[Title 17 CFR 229.503]
[Code of Federal Regulations (annual edition) - April 1, 2007 Edition]
[Title 17 - COMMODITY AND SECURITIES EXCHANGES]
[Chapter II - SECURITIES AND EXCHANGE COMMISSION]
[Part 229 - STANDARD INSTRUCTIONS FOR FILING FORMS UNDER SECURITIES]
[Subpart 229.500 - Registration Statement and Prospectus Provisions]
[Sec. 229.503 - (Item 503) Prospectus summary, risk factors, and ratio of]
[From the U.S. Government Printing Office]


17COMMODITY AND SECURITIES EXCHANGES22007-04-012007-04-01false229.503Sec. 229.503COMMODITY AND SECURITIES EXCHANGESSECURITIES AND EXCHANGE COMMISSIONSTANDARD INSTRUCTIONS FOR FILING FORMS UNDER SECURITIESRegistration Statement and Prospectus Provisions
Sec. 229.503  (Item 503) Prospectus summary, risk factors, and ratio of
earnings to fixed charges.

    The registrant must furnish this information in plain English. See 
Sec. 230.421(d) of Regulation C of this chapter.
    (a) Prospectus summary. Provide a summary of the information in the 
prospectus where the length or complexity of the prospectus makes a 
summary useful. The summary should be brief. The summary should not 
contain, and is not required to contain, all of the detailed information 
in the prospectus. If you provide summary business or financial 
information, even if you do not caption it as a summary, you still must 
provide that information in plain English.

Instruction to paragraph 503(a): The summary should not merely repeat 
the text of the prospectus but should provide a brief overview of the 
key aspects of the offering. Carefully consider and identify those 
aspects of the offering that are the most significant and determine how 
best to highlight those points in clear, plain language.

    (b) Address and telephone number. Include, either on the cover page 
or in the summary section of the prospectus, the complete mailing 
address and telephone number of your principal executive offices.

[[Page 482]]

    (c) Risk factors. Where appropriate, provide under the caption 
``Risk Factors'' a discussion of the most significant factors that make 
the offering speculative or risky. This discussion must be concise and 
organized logically. Do not present risks that could apply to any issuer 
or any offering. Explain how the risk affects the issuer or the 
securities being offered. Set forth each risk factor under a subcaption 
that adequately describes the risk. The risk factor discussion must 
immediately follow the summary section. If you do not include a summary 
section, the risk factor section must immediately follow the cover page 
of the prospectus or the pricing information section that immediately 
follows the cover page. Pricing information means price and price-
related information that you may omit from the prospectus in an 
effective registration statement based on Sec. 230.430A(a) of this 
chapter. The risk factors may include, among other things, the 
following:
    (1) Your lack of an operating history;
    (2) Your lack of profitable operations in recent periods;
    (3) Your financial position;
    (4) Your business or proposed business; or
    (5) The lack of a market for your common equity securities or 
securities convertible into or exercisable for common equity securities.
    (d) Ratio of earnings to fixed charges. If you register debt 
securities, show a ratio of earnings to fixed charges. If you register 
preference equity securities, show the ratio of combined fixed charges 
and preference dividends to earnings. Present the ratio for each of the 
last five fiscal years and the latest interim period for which financial 
statements are presented in the document. If you will use the proceeds 
from the sale of debt or preference securities to repay any of your 
outstanding debt or to retire other securities and the change in the 
ratio would be ten percent or greater, you must include a ratio showing 
the application of the proceeds, commonly referred to as the pro forma 
ratio.

Instructions to Paragraph 503(d): 1. Definitions. In calculating the 
ratio of earnings to fixed charges, you must use the following 
definitions:
    (A) Fixed charges. The term ``fixed charges'' means the sum of the 
following: (a) interest expensed and capitalized, (b) amortized 
premiums, discounts and capitalized expenses related to indebtedness, 
(c) an estimate of the interest within rental expense, and (d) 
preference security dividend requirements of consolidated subsidiaries.
    (B) Preference security dividend. The term ``preference security 
dividend'' is the amount of pre-tax earnings that is required to pay the 
dividends on outstanding preference securities. The dividend requirement 
must be computed as the amount of the dividend divided by (1 minus the 
effective income tax rate applicable to continuing operations).
    (C) Earnings. The term ``earnings'' is the amount resulting from 
adding and subtracting the following items. Add the following: (a) Pre-
tax income from continuing operations before adjustment for minority 
interests in consolidated subsidiaries or income or loss from equity 
investees, (b) fixed charges, (c) amortization of capitalized interest, 
(d) distributed income of equity investees, and (e) your share of pre-
tax losses of equity investees for which charges arising from guarantees 
are included in fixed charges. From the total of the added items, 
subtract the following: (a) interest capitalized, (b) preference 
security dividend requirements of consolidated subsidiaries, and (c) the 
minority interest in pre-tax income of subsidiaries that have not 
incurred fixed charges. Equity investees are investments that you 
account for using the equity method of accounting. Public utilities 
following SFAS 71 should not add amortization of capitalized interest in 
determining earnings, nor reduce fixed charges by any allowance for 
funds used during construction.
    2. Disclosure. Disclose the following information when showing the 
ratio of earnings to fixed charges:
    (A) Deficiency. If a ratio indicates less than one-to-one coverage, 
disclose the dollar amount of the deficiency.
    (B) Pro forma ratio. You may show the pro forma ratio only for the 
most recent fiscal year and the latest interim period. Use the net 
change in interest or dividends from the refinancing to calculate the 
pro forma ratio.
    (C) Foreign private issuers. A foreign private issuer must show the 
ratio based on the figures in the primary financial statement. A foreign 
private issuer must show the ratio based on the figures resulting from 
the reconciliation to U.S. generally accepted accounting principles if 
this ratio is materially different.
    (D) Summary Section. If you provide a summary or similar section in 
the prospectus, show the ratios in that section.
    3. Exhibit. File an exhibit to the registration statement to show 
the figures used to calculate the ratios. See paragraph (b)(12) of

[[Page 483]]

Item 601 of Regulation S-K (17 CFR 229.601(b)(12)).

Instruction to Item 503: For asset-backed securities, see also Item 1103 
of Regulation AB (Sec. 229.1103).

[63 FR 6383, Feb. 6, 1998, as amended at 70 FR 1594, Jan. 7, 2005]