March 31, 2023 (Unaudited)


Shares/Description  Value
 76,798   BlackRock California Municipal Income Trust  $898,537 
 43,644   Blackrock Investment Quality Municipal Trust, Inc.   526,783 
 443,478   BlackRock Municipal 2030 Target Term Trust   9,632,342 
 385,954   BlackRock Municipal Income Fund, Inc.   4,507,943 
 205,144   BlackRock Municipal Income Quality Trust   2,346,847 
 197,055   BlackRock Municipal Income Trust   2,011,932 
 503,745   BlackRock Municipal Income Trust II(a)   5,405,184 
 45,926   BlackRock MuniHoldings California Quality Fund, Inc.   507,942 
 168,388   BlackRock MuniHoldings Fund, Inc.   2,029,075 
 16,602   BlackRock MuniHoldings New Jersey Quality Fund, Inc.   190,093 
 58,502   BlackRock MuniHoldings New York Quality Fund, Inc.   622,461 
 161,821   BlackRock MuniHoldings Quality Fund II, Inc.   1,624,683 
 76,794   BlackRock MuniVest Fund II, Inc.   825,536 
 802,346   BlackRock MuniVest Fund, Inc.(a)   5,552,234 
 14,212   BlackRock MuniYield Fund, Inc.   152,779 
 73,999   BlackRock MuniYield Michigan Quality Fund, Inc.   828,049 
 26,900   BlackRock MuniYield New York Quality Fund, Inc.   273,035 
 3,869   BlackRock MuniYield Quality Fund II, Inc.   40,122 
 923,167   BlackRock MuniYield Quality Fund III, Inc.(a)   10,468,714 
 500,005   BlackRock MuniYield Quality Fund, Inc.   5,920,059 
 5,452   BlackRock New York Municipal Income Trust   56,701 
 323,922   BNY Mellon Strategic Municipal Bond Fund, Inc.   1,946,771 
 63,244   Eaton Vance Municipal Bond Fund   657,738 
 131,627   Eaton Vance Municipal Income Trust   1,333,382 
 69,246   Eaton Vance New York Municipal Bond Fund   673,071 
 164,955   Invesco Advantage Municipal Income Trust II   1,469,749 
 466,840   Invesco Municipal Opportunity Trust   4,579,700 
 228,913   Invesco Municipal Trust   2,270,817 
 846,180   Invesco Quality Municipal Income Trust(a)   8,444,876 
 80,417   Invesco Value Municipal Income Trust   981,087 
 28,534   Neuberger Berman Municipal Fund, Inc.   312,447 
 29,711   Nuveen AMT-Free Municipal Value Fund   409,120 
 919,948   Nuveen AMT-Free Quality Municipal Income Fund(a)   10,229,822 
 14,337   Nuveen Build America Bond Fund   231,112 
 184,843   Nuveen California Municipal Value Fund   1,628,467 
 481,762   Nuveen California Quality Municipal Income Fund   5,304,200 
 1,138,552   Nuveen Dividend Advantage Municipal Fund 3(a)   13,605,696 
 654,828   Nuveen Dividend Advantage Municipal Income Fund(a)   7,713,874 
 941,720   Nuveen Municipal Value Fund, Inc.(a)   8,296,553 
 137,363   Nuveen New York AMT-Free Quality Municipal Income Fund   1,451,927 
 97,379   Nuveen New York Municipal Value Fund   849,632 
 161,510   Nuveen Ohio Quality Municipal Income Fund   2,052,792 
 1,935,827   Nuveen Quality Municipal Income Fund(a)   22,320,085 
 16,561   Nuveen Select Maturities Municipal Fund   152,858 
 110,562   PIMCO California Municipal Income Fund   1,114,465 
 133,246   PIMCO California Municipal Income Fund II   826,125 
 37,343   PIMCO Municipal Income Fund II   350,651 
 101,986   PIMCO Municipal Income Fund III   847,504 
 398,240   Pioneer Municipal High Income Advantage Fund, Inc.   3,277,515 
 75,498   Pioneer Municipal High Income Fund Trust   671,177 
 379,673   Western Asset Managed Municipals Fund, Inc.   3,903,038 
 153,143   Western Asset Municipal High Income Fund, Inc.   1,021,464 


(Cost $172,459,495)   163,348,766 



Principal Amount/Description  Rate  Maturity  Value
Consumer, Non-cyclical (0.61%)
$2,500,000   Stetson University, Inc.   4.09%   12/01/59   $1,954,160 
(Cost $2,500,000)    1,954,160 


Principal Amount/Description  Rate  Maturity  Value
California (19.08%)         
$15,000,000   City of Los Angeles Department of Airports, Revenue Bonds(b)   5.00%   05/15/46   $15,281,064 
 8,000,000   Regents of the University of California Medical Center Pooled Revenue, Revenue Bonds(b)   5.00%   05/15/47    8,794,035 
 12,000,000   Sacramento Municipal Utility District(b)   4.00%   08/15/45    12,104,812 
 3,500,000   San Francisco City & County Airport Comm-San Francisco International Airport, Revenue Bonds(b)   5.00%   05/01/46    3,562,842 
 22,000,000   Sweetwater Union High School District, General Obligation Unlimited Bonds(b)   4.00%   08/01/42    21,937,707 
Connecticut (2.71%)               
 8,565,000   State of Connecticut, General Obligation Unlimited Bonds(b)   4.00%   04/15/38    8,744,935 
Florida (5.23%)               
 9,000,000   County of Broward FL Tourist Development Tax Revenue, Revenue Bonds(b)   4.00%   09/01/47    8,729,051 
 7,500,000   School District of Broward County, General Obligation Unlimited Bonds(b)   5.00%   07/01/51    8,174,694 
Illinois (13.45%)               
 10,000,000   Chicago O'Hare International Airport, Revenue Bonds   5.25%   01/01/45    10,695,238 
 8,830,000   Chicago Park District, General Obligation Limited Bonds   2.68%   01/01/35    7,121,133 
 18,000,000   ILLINOIS ST IL(b)   5.00%   11/01/29    19,491,251 
 6,000,000   Macon County School District No 61 Decatur, General Obligation Unlimited Bonds(b)   4.00%   12/01/36    6,165,478 
Iowa (2.53%)               
 8,000,000   PEFA, Inc., Revenue Bonds   5.00%   09/01/49    8,162,792 



Massachusetts (6.37%)               
 5,000,000   Massachusetts Development Finance Agency, Revenue Bonds(b)   5.00%   03/01/44    5,069,025 
 10,000,000   Massachusetts Educational Financing Authority, Revenue Bonds(b)   4.25%   07/01/46    9,487,632 
 5,500,000   Massachusetts School Building Authority, Revenue Bonds(b)   5.00%   08/15/45    6,032,360 
Michigan (3.45%)               
 10,000,000   Holly Area School District, General Obligation Unlimited Bonds   5.25%   05/01/52    11,162,615 
Nevada (1.14%)               
 3,500,000   Las Vegas Convention & Visitors Authority, Revenue Bonds(b)   5.00%   07/01/43    3,680,492 
New Jersey (1.62%)               
 5,000,000   New Jersey Transportation Trust Fund Authority, Revenue Bonds(b)   5.00%   06/15/50    5,234,549 
New York (13.08%)               
 10,000,000   New York New York A-1 Revenue Bonds(b)   5.25%   09/01/40    11,490,288 
 6,800,000   New York State Dormitory Authority, Revenue Bonds(b)   5.00%   03/15/41    7,598,554 
 10,000,000   Port Authority of New York & New Jersey, Revenue Bonds(b)   5.50%   08/01/52    11,126,250 
 11,250,000   Triborough Bridge & Tunnel Authority, Revenue Bonds(b)   5.00%   11/15/43    12,059,971 
North Carolina (1.35%)               
 4,000,000   Greater Asheville Regional Airport Authority, Revenue Bonds(b)   5.50%   07/01/52    4,353,756 
Pennsylvania (9.67%)               
 11,250,000   Pennsylvania State University, Revenue Bonds(b)   5.00%   09/01/43    12,108,268 
 15,445,000   Pennsylvania Turnpike Commission, Revenue Bonds(b)   4.00%   12/01/49    15,507,264 
 3,185,000   Southeastern Pennsylvania Transportation Authority, Revenue Bonds(b)   5.25%   06/01/43    3,628,722 
Puerto Rico (4.39%)               
 2,000,000   Commonwealth of Puerto Rico, Series 2022 A-1, General Obligation Unlimited Bonds   4.00%   07/01/35    1,748,152 
 2,465,000   Puerto Rico Commonwealth Aqueduct & Sewer Authority, Revenue Bonds   4.00%   07/01/42    2,094,487 
 2,500,000   Puerto Rico Commonwealth Aqueduct & Sewer Authority, Revenue Bonds   4.00%   07/01/42    2,124,200 
 9,032,000   Puerto Rico Sales Tax Financing Corp. Sales Tax Revenue, Series Restructured Series A-2, Revenue Bonds   4.78%   07/01/58    8,220,430 



South Carolina (2.25%)               
 6,500,000   South Carolina Public Service Authority, Revenue Bonds(b)   5.75%   12/01/52    7,272,045 
Tennessee (1.62%)               
 5,000,000   Tennessee Energy Acquisition Corporation Gas Revenue Bonds(b)   5.00%   05/01/52    5,220,265 
Texas (13.44%)               
 13,555,000   Dallas Area Rapid Transit, Revenue Bonds(b)   5.00%   12/01/47    14,752,061 
 16,000,000   Texas Private Activity Bond Surface Transportation Corp., Revenue Bonds(b)   5.00%   06/30/58    15,866,101 
 12,850,000   Texas Transportation Commission, Revenue Bonds(b)   5.00%   08/01/57    12,823,715 
Utah (2.62%)               
 7,635,000   Intermountain Power Agency, Revenue Bonds(b)   5.00%   07/01/43    8,459,162 
Virgin Islands (0.88%)               
 630,000   Matching Fund Special Purpose Securitization Corp., Revenue Bonds   5.00%   10/01/30    644,612 
 2,250,000   Matching Fund Special Purpose Securitization Corp., Revenue Bonds   5.00%   10/01/39    2,208,885 
Washington (1.02%)               
 4,025,000   Washington State Convention Center Public Facilities District, Revenue Bonds   4.00%   07/01/58    3,280,123 
(Cost $346,898,554)             342,219,016 



Shares/Description             Value 
SHORT-TERM INVESTMENTS (12.69%)               
41,031,179   BlackRock Liquidity Funds MuniCash (7 Day Yield 3.800%)            $41,027,076 
(Cost $41,028,136)                  41,027,076 
TOTAL INVESTMENTS (169.70%)               
(Cost $562,886,185)            $548,549,018 
Loan Payable (-7.12%)             (23,000,000)
Floating Rate Note Obligations (-63.70%)(c)             (205,900,000)
Other Assets In Excess Of Liabilities (1.12%)             3,591,924 
NET ASSETS (100.00%)            $323,240,942 


(a) All or a portion of the security is pledged as collateral for the loan payable. As of March 31, 2023, the aggregate value of those securities was $31,133,600 representing 9.63% of net assets.
(b) All or portion of the principal amount transferred to a Tender Option Bond ("TOB") Issuer in exchange for TOB Residuals and cash.
(c) Face value of Floating Rate Notes issued in TOB transactions.


Futures Contracts Sold:                  
Description   Contracts (Short)   Expiration Date   Notional Value    Value and Unrealized Depreciation 
10-Yr U.S. Treasury Note Futures   (2,400)  June 2023  $275,812,500   $(8,836,770)
           $275,812,500   $(8,836,770)





RiverNorth Managed Duration Municipal Income Fund, Inc.  
Notes to Quarterly Schedule of Investments March 31, 2023 (Unaudited)




RiverNorth Managed Duration Municipal Income Fund, Inc. (the “Fund”) was organized as a Maryland corporation on March 18, 2019, pursuant to its Articles of Incorporation, which were amended and restated on June 20, 2019 (“Articles of Incorporation”). The Fund had no operations until July 25, 2019 (commencement of operations), other than those related to organizational matters and the registration of its shares under applicable securities laws.


The Fund is a diversified, closed-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). The Articles of Incorporation permit the Board of Directors (the “Board” or “Directors”) to authorize and issue fifty million shares of common stock with $0.0001 par value per share. The Fund is considered an investment company and therefore follows the Investment Company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946 Financial Services – Investment Companies.


The Fund will terminate on or before July 25, 2031; provided, that if the Board believes that under then-current market conditions it is in the best interests of the Fund to do so, the Fund may extend the Termination Date once for up to one year, and once for an additional six months. The Fund may be converted to an open-end investment company at any time if approved by the Board and the shareholders. Within twelve months prior to the termination date, the Fund may conduct a tender offer to purchase 100% of the then outstanding shares. Following the completion of the tender offer, the Fund must have at least $100 million of net assets. The Board may then eliminate the termination date and convert the Fund to a perpetual structure upon the affirmative vote of a majority of the Board.


The Fund’s investment adviser is RiverNorth Capital Management, LLC (the “Adviser”) and the Fund’s sub-adviser is MacKay Shields, LLC (the “Sub-adviser”). The Fund’s primary investment objective is to seek current income exempt from regular U.S. federal income taxes (but which may be includable in taxable income for purposes of the Federal alternative minimum tax). The Fund’s secondary investment objective is total return.




The following is a summary of significant accounting policies followed by the Fund. These policies are in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”). The financial statements are prepared in accordance with U.S. GAAP, which requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements during the reporting period. Management believes the estimates and security valuations are appropriate; however, actual results may differ from those estimates, and the security valuations reflected in the financial statements may differ from the value the Fund ultimately realizes upon sale of the securities. The financial statements have been prepared as of the close of the New York Stock Exchange (“NYSE”) on March 31, 2023.


The Fund invests in closed end funds (“CEFs”), each of which has its own investment risks. Those risks can affect the value of the Fund's investments and therefore the value of the Fund's shares. To the extent that the Fund invests more of its assets in one CEF than in another, the Fund will have greater exposure to the risks of that CEF.


Security Valuation:  The Fund’s investments are generally valued at their fair value using market quotations. If a market value quotation is unavailable a security may be valued at its estimated fair value as described in Note 3.


Security Transactions and Investment Income:  The Fund follows industry practice and records securities transactions on the trade date basis. The specific identification method is used for determining gains or losses for financial statements and income tax purposes. Dividend income is recorded on the ex-dividend date, and interest income and expenses are recorded on an accrual basis. Discounts and premiums on securities purchased are amortized or accreted using the effective interest method over the life of the respective securities.




Fair value is defined as the price that the Fund might reasonably expect to receive upon selling an investment in a timely transaction to an independent buyer in the principal or most advantageous market of the investment. U.S. GAAP establishes a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes.



RiverNorth Managed Duration Municipal Income Fund, Inc.  
Notes to Quarterly Schedule of Investments March 31, 2023 (Unaudited)


Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, for example, the risk inherent in a particular valuation technique used to measure fair value including using such a pricing model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.


Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three broad levels listed below.


  Level 1 – Unadjusted quoted prices in active markets for identical, unrestricted assets or liabilities that a Fund has the ability to access at the measurement date;


  Level 2 – Quoted prices which are not active, quoted prices for similar assets or liabilities in active markets or inputs other than quoted prices that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and


  Level 3 – Significant unobservable prices or inputs (including the Fund’s own assumptions in determining the fair value of investments) where there is little or no market activity for the asset or liability at the measurement date.


The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety.


Equity securities, including CEFs, are generally valued by using market quotations, but may be valued on the basis of prices furnished by a pricing service when the Adviser believes such prices more accurately reflect the fair market value of such securities. Securities that are traded on any stock exchange are generally valued by the pricing service at the last quoted sale price. Lacking a last sale price, an exchange-traded security is generally valued by the pricing service at its last bid price. Securities traded in the NASDAQ over-the-counter market are generally valued by the pricing service at the NASDAQ Official Closing Price. When using the market quotations or close prices provided by the pricing service and when the market is considered active, the security will be classified as a Level 1 security. Sometimes, an equity security owned by the Fund will be valued by the pricing service with factors other than market quotations or when the market is considered inactive. When this happens, the security will be classified as a Level 2 security. When market quotations are not readily available, when the Adviser determines that the market quotation or the price provided by the pricing service does not accurately reflect the current fair value, or when restricted or illiquid securities are being valued, such securities are valued as determined in good faith by the Adviser in conformity with guidelines adopted by and subject to review by the Board. These securities will be categorized as Level 3 securities.


Investments in mutual funds, including short term investments, are generally priced at the ending NAV provided by the service agent of the funds. These securities will be classified as Level 1 securities.


Fixed income securities, including municipal and corporate bonds, are normally valued at the mean between the closing bid and asked prices provided by independent pricing services. Prices obtained from independent pricing services typically use information provided by market makers or estimates of market values obtained from yield data relating to investments or securities with similar characteristics. These securities will be classified as Level 2 securities.


Futures contracts are normally valued at the settlement price or official closing price provided by independent pricing services.


Effective September 8, 2022, and pursuant to the requirements of Rule 2a-5 under the 1940 Act, the Board approved updated valuation procedures for the Fund and designated the Adviser as the Fund's valuation designee to make all fair valuation determinations with respect to the Fund's portfolio investments, subject to the Board's oversight.


In accordance with the Fund’s good faith pricing guidelines, the Adviser is required to consider all appropriate factors relevant to the value of securities for which it has determined other pricing sources are not available or reliable as described above. No single standard exists for determining fair value, because fair value depends upon the circumstances of each individual case. As a general principle, the current fair value of an issue of securities being valued by the Adviser would appear to be the amount which the owner might reasonably expect to receive for them upon their current sale. Methods which are in accordance with this principle may, for example, be based on (i) a multiple of earnings; (ii) discounted cash flow models; (iii) weighted average cost or weighted average price; (iv) a discount from market of a similar freely traded security (including a derivative security or a basket of securities traded on other markets, exchanges or among dealers); or (v) yield to maturity with respect to debt issues, or a combination of these and other methods. Good faith pricing is permitted if, in the Adviser’s, opinion, the validity of market quotations appears to be questionable based on factors such as evidence of a thin market in the security based on a small number of quotations, a significant event occurs after the close of a market but before the Fund’s NAV calculation that may affect a security’s value, or the Adviser is aware of any other data that calls into question the reliability of market quotations.


Good faith pricing may also be used in instances when the bonds in which the Fund invests default or otherwise cease to have market quotations readily available.



RiverNorth Managed Duration Municipal Income Fund, Inc.  
Notes to Quarterly Schedule of Investments March 31, 2023 (Unaudited)


The following is a summary of the inputs used at March 31, 2023 in valuing the Fund’s assets and liabilities:


Investments in Securities at Value*  Level 1 - Quoted Prices  Level 2 -Other Significant Observable Inputs  Level 3 Significant Unobservable Inputs  Total
Closed-End Funds  $163,348,766   $   $   $163,348,766 
U.S. Corporate Bonds       1,954,160        1,954,160 
Municipal Bonds       342,219,016        342,219,016 
Short-Term Investments   41,027,076            41,027,076 
Total  $204,375,842   $344,173,176   $   $548,549,018 
Other Financial Instruments**                    
Future Contracts  $(8,836,770)  $   $   $(8,836,770)
Total  $(8,836,770)  $   $   $(8,836,770)



* Refer to the Fund's Schedule of Investments for a listing of securities by type.
** Other financial instruments are derivative instruments reflected in the Schedule of Investments. Futures contracts are reported at their unrealized appreciation/depreciation.


The Fund did not have any securities that used significant unobservable inputs (Level 3) in determining fair value, and there were no transfers into or out of Level 3 during the year.


4. Derivative Financial Instruments


The following discloses the Fund’s use of derivative instruments. The Fund’s investment objective not only permits the Fund to purchase investment securities, but also allow the Fund to enter into various types of derivative contracts such as futures. In doing so, the Fund will employ strategies in differing combinations to permit it to increase, decrease, or change the level or types of exposure to market factors. Central to those strategies are features inherent to derivatives that make them more attractive for this purpose than equity or debt securities; they require little or no initial cash investment, they can focus exposure on only selected risk factors, and they may not require the ultimate receipt or delivery of the underlying security (or securities) to the contract. This may allow the Fund to pursue its objective more quickly and efficiently than if it were to make direct purchases or sales of securities capable of affecting a similar response to market factors.


On October 28, 2020, the SEC adopted Rule 18f-4 under the 1940 Act providing for the regulation of the use of derivatives and certain related instruments by registered investment companies. Rule 18f-4 prescribes specific value-at-risk leverage limits for certain derivatives users. In addition, Rule 18f-4 requires certain derivatives users to adopt and implement a derivatives risk management program (including the appointment of a derivatives risk manager and the implementation of certain testing requirements) and prescribes reporting requirements in respect of derivatives. Subject to certain conditions, if a fund qualifies as a “limited derivatives user,” as defined in Rule 18f-4, it is not subject to the full requirements of Rule 18f-4. In connection with the adoption of Rule 18f-4, the SEC rescinded certain of its prior guidance regarding asset segregation and coverage requirements in respect of derivatives transactions and related instruments. The Fund was required to comply with Rule 18f-4 beginning August 19, 2022 and has adopted procedures for investing in derivatives and other transactions in compliance with Rule 18f-4.


Market Risk Factors: In pursuit of its investment objectives, the Fund may seek to use derivatives to increase or decrease its exposure to the following market risk factors:


Equity Risk: Equity risk relates to the change in value of equity securities as they relate to increases or decreases in the general market.


Interest Rate Risk: Interest rate risk relates to the risk that the municipal securities in the Fund’s portfolio will decline in value because of increases in market interest rates.



RiverNorth Managed Duration Municipal Income Fund, Inc.  
Notes to Quarterly Schedule of Investments March 31, 2023 (Unaudited)


Risk of Investing in Derivatives

The Fund’s use of derivatives can result in losses due to unanticipated changes in the market risk factors and the overall market. Derivatives may have little or no initial cash investment relative to their market value exposure and therefore can produce significant gains or losses in excess of their cost. This use of embedded leverage allows the Fund to increase its market value exposure relative to its net assets and can substantially increase the volatility of the Fund’s performance.


Additional associated risks from investing in derivatives also exist and potentially could have significant effects on the valuation of the derivative and the Fund. Typically, the associated risks are not the risks that the Fund is attempting to increase or decrease exposure to, per its investment objective, but are the additional risks from investing in derivatives.


Examples of these associated risks are liquidity risk, which is the risk that the Fund will not be able to sell the derivative in the open market in a timely manner, and counterparty credit risk, which is the risk that the counterparty will not fulfill its obligation to the Fund.



The Fund may invest in futures contracts in accordance with its investment objectives. The Fund does so for a variety of reasons including for cash management, hedging or non-hedging purposes in an attempt to achieve the Fund’s investment objective. A futures contract provides for the future sale by one party and purchase by another party of a specified quantity of the security or other financial instrument at a specified price and time. A futures contract on an index is an agreement pursuant to which two parties agree to take or make delivery of an amount of cash equal to the difference between the value of the index at the close of the last trading day of the contract and the price at which the index contract was originally written. Futures transactions may result in losses in excess of the amount invested in the futures contract. There can be no guarantee that there will be a correlation between price movements in the hedging vehicle and in the portfolio securities being hedged. An incorrect correlation could result in a loss on both the hedged securities in a fund and the hedging vehicle so that the portfolio return might have been greater had hedging not been attempted. There can be no assurance that a liquid market will exist at a time when a fund seeks to close out a futures contract or a futures option position. Lack of a liquid market for any reason may prevent a fund from liquidating an unfavorable position, and the fund would remain obligated to meet margin requirements until the position is closed. In addition, a fund could be exposed to risk if the counterparties to the contracts are unable to meet the terms of their contracts. With exchange-traded futures, there is minimal counterparty credit risk to the Fund since futures are exchange-traded and the exchange’s clearinghouse, as counterparty to all exchange-traded futures, guarantees the futures against default. The Fund is party to certain enforceable master netting arrangements, which provide for the right of offset under certain circumstances, such as the event of default.


When a purchase or sale of a futures contract is made by a fund, the fund is required to deposit with its custodian (or broker, if legally permitted) a specified amount of liquid assets (“initial margin”). The margin required for a futures contract is set by the exchange on which the contract is traded and may be modified during the term of the contract. The initial margin is in the nature of a performance bond or good faith deposit on the futures contract that is returned to the Fund upon termination of the contract, assuming all contractual obligations have been satisfied. These amounts are included in Deposit with broker for futures contracts on the Statement of Assets and Liabilities. Each day the Fund may pay or receive cash, called “variation margin,” equal to the daily change in value of the futures contract. Such payments or receipts are recorded for financial statement purposes as unrealized gains or losses by the Fund. Variation margin does not represent a borrowing or loan by the Fund but instead is a settlement between the Fund and the broker of the amount one would owe the other if the futures contract expired. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.