Supporting Statement - Form N-2

OMB CONTROL NUMBER: 3235-0026
SUPPORTING STATEMENT
For the Paperwork Reduction Act Information Collection Submission
for FORM N-2
A.

JUSTIFICATION
1.

Necessity for the Information Collection

On November 19, 2020, the Securities and Exchange Commission (the
“Commission”) adopted amendments to modernize, simplify, and enhance certain
financial disclosure requirements in Regulation S-K, and related rules and forms. 1 The
final amendments are intended to eliminate duplicative disclosures and modernize and
enhance Management’s Discussion and Analysis (“MD&A”) disclosures for the benefit
of investors, while simplifying compliance efforts for registrants. Overall, the final
amendments to Item 301, 2 Item 302, 3 and Item 303 4 are expected to reduce disclosure
burdens.
The Paperwork Reduction Act burdens associated with the collection of
information for Form N-2 (OMB Control No. 3235-0026) will be affected by the
amendments.
Form N-2 (17 CFR 239.14 and 274.11a-1) is the form used by closed-end
management investment companies (“registered closed-end funds”) to register as
investment companies under the Investment Company Act of 1940 (15 U.S.C. 80a-1 et
seq.) (“Investment Company Act”), and to register their securities under the Securities
Act of 1933 (15 U.S.C. 77a et seq.) (“Securities Act”). Form N-2 is also used by
business development companies (“BDCs’”), which are closed-end management
investment companies that do not register under the Investment Company Act (but
instead elect to be subject to certain provisions of the Investment Company Act (15
U.S.C. 80a-2(a)(48)) to register and offer their securities under the Securities Act.
Form N-2 contains an item that requires BDCs to furnish in a separate section the
information required by Items 301, 302, and 303 of Regulation S-K.

1

See Management’s Discussion and Analysis, Selected Financial Data, and Supplementary
Financial Information, Release No. 33-10890 (November 19, 2020) [86 FR 2080 (January 11, 2021)]
(“MD&A and Financial Disclosure Release” or “Adopting Release”).

2

17 CFR 229.301.

3

17 CFR 229.302.

4

17 CFR 229.303.

2.

PURPOSE AND USE OF THE INFORMATION COLLECTION

The final amendments eliminate duplicative disclosures and modernize and
enhance MD&A disclosures for the benefit of investors, while simplifying compliance
efforts for registrants.
3.

CONSIDERATION GIVEN TO INFORMATION TECHNOLOGY

The collection of information requirements are set forth in the affected rules and
forms. All of the affected forms are filed electronically with the Commission using the
Commission’s Electronic Data Gathering, Analysis and Retrieval (“EDGAR”) system.
4.
rules.
5.

DUPLICATION
The final amendments do not duplicate, overlap, or conflict with other federal
EFFECT ON SMALL ENTITIES

The final amendments modernize, simplify, and enhance certain financial
disclosure requirements for small entities and other registrants. Many of the final
amendments simplify and streamline disclosure requirements in ways that are expected to
reduce compliance burdens. Because the final amendments generally do not impose any
significant new compliance obligations, it was unnecessary to adopt different compliance
and reporting requirements or timetables or to exempt small entities from all or part of
the final rules.
The few amendments that will impose additional disclosure requirements are
expected to only incrementally increase the paperwork burden. For example, the
amendment to disclose critical accounting estimates is expected to have only a minimal
impact on registrants’ burdens because the Commission, in prior guidance, has stated that
companies should provide this disclosure where material. 5 Other amendments codify
existing Commission guidance, so are similarly expected to only incrementally increase
the paperwork burden.
6.

CONSEQUENCES OF NOT CONDUCTING COLLECTION

The amendments affect Form N-2, which sets forth the disclosure requirements
for registration statements filed by registered closed-end funds and BDCs to help
investors make informed investment decisions. Less frequent collection would deprive
investors of access to information that is important to their investment decisions.

5

See Commission Guidance Regarding Management’s Discussion and Analysis of Financial Condition
and Results of Operation, Release No. 33-8350 (Dec. 19, 2003) [68 FR 75056 (Dec. 29, 2003)]

2

7.

INCONSISTENCIES WITH GUIDELINES IN 5 CFR 1320.5(D)(2)
There are no special circumstances in connection with these amendments.

8.

CONSULTATIONS OUTSIDE THE AGENCY

In the Proposing Release, the Commission solicited public comment on the new
“collection of information” requirements and the associated paperwork burdens. The
Commission did not receive any comments directly addressing the PRA analysis of the
proposed amendments. The PRA estimates were, however, revised as a result of the
comments received. In addition, the Commission and staff participated in ongoing
dialogue with representatives of various market participants through public conferences,
roundtables and meetings. All comments received on the proposal are available at
https://www.sec.gov/comments/s7-01-20/s70120.htm. The Commission considered all
comments received prior to publishing the final rules, as required by 5 CFR 1320.11(f).
9.

PAYMENT OR GIFT
No payment or gift has been provided to any respondents.

10.

CONFIDENTIALITY
All documents submitted to the Commission are available to the public.

11.

SENSITIVE QUESTIONS

No information of a sensitive nature will be required under the following
collections of information in connection with these rulemaking amendments: Form N-2.
These information collections collect basic Personally Identifiable Information (PII) that
may include a name and job title. However, the agency has determined that these
information collections do not constitute a system of record for purposes of the Privacy
Act. Information is not retrieved by a personal identifier. In accordance with Section 208
of the E-Government Act of 2002, the agency has conducted a Privacy Impact
Assessment (PIA) of the EDGAR system, in connection with this collection of
information. The EDGAR PIA, published on February 5, 2020 is provided as a
supplemental document and is also available at https://www.sec.gov/privacy.
12. and 13.

ESTIMATES OF HOUR AND COST BURDENS

The Commission anticipates that the amendments would, overall, reduce the
burden associated with compliance with the federal securities disclosure regime by
eliminating duplicative disclosures and simplifying disclosure. Tables 1 and 2 below
show the estimated incremental and aggregate reductions in paperwork burden as a result

3

of the final amendments. 6 These estimates represent the average burden for all
registrants, both large and small. In deriving our estimates, we recognize that the burdens
will likely vary among individual registrants based on a number of factors, including the
nature of their business. We do not believe that the final amendments would change the
frequency of responses to the existing collections of information; rather, we estimate that
the final amendments would change only the burden per response.
The burden estimates were calculated by multiplying the estimated number of
responses by the estimated average amount of time it would take a registrant to prepare
and review disclosure required under the final amendments. The portion of the burden
carried by outside professionals is reflected as a cost, while the portion of the burden
carried by the registrant internally is reflected in hours.
For registration statements on Form N-2, with respect to the final amendments to
the Form N-2 that this Supporting Statement discusses, we estimate that 25% of the
burden of preparation is carried by the company internally and that 75% of the burden of
preparation is carried by outside professionals retained by the company at an average cost
of $400 per hour. 7
Table 1. Calculation of the Incremental Change in Burden Estimates of Current
Responses Resulting from the Amendments for Form N-2
Form

N-2±

Number of
Estimated
Affected
Responses
(A) 8

39

Burden
Hour
Reduction
per
Current
Affected
Response
(B)

Reduction in
Burden
Hours for
Current
Affected
Responses
(C)

Reduction in
Company
Hours for
Current
Affected
Responses
(D)

Reduction in
Professional
Hours for
Current
Affected
Responses
(E)

Reduction in
Professional
Costs for
Current
Affected
Responses
(F)

= (A) x (B) 9

= (C) x 0.25

= (C) – (D)

= (E) x $400

.8

31

8

23

$9,360

Form N-2 states that disclosure under Items 301–303 of Regulation S-K is only required if “the Registrant
is regulated as a business development company under the 1940 Act.” Accordingly, although the most
recently approved PRA estimates 298 responses for all Form N-2 registrants, any incremental burdens
associated with Form N-2 due to the final amendments would only affect BDCs. Because we estimate that
±

6

For convenience, the estimated hour and cost burdens in the tables have been rounded to the nearest
whole number.

7

We recognize that the costs of retaining outside professionals may vary depending on the nature of the
professional services, but for purposes of this PRA analysis we estimate that such costs would be an
average of $400 per hour. This estimate is based on consultations with several registrants, law firms,
and other persons who regularly assist registrants in preparing and filing reports with the Commission.

8

The number of estimated affected responses is based on the number of responses in the Commission’s
current OMB PRA filing inventory. The OMB PRA filing inventory represents a three-year average.
We do not expect that the final amendments would materially change the number of responses in the
current OMB PRA filing inventory.

9

The estimated reductions in Columns (C), (D), and (E) are rounded to the nearest whole number.

4

approximately 13% of all Form N-2 registrants are BDCs, the estimated burdens have been reduced to
reflect this percentage (e.g., 13% of 298 responses results in 39 responses).

Table 2 summarizes the requested paperwork burden, including the estimated total
reporting burdens and costs, under the final amendments.
Table 2. Requested Paperwork Burden under the Final Amendments
Current Burden
Form

N-2

Program Change

Current
Annual
Responses
(A)

Current
Burden
Hours
(B)

Current
Cost Burden
(C)

Number of
Affected
Responses
(D)

39

94,350

$6,269,752

39

14.

Reduction
in
Company
Hours
(E) 10
23

Reduction
in
Profession
al Costs
(F) 11
$9,360

Requested Change in Burden
Annual
Responses
(G) = (A)

Burden
Hours
(H) = (B)
- (E)

Cost Burden
(I) = (C) - (F)

39

94,627

$6,260,392

COSTS TO FEDERAL GOVERNMENT

The annual cost of reviewing and processing disclosure documents, including
registration statements, post-effective amendments, proxy statements, annual reports, and
other filings of investment companies amounted to approximately $22.1 million in fiscal
year 2019, based on the Commission’s computation of the value of staff time devoted to
this activity and related overhead.
15.

CHANGE IN BURDEN

The amendments adopted in Release No. 33-10890 are designed to modernize,
simplify, and enhance certain financial disclosure requirements. The final amendments
eliminate duplicative disclosure and modernize and enhance MD&A. The Commission

10
11

From Column (D) in Table 1.
From Column (F) in Table 1.

5

estimated that the final amendments would, in the aggregate, reduce the burden and costs
of affected parties.
Specifically, the reasons for the change in burden for the specific amendments are
as follows:
Final Amendments and Effects

Affected Forms 12

Estimated Net Effect*

Item 301: Selected Financial Data
• Elimination of Item 301 requirement to furnish selected
financial data for each of the registrant’s last five fiscal years
because Item 303 already calls for disclosure of material
trend information, which would decrease the paperwork
burden by reducing repetitive information about a
registrant’s historical performance.
• Replacing the reference to Item 301 with a reference to
Rule 1-02(bb) of Regulation S-X in Items 1112, 1114, and
1115 of Regulation AB would generally result in similar
disclosure being presented under these Items, and therefore
not affect the burden estimate.

• Forms 10, 10-K, S-1, S-4,
and S-11

• 2 hour net decrease in
compliance burden per form

• Schedule 14A
• Form N-2

• 0.2 hour net decrease in
compliance burden per
schedule

• Forms SF-1 and SF-3

• 0.3 hour net decrease in
compliance burden per form
• No change in compliance
burden per form

Item 302(a): Supplementary Financial Information
• Streamlining Item 302(a) to eliminate disclosure
requirement except when there are one or more retrospective
changes to the statements of comprehensive income for any
of the quarters within the two most recent fiscal years and
any subsequent interim period for which financial statements
are included or required to be included by Article 3 of
Regulation S-X that, individually or in the aggregate, are
material.

• Forms 10, 10-K, S-1, S-4,
and S-11

• 2 hour net decrease in
compliance burden per form

• Schedule 14A

• 0.2 hour net decrease in
compliance burden per
schedule

• Form N-2

• 0.3 hour net decrease in
compliance burden per for

• Forms 10, 10-K, 10-Q, S-1,
S-4, and S-11

• 2.1 hour net increase in
compliance burden per form

• Form 1-A

• 0.3 hour net increase in
compliance burden per form

• Schedule 14A

• 0.3 hour net increase in
compliance burden per
schedule

• Form N-2

• 0.5 hour net increase in
compliance burden per form

Item 303(a): Full Fiscal Years
Restructuring and Streamlining:
• Establishing a new paragraph to emphasize the purpose of
the MD&A section at the outset to clarify and focus
registrants is expected to have a minimal impact on the
paperwork burden, as the change would codify existing
guidance. Estimated burden increase: 0.1 hour per form and
per schedule.
• Amendments to streamline the text of new Item 303 would
have no effect on the paperwork burden because these
amendments are clarifications of existing requirements.
Liquidity and Capital Resources:
• Expanding Item 303(b)(1)(ii) (current Item 303(a)(2)) to
also require a discussion of material cash requirements, in

12

The SEC’s Division of Corporation Finance will be responsible for submitting the PRA for the other
Affected Forms to OMB.

6

addition to commitments for capital expenditures, would
increase the paperwork burden.
• Clarifying the liquidity and capital resources disclosure
requirements of Item 303(b)(1), including to specifically
require disclosure of material cash requirements from known
contractual and other obligations. Estimated burden
increase: 1.5 hour per form and 0.2 hour increase per
schedule.
Results of Operations – Known Trends or Uncertainties:
• Amending Item 303(a)(3)(ii) to clarify that a registrant
should disclose reasonably likely changes in the relationship
between costs and revenues would increase the paperwork
burden, although this effect is expected to be minimal
because the amendment is consistent with existing guidance.
Estimated burden increase: 1.0 hour per form and 0.1 hour
increase per schedule.
Results of Operations – Net Sales, Revenues, and Line Item
Changes:
• Amending Item 303(a), Item 303(a)(3)(iii) and Instruction
4 to Item 303(a) to clarify that a registrant should include in
its MD&A a discussion of the reasons underlying material
changes from period-to-period in one or more line items
could marginally increase the paperwork burden by requiring
a more nuanced discussion consistent with the overall
objective of MD&A. Estimated burden increase: 1.0 hour
per form and 0.1 hour increase per schedule.
Results of Operations – Inflation and Price Changes:
• Eliminating the specific reference to inflation within Item
303(a)(3)(iv) for issuers should marginally reduce the
paperwork burden, although such decrease is expected to be
minimal. Estimated burden decrease: 0.5 hours per form
and 0.1 hour decrease per schedule.
Off-Balance Sheet Arrangements:
• Replacing Item 303(a)(4) with an instruction emphasizing
a more principles-based approach with respect to off-balance
sheet arrangement disclosures, would reduce duplicative
disclosures and decrease the paperwork burden. Estimated
burden decrease: 1.0 hour per form and 0.1 hour decrease
per schedule.
• Amending Items 2.03 and 2.04 of Form 8-K to retain the
definition of “off-balance sheet arrangements” that is
currently in Item 303(a)(4) would not result in any changes
in reporting obligations under Item 2.03 and Item 2.04 of
Form 8-K, and would therefore result in no change in
paperwork burden for this form.
Contractual Obligations Table:
• Eliminating Item 303(a)(5), the requirement that registrants
provide a tabular disclosure of contractual obligations, would
reduce duplicative disclosures and decrease the paperwork

7

burden. Estimated burden decrease: 2.0 hours per form and
0.2 hour decrease per schedule.
Critical Accounting Estimates:
• Amending Item 303 to explicitly require disclosure of
critical accounting estimates would provide more clarity on
the uncertainties involved in creating an accounting policy
and how significant accounting policies of registrants may
differ. This would increase the paperwork burden. Estimated
burden increase: 2.0 hours per form and 0.2 hour increase
per schedule.
Item 303(c): Interim Periods
• Amending Item 303(c) (current Item 303(b)) to allow for
more flexibility in interim periods compared and eliminating
certain instructions and providing cross-references to similar
instructions to Item 303(b) would decrease the paperwork
burden.

• Forms 10, 10-K, 10-Q, S-1,
S-4, and S-11

• 4.0 hour net decrease in
compliance burden per form

• Form 1-A

• 0.4 hour net decrease in
compliance burden per form

• Schedule 14A
• Form N-2

• 0.4 hour net decrease in
compliance burden per
schedule
• 0.7 hour net decrease in
compliance burden per form

Item 303(d): Accommodations for SRCs
• Eliminating Item 303(d) as a conforming change would
have no effect on the paperwork burden.
Effect on FPIs
• Eliminating Item 3.A and generally conforming Item 5 of
Form 20-F to the final amendments to Item 303 would
reduce the paperwork burden.

• Form 20-F

• 2.0 hour net decrease in
compliance burden per form

• Eliminating the contractual obligations disclosure
requirement and replacing the off-balance sheet disclosure
requirements in Forms 20-F and 40-F with a principles-based
instruction would reduce the paperwork burden.

• Form 40-F

• 2.0 hour net decrease in
compliance burden per form

• Forms F-1 and F-4

• 3.5 hour net decrease per
form

• Form 1-A

• 0.1 hour net decrease per
form

• Form 10-Q

• 1.9 hour net decrease per
form

• Forms 10, 10-K, S-1, S-4,
and S-11

• 5.90 hour net decrease per
form

• Amending current Instruction 11 to Item 303 to conform to
the hyperinflation disclosure requirements of Form 20-F
would not affect the paperwork burden.
Total

• Schedule 14A

8

• Forms F-1 and F-4

• Form 20-F
• Form 40-F
• Form N-2

• 0.5 hour net decrease per
form
• 3.5 hour net decrease per
form
• 2.0 hour net decrease per
form
• 2.0 hour net decrease per
form
• .8 hour net decrease per
form

16.
INFORMATION COLLECTIONS PLANNED FOR STATISTICAL
PURPOSES
The information collections do not employ statistical methods.
17.

APPROVAL TO OMIT OMB EXPIRATION DATE

We request authorization to omit the expiration date on the electronic version of
the form. Including the expiration date on the electronic version of the form will result in
increased costs because the need to make changes to the form may not follow the
application’s scheduled version release dates. The OMB control number will be
displayed.
18.

EXCEPTIONS TO CERTIFICATION FOR PAPERWORK REDUCTION
ACT SUBMISSIONS

There are no exceptions to certification for the Paperwork Reduction Act
submissions.
B.

STATISTICAL METHODS
The information collections do not employ statistical methods.

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FORM N-2 SHORT STATEMENT
The final amendments are intended to modernize, simplify and enhance certain
financial disclosure requirements. The amendments are also intended to eliminate
duplicative disclosures and modernize and enhance MD&A disclosure for the benefit of
investors, while simplifying compliance efforts for registrants. We anticipate that the
amendments would, in the aggregate, reduce the burdens and costs to registrants
associated with compliance with the federal securities disclosure regime. These
estimated burden and cost reductions are expected to result primarily from final
amendments that (i) eliminate disclosure of five years of selected financial data; (ii)
eliminate disclosure of two years of supplementary quarterly financial data; and (iii)
revise the interim MD&A requirement to allow for more flexibility. For purposes of the
PRA, we estimate that the final amendments to Form N-2 will result in a net decrease of
23 burden hours and a net decrease in the cost burden of $9,360 for the services of
outside professionals.

10