of such designation or identification; (iii) the designation or 
identification of a person as an audit committee financial expert 
pursuant to this instruction does not affect the duties, obligations, 
or liability of any other member of the audit committee or board of 
directors.
    (8) If a person qualifies as an audit committee financial expert by 
means of having held a position described in paragraph (b)(6)(iv) of 
this Instruction, the Registrant shall provide a brief listing of that 
person's relevant experience.

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.

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(Registrant)

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Date

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(Signature)*

    *Print full name and title of the signing officer under his/her 
signature.
0
66. Form N-CSR (referenced in Sec.  274.128) is amended by:
0
a. In I