[Federal Register Volume 60, Number 131 (Monday, July 10, 1995)]
[Proposed Rules]
[Pages 35604-35633]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-16389]




[[Page 35603]]

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Part II





Securities and Exchange Commission





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17 CFR Parts 228, 229, et al.



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Securities; Final Rule and Proposed Rules

  Federal Register / Vol. 60, No. 131 / Monday, July 10, 1995 / 
Proposed Rules  
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[[Page 35604]]


SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 228, 229, 230, 239, 240 and 249

[Release Nos. 33-7183; 34-35893; IC-21166; File No. S7-13-95]
RIN 3235-AG49


Use of Abbreviated Financial Statements in Documents Delivered to 
Investors Pursuant to the Securities Act of 1933 and Securities 
Exchange Act of 1934

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule.

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SUMMARY: The Securities and Exchange Commission (``Commission'') today 
is soliciting comment on proposed amendments to allow the use of 
abbreviated financial statements in annual reports delivered to 
shareholders pursuant to the proxy rules. Comment is also solicited on 
additional approaches to streamlining annual reports to shareholders. 
Rule changes also are proposed to allow the use of abbreviated 
financial statements in other disclosure documents, including 
prospectuses, that are required to be delivered to investors. In order 
to encourage individual investor comments and suggestions, the 
Commission is including in the Release an Appendix directed to 
investors, which will be published separately and distributed to 
investors. In addition, during the comment period, the Commission 
intends to hold focus groups composed of investors to assess investors' 
views as to the utility of sample abbreviated financial statements, as 
compared with full financial statements.

DATES: Comments on the proposed amendments should be received on or 
before October 10, 1995.

ADDRESSES: Comments should be submitted in triplicate to Jonathan G. 
Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street 
NW., Washington, DC 20549. Comment letters should refer to File No. S7-
13-95. All comments received will be available for public inspection 
and copying in the Commission's Public Reference Room, 450 Fifth Street 
NW., Washington, DC 20549.

FOR FURTHER INFORMATION CONTACT: Craig C. Olinger, Associate Chief 
Accountant, at (202) 942-2960, Kenneth T. Marceron, Staff Accountant, 
at (202) 942-1781, or Elizabeth M. Murphy or William B. Haseltine, 
Special Counsels, at (202) 942-2910, Division of Corporation Finance, 
Securities and Exchange Commission, 450 Fifth Street NW., Mail Stop 3-
12, Washington, DC 20549.

SUPPLEMENTARY INFORMATION: The Commission is proposing amendments to 
Forms S-1, S-2, S-3, S-4, S-6, S-8, S-11, SB-1, SB-2, F-1, F-2, F-3, F-
4, F-7, F-8, F-9, F-10, F-80 and 1-A 1 and Regulation D 2 
under the Securities Act of 1933 (``Securities Act''),3 as well as 
Forms 10-K and 10-KSB 4, Rules 13e-3, 13e-4, 14a-3, 14c-3, 14d-1 
and 14d-6 5 and Schedules 13E-4F, 14A, 14C, 14D-1F, and 14D-9F 
6 under the Securities Exchange Act of 1934 (``Exchange 
Act'').7 Additionally, a new Item 305 would be added to 
Regulations S-B and S-K,8 and new Securities Act Rule 435 and new 
Exchange Act Rules 14a-16 and 14c-8 would be created.

    \1\ 17 CFR 239.11, 12, 13, 25, 16, 16b, 18, 9, 10, 31, 32, 33, 
34, 37, 38, 39, 40, 41 and 90.
    \2\ 17 CFR 230.501-508.
    \3\ 15 U.S.C. 77a et seq.
    \4\ 17 CFR 249.310 and 310b.
    \5\ 17 CFR 240.13e-3, 13e-4, 14a-3, 14c-3, 14d-1 and 14d-6.
    \6\ 17 CFR 240.13e-102, 14a-101, 14c-101, 14d-102, and 14d-103.
    \7\ 15 U.S.C. 78a et seq.
    \8\ 17 CFR Part 228 and 17 CFR Part 229.
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I. Executive Summary and Background

    The Commission today is publishing for comment proposals to 
streamline the financial information currently required to be delivered 
to investors in connection with the annual election of directors 
pursuant to the Commission's proxy regulations.9 This initiative 
responds to concerns that the growing complexity and volume of 
financial information, particularly that required in notes to financial 
statements,10 render the annual report less readable and useful to 
the general shareholder body.11 Proponents of annual report 
simplification believe that streamlined annual reports will allow 
registrants both to communicate more effectively with shareholders in 
the annual report by being able to highlight key financial items and to 
reduce the costs of preparing and delivering the annual report. These 
commentators are of the view that a large segment of a company's 
shareholder body does not review and analyze the detailed information 
in the notes to the financial statements, particularly in determining 
whether to vote for director nominees, and companies therefore should 
not have to incur the cost of delivery of the full set of financial 
statements in the annual report.

    \9\ See Rules 14a-3 and 14c-3.
    \10\ Financial statements prepared in conformity with generally 
accepted accounting principles (``GAAP'') are required to include 
adequate disclosure of material matters (Statement on Auditing 
Standards (``SAS'') No. 32, Adequacy of Disclosure in Financial 
Statements). Disclosures in notes to the financial statements are 
intended to provide material information necessary to make the 
financial statements, in light of the circumstances under which they 
are made, not misleading (Rule 4-01(a) of Regulation S-X [17 CFR 
210.4-01(a)]). In recent decades, numerous requirements have been 
adopted that specify in detail the content of disclosures required 
in the notes to the financial statements.
    \11\ See, e.g., Groves, Ray J., ``Overload of Financial 
Disclosure Rules is Defeating the Purpose of the Exercise,'' 
American Banker (Jan. 3, 1995); Beresford, Dennis R. and Hepp, John 
A., Financial Accounting Series: Status Report, No. 149-B, 
``Financial Statement Disclosures: Too Many or Too Few?'' (May 25, 
1995); Deloitte & Touche LLP, Summary Annual Reporting, Improving 
Shareholder Communications (1995), at 3-4; Cook, Michael and Sutton, 
Michael H., ``Summary Annual Reporting: A Cure for Information 
Overload,'' Fin. Executive (Jan/Feb 1995).
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    Various approaches have been suggested to accomplish the 
streamlining. One, which is contained in rule amendments proposed 
today, would permit an eligible registrant to use financial statements 
with significantly abbreviated notes (``abbreviated financial 
statements'') in annual reports to shareholders. The annual report 
would prominently identify the financial statements as abbreviated and 
state that the registrant will provide upon request, and without 
charge, a copy of the full financial statements. The full financial 
statements would be required to be filed in the registrant's annual 
report on Form 10-K, 10-KSB or 20-F; 12 registrants are already 
required to advise shareholders in the proxy statement or annual report 
that the Form 10-K or 10-KSB will be provided upon request and without 
charge. This would continue under the proposed rules.

    \12\ 17 CFR 249.220f.
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    In summary, disclosure required in the notes to the abbreviated 
financial statements would include:
     the significant accounting policies of the registrant;
     certain matters materially affecting the comparability of 
amounts reported in the financial statements;
     circumstances identified in explanatory language added to 
the independent accountant's report, contingencies, loan defaults, and 
subsequent events; and
     related party transactions.
    The abbreviated financial statements contemplated by the proposed 
rule would omit a significant number of notes to financial statements 
that are required under GAAP. Appendix A to this release summarizes the 
common disclosures that would be omitted from the abbreviated financial 
statements under the proposals. In general, the disclosures that would 
be omitted from 

[[Page 35605]]
the abbreviated financial statements contain quantitative detail and 
related explanatory information regarding amounts included in the 
financial statements. Detailed quantitative disclosures and related 
explanatory material regarding many off-balance sheet items also would 
be omitted. For example, disclosure enumerating the composition of 
inventories and fixed assets, the terms and conditions of borrowings, 
the components of income tax expense and related deferred taxes, the 
status of pension fund assets and obligations, the assets and operating 
results of business and geographic segments, the details of 
restructuring charges and the characteristics of on-balance sheet and 
off-balance sheet financial instruments (including derivative 
instruments), among other things, would be omitted.
    Other approaches for streamlining the annual report to shareholders 
include the concept of a summary annual report, the subject of a 1983 
research study prepared for the Financial Executives Research 
Foundation (``FERF'').13 The summary annual report concept is 
discussed in this release, and comments are solicited on the approach. 
Comment is also being solicited as to whether the Commission should 
allow registrants total flexibility, subject to the requirements of 
state corporate law and trading market listing agreements, by 
rescinding the proxy requirements regarding delivery of the annual 
report to shareholders.

    \13\ ``Summary Reporting of Financial Information--Moving Toward 
More Readable Annual Reports,'' Deloitte, Haskins & Sells (1983) 
(``FERF Report'').
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    Similar concerns about the complexity and volume of financial 
information, particularly in the notes to the financial statements, as 
well as the use of the annual report to shareholders in the integrated 
disclosure system, underlie additional rule proposals that would allow 
the use of abbreviated financial statements in the full spectrum of 
other disclosure documents required to be delivered to investors, such 
as prospectuses and transactional proxy statements.14 Use of 
abbreviated financial statements in these circumstances raises 
additional issues, including the extent to which those making 
investment decisions would be willing to rely on the abbreviated 
financial statements and the practicality of requiring delivery of full 
financial statements upon request in various transactional contexts. A 
number of Commission registration forms, most notably Forms S-3 and F-
3, already use a model of incorporation by reference, and delivery of 
incorporated documents upon request. The Commission invites comment as 
to the appropriateness and utility of such approach for both investors 
and issuers generally, and specifically with respect to each class of 
disclosure document covered by the proposed rulemaking.

    \14\ These documents include: (1) prospectuses required to be 
delivered in connection with offerings of securities pursuant to the 
Securities Act; (2) proxy or information statements required to be 
furnished pursuant to Section 14 of the Exchange Act [15 U.S.C. 
78n]; (3) documents furnished to investors in connection with tender 
offers or going private transactions; (4) offering circulars 
delivered in connection with Regulation A [17 CFR 230.251-263] 
offerings; and (5) disclosure required to be furnished in connection 
with Regulation D offerings. If the disclosure document is required 
to include financial statements of another entity, such as an 
acquired business, significant subsidiary, or guarantor, the 
registrant also could choose to deliver abbreviated financial 
statements of that entity to investors, provided that the 
eligibility criteria are met.
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    The Commission recognizes that the feasibility of this initiative 
requires the confidence of registrants that they will not be subject to 
liability for failure to deliver the full financial statements in the 
annual report or other mandated disclosure documents. The rules 
proposed today include a safe harbor from liability for non-delivery of 
the note disclosures allowed to be excluded from the abbreviated 
financial statements. The proposals would not change the disclosure 
currently required outside the company's financial statements in 
mandated disclosure documents.
    This initiative is part of the Commission's overall efforts to 
improve the effectiveness and efficiency of its disclosure 
system.15 Both the Commission and the Financial Accounting 
Standards Board (``FASB'') recognize that an important part of that 
effort is to evaluate current financial disclosures to assess their 
continued utility and cost effectiveness.16

    \15\ See, e.g., Securities Act Release No. 7053 (April 19, 1994) 
[59 FR 21644] and Securities Act Release Nos. 7117, 7118 and 7119 
(December 1, 1994) [59 FR 65628, 65632, and 65637] adopting 
amendments to Form 20-F and Regulation S-X [17 CFR 210] designed to 
streamline the financial information and reconciliation requirements 
for both foreign and domestic companies.
    \16\ In response to the Financial Accounting Standards Advisory 
Council's 1994 Annual FASB Agenda Survey, survey respondents 
selected ``Comprehensive Review of Financial Statement Disclosures'' 
from a list of projects not currently on FASB's agenda and indicated 
that it should be given high priority by FASB. While FASB has not 
yet added a formal project to its agenda, the Chairman of FASB has 
indicated that FASB will be devoting significant resources to this 
issue. See Beresford, Dennis R. and Hepp, John A., Financial 
Accounting Series: Status Report, No. 149-B, ``Financial Statement 
Disclosures: Too Many or Too Few?'' at 7 (May 25, 1995).
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II. Proposed Amendments To Permit Use of Abbreviated Financial 
Statements

A. Content of Abbreviated Financial Statements

    The proposed rule amendments would permit eligible registrants to 
use abbreviated financial statements in specified disclosure documents 
delivered to shareholders and investors. The content of the abbreviated 
financial statements is set forth in proposed new Item 305(b) of 
Regulations S-K and S-B.17

    \17\ Proposed Item 305 of Regulations S-B and S-K. References 
throughout the release to provisions of proposed Item 305 of 
Regulation S-K should be read to include the comparable provisions 
in proposed Item 305 of Regulation S-B. The two items are identical 
in all substantive respects, except that all but one of the 
references to Regulation S-X in proposed Item 305 of Regulation S-K 
are omitted from proposed Item 305 of Regulation S-B or changed to 
refer to Item 310 of Regulation S-B [17 CFR 228.310] (there is a 
reference to Article 2 of Regulation S-X [17 CFR 210.2] regarding 
accountants' reports in both the proposed Regulation S-K and S-B 
Items).
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    The face of the abbreviated financial statements would have to 
include a prominent statement identifying them as such.18 
Abbreviated financial statements would include balance sheets, 
statements of income and cash flows, and statements of changes in 
stockholders' equity that conform with GAAP and Regulation S-X with 
respect to classifications, measurements and periods presented.19 
The notes to the abbreviated financial statements would be limited to 
the items specified in proposed Item 305. 20

    \18\ Proposed Item 305(b)(1) of Regulation S-K.
    \19\ Proposed Items 305(b) (1) and (2) of Regulation S-K. 
Updating requirements for the abbreviated financial statements in 
prospectuses and proxy statements would be consistent with the 
updating requirements for the full financial statements. 
Accordingly, domestic issuers would follow the requirements of Rule 
3-12 of Regulation S-X [17 CFR 210.3-12], while foreign issuers 
would follow the requirements of Rule 3-19 of Regulation S-X [17 CFR 
210.3-19]. See proposed Regulation S-K Items 305(c) and (f)(2). 
Pursuant to proposed Regulation S-B Item 305(c), small business 
issuers would update their abbreviated financial statements in 
accordance with Item 310(d) of Regulation S-B [17 CFR 228.310(d)].
    \20\ The abbreviated financial statement proposals do not affect 
other disclosure requirements, such as the registrant's description 
of business, legal proceedings discussions, supplementary financial 
information, or Management's Discussion & Analysis (``MD&A'') (Items 
101, 103, 302, and 303 of Regulations S-B and S-K [17 CFR 228.101, 
103, 302 and 303 and 229.101, 103, 302 and 303]). Registrants that 
currently cross-reference, but do not reiterate, data set forth in 
the notes to the financial statements in the MD&A section of their 
disclosure documents could not cross-reference notes omitted from 
the abbreviated financial statements. It is the current practice of 
many registrants to include supplementary financial information 
pursuant to Item 302 of Regulations S-K and S-B in an unaudited note 
to the financial statements. Registrants using abbreviated financial 
statements would be required to disclose supplementary financial 
information outside of the financial statements elsewhere in the 
disclosure document.

[[Page 35606]]

    As proposed, the disclosures required in the notes to the 
abbreviated financial statements are intended to be an extraction of 
all disclosures included in the registrant's full financial statements 
that are responsive to the matters specified by Item 305.21 
Disclosures responsive to a particular matter may be located in several 
places in the notes to the full financial statements. Proposed Item 305 
would require all disclosures included in the notes to the full 
financial statements that are responsive to a matter specified in Item 
305 to be included in the notes to the abbreviated financial 
statements, regardless of the source of the underlying disclosure 
requirement or the location of the disclosure in the full financial 
statements. For example, requirements regarding the disclosure of 
accounting policies are primarily contained in Accounting Principles 
Board (``APB'') Opinion No. 22,22 but various other FASB and AICPA 
pronouncements specifically require disclosure of accounting policies 
with respect to certain matters.23 In practice, some registrants 
include all accounting policy disclosures in a single note, while 
others integrate certain accounting policy disclosures within the 
detailed disclosure of the matters to which the policies relate. Under 
the proposed requirements, registrants would have to identify and 
describe in the notes to the abbreviated financial statements all 
significant accounting policies used in the preparation of the 
financial statements, regardless of the particular manner in which they 
are presented in the notes to the full financial statements.

    \21\ Proposed Item 305(b)(3) of Regulation S-K.
    \22\ Disclosure of Accounting Policies.
    \23\ Disclosures responsive to a particular matter may emanate 
from requirements in various accounting pronouncements. SAS No. 69, 
The Meaning of Present Fairly in Conformity with Generally Accepted 
Accounting Principles in the Independent Auditor's Report, defines 
the sources of accounting principles generally accepted in the 
United States.
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    The specific matters proposed to be required in the notes to the 
abbreviated financial statements are as follows: 24

    \24\ Proposed Item 305(b)(3)(i)-(xiii) of Regulation S-K.
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    1. Basis of presentation. A note to the abbreviated financial 
statements would explain that although such statements were prepared 
using GAAP for measurement and classification, substantially all of the 
notes necessary for a fair presentation in accordance with GAAP and 
Regulation S-X have been omitted.25 The note also would state that 
the disclosures in the notes to the abbreviated financial statements 
are limited to those matters specified by Commission rules, and comply 
with Commission rules for presentation of abbreviated financial 
statements. The note would contain a reference to the complete note 
disclosures in the full financial statements.

    \25\ The note to the abbreviated financial statements containing 
basis of presentation disclosures that is included by small business 
issuers in their delivery documents would refer only to GAAP since 
small business issuers are not required to comply with Regulation S-
X.
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    2. Accounting policies. A description of all significant accounting 
policies used in the preparation of the financial statements, including 
a description of the accounting principles followed by the reporting 
entity and the methods of applying those principles that materially 
affect the determination of financial position, cash flows or results 
of operations, as specified by APB Opinion No. 22 and related 
pronouncements, would be provided.26

    \26\ ``Related pronouncement'' as used throughout this section 
refers to a pronouncement constituting GAAP as defined in SAS No. 69 
that requires disclosure regarding a matter that would have to be 
disclosed in the notes to the abbreviated financial statements under 
proposed Item 305 of Regulation S-K.
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    3. Changes in accounting principle. The nature of, and 
justification for, a change in accounting principle, and the effects of 
the change, as specified by APB Opinion No. 20 27 and related 
pronouncements, would be furnished.

    \27\ Accounting Changes.
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    4. Restatements and reclassifications. The nature and effects of a 
correction of an error in previously issued financial statements, as 
specified by APB Opinion No. 20 and related pronouncements, would be 
furnished. Also, the nature and reasons for a change in the reporting 
entity, and effects of the change, as specified by APB Opinion No. 20 
and related pronouncements, would be furnished. Further, the nature and 
effects of reclassifications materially affecting amounts reported in 
previously issued financial statements would be explained.
    5. Changes in accounting estimate. The nature and effects of 
changes in accounting estimate, as specified by APB Opinion No. 20 and 
related pronouncements, would be furnished.
    6. Business combinations. The nature of business combinations 
during the most recent fiscal year and quantitative disclosures of the 
effects of the business combinations, as specified by APB Opinion No. 
16 28 and related pronouncements, would be furnished.

    \28\ Business Combinations.
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    7. Discontinued operations. The nature of business operations that 
were discontinued during the most recent fiscal year, and quantitative 
disclosures of the effects of the discontinuation, as specified by APB 
Opinion No. 30 29 and related pronouncements, would be furnished.

    \29\ Reporting the Results of Operations--the Effects of 
Disposal of a Segment of a Business, and Extraordinary, Unusual and 
Infrequently Occurring Events and Transactions.
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    8. Circumstances identified in explanatory language added to the 
independent accountant's standard report. If the independent 
accountant's report on the entity's full financial statements includes 
explanatory language added to the standard report, a note would 
describe the circumstances identified in SAS No. 58 30 
necessitating the explanatory language and would include all disclosure 
set forth in notes to the full financial statements that bears upon an 
understanding of those circumstances. Disclosure would also be provided 
for explanatory paragraphs that emphasize a matter regarding the 
financial statements.

    \30\ Reports on Audited Financial Statements.
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    9. Loss contingencies. If the entity is exposed to loss 
contingencies for which a loss exceeding the amount accrued in the 
financial statements is reasonably possible, a note would describe the 
nature of the loss and disclose either the amount or range of 
reasonably possible additional loss, or management's view that such 
amount or range of loss cannot be estimated, as specified by SFAS No. 5 
31 and related pronouncements.

    \31\ Accounting for Contingencies.
    10. Events of default under credit agreements. As presently 
required by Regulation S-X, 32 the facts and amounts concerning 
any default in principal, interest, sinking fund, or redemption 
provisions with respect to any material issue of securities or credit 
agreements, or any breach of covenant of a related indenture or 
agreement, which default or breach existed at the date of the most 
recent balance sheet date being filed and has not been subsequently 
cured, would be described. If a default or breach exists but 
acceleration of the obligation has been waived for a stated period of 
time beyond the date of the most recent balance sheet being filed, the 
amount of the obligation and the period of the waiver would have to be 
stated.

    \32\ Rule 4-08(c) of Regulation S-X [17 CFR 210.4-08(c)].
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    11. Related party transactions. The nature of related party 
relationships, and a description of transactions, amounts and balances, 
as specified by 

[[Page 35607]]
SFAS No. 57 33 and related pronouncements, would be furnished.

    \33\ Related Party Disclosures.
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    12. Bankruptcies and quasi-reorganizations. Entities entering into, 
operating under, or emerging from proceedings under the federal 
bankruptcy code during the most recent fiscal year would have to 
provide all the disclosures specified by AICPA Statement of Position 
No. 90-7.34 As presently required by Regulation S-X and related 
interpretations,35 entities effecting a quasi-reorganization 
during the most recent fiscal year would disclose the nature and 
effects of the quasi-reorganization.

    \34\ Financial Reporting Entities and Reorganization Under the 
Bankruptcy Code.
    \35\ Rule 5-02.31(b) of Regulation S-X [17 CFR 210.5-02.31(b)]. 
See also Accounting Series Release 25 and Staff Accounting Bulletins 
78 and 86, Quasi-Reorganizations.
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    13. Subsequent events. All events occurring subsequent to the date 
of the most recent balance sheet for which disclosure was required to 
be made in the full financial statements would be disclosed.
    If none of the matters identified in Items 3 through 13 above apply 
to a registrant, the note disclosures included in abbreviated financial 
statements of that registrant would be limited to a description of the 
basis of presentation of the abbreviated financial statements and the 
registrant's accounting policies.
    The types of disclosures commonly provided in full financial 
statements that would be omitted from the notes to the abbreviated 
financial statements are summarized in Appendix A to the release. 
Comment is requested as to whether any of the items specified for 
inclusion should not be deemed necessary in a presentation of 
abbreviated financial statements, or whether there are other specific 
items included in full financial statements that should be required 
disclosure in abbreviated financial statements in order to provide 
essential information to investors. For example, should the disclosures 
regarding the amounts, terms, risks, or fair values of financial 
instruments (including derivatives) specified by SFAS Nos. 105, 107, 
and 119,36 or the information about stock options valuation to be 
required by the forthcoming FASB standard on stock compensation,37 
be required?

    \36\ Disclosure of Information about Financial Instruments with 
Off-Balance Sheet Risk and Financial Instruments with Concentrations 
of Credit Risk, Disclosures about Fair Value of Financial 
Instruments, and Disclosure about Derivative Financial Instruments 
and Fair Value of Financial Instruments, respectively.
    \37\ A draft of a Final Statement on stock compensation has been 
sent to the FASB's Stock Compensation Task Force and other 
interested persons for review and comment. FASB hopes to issue a 
Final Statement in July.
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    Proposed Item 305 specifies every matter that would require 
disclosure in the notes to the abbreviated financial statements; the 
Item does not provide for the discretionary addition by registrants of 
note disclosures regarding other matters. Comment is solicited as to 
whether the Item should allow for additional discretionary note 
disclosures. Commenters remarking on this issue are asked to address 
whether, if proposed Item 305 expressly permitted the discretionary 
note disclosures: (1) registrants would be more or less likely to use 
the abbreviated financial statement format; (2) the disclosures 
included in the notes to the abbreviated financial statements would be 
more or less useful to investors; and (3) whether registrants would 
feel compelled routinely to add note disclosures regarding 
discretionary matters similar to those included at the discretion of 
other registrants.
    As an alternative to the disclosures specified in the proposed 
rules, comment is requested as to whether note disclosures in 
abbreviated financial statements should be limited to only those 
matters regarding the manner in which the full financial statements 
were prepared. For example, should disclosures be limited to a 
description of the registrant's significant accounting policies, 
changes in those policies, and material restatements and 
reclassifications of previously reported amounts? Should disclosures be 
further limited to only include changes in those matters, and to 
exclude descriptions of accounting policies that have not changed 
during the reporting period? Should the abbreviated financial 
statements also include a list of the notes that have been omitted?

B. Use of Abbreviated Financial Statements--Specified Disclosure 
Documents

    As discussed in the introduction to this release, the primary 
impetus to the abbreviated financial statement initiative has been 
suggestions to streamline the financial information required to be 
included in annual reports to shareholders, so as to make the reports 
more readable and useful to the general shareholder body. Underlying 
these suggestions is the premise that, at least in the case of voting 
on the election of directors, many, if not most, shareholders do not 
use the detailed information contained in the financial statement 
footnotes to make their voting decision.
    The proposed amendments also would extend the abbreviated financial 
statement approach to other disclosure documents required to be 
delivered to investors, including those prospectuses currently required 
to include financial statements. While the transactional context of 
these documents and the use of the information as a basis for an 
investment decision present additional issues to those raised by the 
annual report, the Commission is interested in commenters' views as to 
whether the concept of allowing delivery of more summary information, 
while assuring that more extensive information is available in 
Commission filings and promptly upon request from the company, should 
be extended throughout the Commission's disclosure scheme. This model 
already currently exists in the distinction between the annual report 
required to be delivered to shareholders and the Form 10-K annual 
report required to be filed with the Commission. Registration on Form 
S-2 similarly uses this model.
    The Commission also solicits comment as to the extent to which the 
availability of financial disclosure documents through electronic media 
warrants a reassessment of the regulatory framework that is based on 
delivery of disclosure documents in hard copy to investors.38 By 
mid-1996, most registrants under the Securities Act, Exchange Act and 
Investment Company Act will be required to file their disclosure 
documents electronically through the Commission's Electronic Data 
Gathering, Analysis and Retrieval (``EDGAR'') system.39 Public 
access to these reports is currently available through a wide variety 
of private vendors, as well as through the Commission.40 Today, it 
is estimated 

[[Page 35608]]
that more than 16% of the public has access through home computers to 
this information.41 These developments have changed and will 
continue to change how investors access information about public 
companies, and provide a significant opportunity to enhance the 
efficacy and efficiency of the disclosure process under the federal 
securities laws.42

    \38\ In recognition of developments in electronic media, the 
staff issued an interpretive letter to facilitate the use of 
electronic transmission to satisfy prospectus delivery requirements. 
Brown & Wood (Feb. 17, 1995). The Division of Corporation Finance 
staff, in addition to issuing the Brown & Wood letter, is 
considering generally delivery under the Securities Act of 
prospectuses through other non-paper media (e.g., audiotapes, 
videotapes, facsimile, directed electronic mail, and CD ROMs). The 
staff anticipates submitting to the Commission in the near future 
recommendations intended both to facilitate compliance with the 
Securities Act's prospectus delivery requirements and to encourage 
continued technological developments of non-paper delivery media.
    \39\ To date, 6,250 Exchange Act registrants are filing on 
EDGAR, and 2,500 under the Investment Company Act. The remaining 
domestic registrants will be required to file on EDGAR by May 1996. 
Foreign issuers may file on EDGAR on a voluntary basis.
    \40\ For example, EDGAR filings are available through Dow Jones 
and Lexis/Nexis. One of the subscribers to the EDGAR data base has 
made it available on the Internet.
    \41\ Gates, Bill, ``In Praise of a Free Market Approach,'' The 
Guardian (June 22, 1995) at 7.
    \42\ See Langevoort, Donald C., ``Information Technology and the 
Structure of Securities Regulation, Harvard Law Review (February 
1985), and Arnold, Jerry L., Greene, Edward F., and Keller, Earl C., 
``The Impact of Electronic Technology at the S.E.C.: An Analysis of 
Policies Governing the Content and Dissemination of Corporate 
Disclosures'' (Financial Executives Institute and SEC and Financial 
Reporting Institute, 1987).
    The manner in which the abbreviated financial statements scheme 
would apply to specified disclosure documents varies according to the 
nature of the document, as described in this section. In all cases, the 
rules would provide that the full financial statements would be deemed 
a part of the related disclosure document, so that liability for this 
information would remain unchanged.43 Comment is requested 
generally on whether the proposed system of delivering abbreviated 
financial statements to investors and filing the full financial 
statements would benefit the investing public. Comment also is 
solicited as to whether issuers should be permitted to include 
abbreviated financial statements in each type of disclosure document 
covered by the proposed amendments.

    \43\ Proposed Rules 435(c); 13e-3(e)(4)(iv); 13e-4(d)(1)(i); 
14a-16; 14c-8 and 14d-1(b)(3)(iii).
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1. Annual Reports to Shareholders
    a. Abbreviated Financial Statements. Companies that are subject to 
the proxy and information statement rules because they have a class of 
securities registered under Section 12 of the Exchange Act 44 must 
furnish shareholders an annual report containing specified information, 
including financial statements.45 Under the proposal, registrants 
could choose to use abbreviated financial statements in their annual 
reports to shareholders. If the Form 10-K or 10-KSB containing the full 
financial statements was on file with the Commission, the copy of the 
annual report to shareholders would simply be submitted to the 
Commission, as is currently the case. If the Form 10-K or 10-KSB was 
not yet on file, the annual report to shareholders submitted to the 
Commission would have to be accompanied by a copy of the full financial 
statements. This is to assure the availability of the full financial 
statements in the Commission's public files at the time the annual 
report to shareholders with the abbreviated financial statements is 
being used.

    \44\ 15 U.S.C. 78l.
    \45\ Exchange Act Rules 14a-3 and 14c-3.
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    Under the proposed rules, registrants using abbreviated financial 
statements in their annual report to shareholders would not be able to 
incorporate the financial statements from such annual report, but would 
have to file the full financial statements in their Form 10-K or 10-KSB 
report filed with the Commission. This would assure that investors 
would be able to easily access the complete financial statements in 
Commission filings.46 Comment is requested as to whether 
registrants should be permitted to incorporate the abbreviated 
financial statements from the annual report to shareholders and include 
the additional information (i.e., the omitted notes and the 
accountant's report on the full financial statements) in the Form 10-K 
or 10-KSB when filed.

    \46\ As noted above, full, rather than abbreviated, financial 
statements would be required in Forms 10-K, 10-KSB, and 20-F. 
Technical revisions would be made to Forms 10-K and 10-KSB.
---------------------------------------------------------------------------

    b. Summary Annual Reports. Another alternative to simplifying the 
annual report requirements is the summary annual reporting concept that 
was the subject of the 1983 FERF Report. The summary annual report 
discussed in the FERF Report contemplated use of condensed financial 
statements without traditional financial statement notes. Certain 
information customarily contained in the notes, e.g. material 
accounting changes, significant acquisitions and dispositions, material 
contingencies, specified information on significant equity investees, 
would be included in the summary annual report under the Disclosure 
Guidelines outlined in the FERF Report. The summary report would not 
include the full MD&A, or the full stock price and dividend information 
and business description currently mandated by Rules 14a-3 or 14c-
3.47 Under the summary annual report approach, registrants would 
still be required to deliver financial information to shareholders 
annually. The rules could provide significantly greater flexibility as 
to the form and content of such reports and could expressly permit the 
use of condensed financial statements. The disclosure guidelines 
included in the FERF Report are set forth in Appendix B to this 
release.

    \47\ A number of companies have used a variation of the summary 
annual report approach following staff interpretative letters issued 
in 1987. See General Motors (avail. January 20, 1987) and McKesson 
Corp. (avail. May 15, 1987). Under the interpretative guidance in 
the letters, a registrant may provide summary financial information 
in the annual report to shareholders, provided the full financial 
statements are otherwise delivered to shareholders, for example, as 
an attachment to the annual meeting proxy statement.
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    c. Rescission of the Rules Governing the Annual Report to 
Shareholders. Rescission of the rules governing the annual report to 
shareholders would give registrants the most flexibility in determining 
how to communicate directly with their shareholders, subject to 
requirements of state corporate law and any trading market for the 
registrant's securities.48

    \48\ Applicable state law and self-regulatory organization rules 
may require that certain specified financial information be 
furnished to security holders on an annual basis.
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    The Exchange Act's periodic reporting provisions require the filing 
of annual and quarterly reports with the Commission. The requirement to 
deliver specified information, including audited financial statements, 
was implemented as part of the Commission's proxy rules. Registrants 
not subject to the Commission's proxy rules, such as foreign private 
issuers, registrants subject to Section 15(d) 49 reporting 
requirements, or registrants with only Section 12 registered debt 
securities, are not required to deliver annual reports to their 
investors.

    \49\ 15 U.S.C. 78o(d).
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    In adopting the requirement to deliver audited financial statements 
and other specified information to shareholders prior to their voting 
in the annual election of directors, the Commission noted that existing 
common practice was to deliver this information. However, in 
formalizing the practice, it reaffirmed its belief that the information 
was important to enable investors ``to appraise the financial position 
and results of operations of the issuer.'' 50

    \50\ Exchange Act Release No. 8000 (Dec. 5, 1966) [31 FR 15750].
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    Comment is requested as to whether the Commission should continue 
to require a registrant to deliver to its shareholders full financial 
statements, MD&A and the other information specified by Rules 14a-3 and 
14c-3 in advance of the annual election of directors. If not, should 
the rules be amended to provide for a more streamlined disclosure using 
the model of abbreviated financial statements proposed today, the 
summary annual report concept outlined in the FERF report or some other 
simplification approach? Should the current requirement simply be 
rescinded and registrants permitted total discretion to determine the 
form and content of their annual report to shareholders, subject to the 
requirements of state corporate law 

[[Page 35609]]
and stock exchange or NASDAQ listing requirements and antifraud 
prohibitions? If the requirements were rescinded, do commenters expect 
that registrants would discontinue delivery of annual reports if not 
subject to other requirements to do so? If the annual report rules were 
amended to allow use of abbreviated financial statements or summary 
annual reports or rescinded altogether, should the rules require 
registrants to provide a mechanism by which shareholders could make a 
standing request for the company to deliver annually a copy of the Form 
10-K or 10-KSB report? If the annual report rules were rescinded, do 
commenters expect that those registrants delivering annual reports 
would include full financial statements, or would they provide summary 
financial data? Are there other alternatives to streamlining the annual 
report to shareholders?
2. Securities Act Disclosure Documents
    Under the proposed amendments, the Part I item in each Securities 
Act registration form 51 requiring the registrant to include 
financial statements in the prospectus delivered to investors would be 
amended to provide eligible registrants with the option of including in 
the prospectus either full or abbreviated financial statements. 
Registrants choosing to include full financial statements in the 
prospectus would deliver to investors and file with the Commission the 
same information, in the same format, that they deliver and file under 
current requirements.

    \51\ Part I of Securities Act registration statements sets forth 
the information required in the prospectus.
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    For registration statements on forms not permitting incorporation 
by reference of financial statements, registrants choosing to include 
abbreviated financial statements in the prospectus would put the 
information required by proposed Item 305 in Part I. The full financial 
statements would be filed in Part II of the registration 
statement,52 but not delivered to investors except upon specific 
request. If requested, a copy of the full financial statements would 
have to be provided. Comment is requested as to whether, in order to 
avoid unnecessary duplication in filing, the proposal should permit a 
registrant either to file the full financial statements in their 
entirety in Part II, or to file only the remaining financial 
information--that is, the independent accountant's report on the full 
financial statements plus the notes omitted from the disclosure 
document, which, taken together with the abbreviated financial 
statements, would constitute the full financial statements meeting the 
requirements of GAAP and Regulation S-X. This latter option would be 
feasible only if the omitted notes were grouped so the presentation 
would be clear when the abbreviated financial statements were 
considered together with the omitted notes. If the option to file only 
the remaining financial information in Part II were adopted, should 
delivery of the remaining financial information suffice in the event of 
a request from a potential investor? Comment is solicited on whether 
the option to file only the remaining financial information would be 
useful to registrants, whether the presentation would be clear to 
members of the financial community obtaining and using this 
information, and whether such a presentation would be permitted by 
existing auditing standards.

    \52\ Part II of Securities Act registration statements sets 
forth the information not required in the prospectus. A new Part II 
Item would be added to each of the forms to require filing of the 
full financial statements with the Commission.
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    In addition, comment is solicited on whether, rather than requiring 
full financial statements to be physically filed, in whole or in part, 
in Part II of the registration statement, incorporation by reference 
should be permitted. If the registrant had previously filed full 
financial statements for the same period as required in the related 
disclosure document, for example in a report on Form 10-K, would it be 
acceptable to provide this information by incorporation by reference, 
which is currently not permitted for any of the ``long form'' 
registration statements?
    Registrants eligible to use short form registration statements 
providing for the incorporation by reference of previously filed 
documents 53 also could elect to use abbreviated financial 
statements.54 In general, full financial statements would not be 
required to be filed in Part II of these forms, since these would be 
incorporated by reference from the registrant's periodic Exchange Act 
filings. Where restated financial statements of the registrant, or 
financial statements of businesses acquired or to be acquired, are not 
incorporated by reference from a previously filed report and therefore 
required to be included in a prospectus, abbreviated financial 
statements of those entities could be included in the prospectus and 
delivered to investors.55 The full financial statements would be 
required to be filed with the Commission in Part II of the registration 
statement, and delivered to investors upon request.56

    \53\ Forms S-2, S-3, F-2, and F-3.
    \54\ Since Form S-3 and F-3 registrants generally incorporate 
their financial statements into the prospectus by reference from 
Exchange Act reports and are not required to deliver this 
information, they ordinarily would not use abbreviated financial 
statements, but the forms would be amended so this option would be 
available.
    \55\ Forms S-2, F-2, S-3, F-3, S-4 and F-4 require financial 
statements of the registrant to be restated if: (1) there has been a 
change in accounting principles or a correction of an error where 
such change or correction requires a material retroactive 
restatement of financial statements; (2) where one or more business 
combinations accounted for by the pooling of interests method of 
accounting have been consummated subsequent to the most recent 
fiscal year and the acquired businesses, considered in the 
aggregate, are significant pursuant to Rule 11-01(b) [17 CFR 210.11-
01(b)]; or (3) in certain situations involving a material 
disposition of assets not in the ordinary course of business.
    \56\ With respect to Form S-2, in addition to the options 
currently available, a registrant not choosing to deliver its Form 
10-K could elect to include abbreviated financial statements in the 
prospectus, or instead choose to deliver with the prospectus its 
latest annual report to security holders that included abbreviated 
financial statements. With respect to Form S-8, documents required 
to be delivered upon request, such as the annual report to security 
holders, could contain abbreviated financial statements. No 
financial statements are required in the prospectus or registration 
statement other than those incorporated by reference. Accordingly, 
this form would not be amended, except for a technical provision in 
Part II to assure that the full financial statements are 
incorporated by reference (proposed revision to Item 3(a) of Form S-
8).
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    With respect to securities registered on Form S-4 or F-4, 
registrants and companies being acquired 57 would have the same 
options regarding delivery of abbreviated financial statements 
described above, depending on whether they furnish the Form S-1, S-2, 
or S-3 level of disclosure.58 Comment is solicited on whether the 
use of abbreviated financial statements is appropriate in the context 
of a business combination. It appears that streamlining the financial 
information presented to investors would be particularly useful in this 
context, where the information for the registrant and other entities 
can grow quite voluminous. Comment also is solicited on whether the 
current requirement in Forms F-4 and S-4 that, if incorporation by 
reference is used, the prospectus must be sent to security holders no 
later than 20 business days prior to the meeting or the date on which 
action is to be taken should also 

[[Page 35610]]
apply when abbreviated financial statements are being used.59

    \57\ See Part II.C below for further discussion of Forms S-4 and 
F-4.
    \58\ Pursuant to Item 17(b) of Form S-4, if the company being 
acquired is not subject to the reporting requirements of either 
Section 13(a) [15 U.S.C. 78m(a)] or 15(d) of the Exchange Act, or, 
because of Section 12(i) [15 U.S.C. 78l(i)] of the Exchange Act, has 
not furnished an annual report to security holders pursuant to 
Exchange Act Rule 14a-3 or 14c-3 for its latest fiscal year, the 
registrant would furnish financial statements as would have been 
required to be included in a Rule 14a-3 or 14c-3 annual report 
except that the financial statements need not be audited in certain 
circumstances.
    \59\ General Instruction A.2 to both Forms F-4 and S-4.
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    The proposals would apply to filings relating to roll-up 
transactions, whether or not involving a Form F-4 or S-4.60 
Comment is solicited on whether abbreviated financial statements should 
be permissible in the roll-up context. Since roll-ups are subject to a 
60 day solicitation period, investors desiring full financial 
statements would have the opportunity to send for them and consider 
them before making a voting or tendering decision.

    \60\ Item 901(c) of Regulation S-K [17 CFR 229.901(c)].
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    Under the proposed amendments, abbreviated financial statements 
could be included by eligible issuers in offering statements on Form 1-
A under Regulation A and furnished to purchasers of securities offered 
pursuant to Regulation D. Comment is solicited on whether it is 
appropriate to provide issuers conducting exempt offerings pursuant to 
Regulation A or D with the option to distribute abbreviated financial 
statements to investors, and whether such issuers would find this to be 
a useful option.
    Since, under current requirements, Regulation D issuers are 
required to furnish financial statement information to purchasers, but 
are not required to file this information with the Commission, issuers 
opting to furnish abbreviated financial statements to purchasers would 
not be required to file the full financial statements with the 
Commission. They would, however, have to deliver the full financial 
statements to requesting purchasers. Comment is solicited as to whether 
Regulation D issuers choosing to distribute abbreviated financial 
statements to purchasers should have to file the full financial 
statements with the Commission, and if so, the method by which they 
should be filed. Specific consideration should be given to whether the 
fact that Regulation D issuers would not have to file the full 
financial statements with the Commission would impair the objectives of 
the proposed amendments.
3. Proxy and Information Statements
    Registrants could use abbreviated financial statements in proxy and 
information statements requiring financial statements. The full 
financial statements would be appended to the proxy or information 
statement filed with the Commission and delivered to security holders 
only upon request.61 It would not, however, be necessary to append 
the information if the full financial statements for the same period 
had previously been filed in the registrant's Form 10-K or 10-KSB and 
any Forms 10-Q or 10-QSB 62 necessary to provide interim financial 
disclosure. Proxy or information statements for mergers or other 
business combinations,63 which permit incorporation by reference 
in a manner comparable to that in Form S-4 registration statements, 
could include abbreviated financial statements in the same manner as 
Form S-4.

    \61\ This appended information would be publicly available 
unless the related proxy or information statement was the subject of 
a confidential treatment request.
    \62\ 17 CFR 249.308a, 249.308b.
    \63\ Item 14 of Schedule 14A.
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4. Tender Offers and Going Private Transactions
    Currently, the rules governing tender offers and going private 
transactions permit the delivery to investors of summary financial 
information, with full financial statements being filed with the 
Commission in the associated Schedule.64 As proposed, abbreviated 
financial statements could be used for these transactions as well, 
whether financial statements are required in the disclosure document or 
included voluntarily. Comment is solicited on whether the eligibility 
requirements should vary depending on whether the financial statements 
involved are those of the bidder, the affiliate engaging in the 
transaction, or the subject company.

    \64\ See Rules 13e-3, 13e-4, and 14d-6; Schedules 13E-3 [17 CFR 
240.13e-100], 13E-4 [17 CFR 240.13e-101], and 14D-1 [17 CFR 240.14d-
100].
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C. Eligibility to Use Abbreviated Financial Statements

    As proposed, both reporting and non-reporting registrants would be 
permitted to include abbreviated financial statements in the specified 
disclosure documents delivered to investors, in lieu of full financial 
statements required by the applicable form, provided that two 
conditions are met. First, the report of the independent accountant on 
the full financial statements of the registrant must express an opinion 
that is unqualified as to scope of the audit and as to accounting 
principles used, and must not contain a disclaimer of opinion.65 
Second, a reporting registrant would have to be current in filing all 
of its Exchange Act reports at the time the abbreviated financial 
statements are delivered.66 Comment is requested as to whether a 
further condition should be that an issuer filing reports under the 
Exchange Act must have timely filed all required reports during the 
most recent 12 months, or since becoming subject to the Exchange Act, 
whichever is shorter.

    \65\ Proposed Item 305(a)(1) of Regulation S-K.
    \66\ Proposed Item 305(a)(2) of Regulation S-K.
    Comment also is requested as to whether use of the proposed rule 
should be limited to companies that are subject to Section 13(a) or 
15(d) of the Exchange Act, precluding the use of abbreviated financial 
statements in initial public offerings. If so, should the rule contain 
a reporting history requirement, e.g., 12 or 18 months? Comment also is 
requested as to whether other eligibility criteria should be 
established, such as size of the issuer or other condition. Comment is 
further requested on whether eligibility should be limited based on 
certain financial statement attributes.
    In addition to financial statements of the registrant, disclosure 
documents may be required to include financial statements of other 
entities, such as a business acquired or to be acquired, 50 percent or 
less owned entity accounted for by the equity method, or 
guarantor.67 The proposed rules would base eligibility for the use 
of abbreviated financial statements of such entities on a combination 
of: (1) the registrant's eligibility, i.e., the registrant would have 
to have filed with its full financial statements an acceptable 
independent accountant's report and be current in its filing of 
Exchange Act reports; 68 and (2) the acceptability of the 
independent accountant's report on the other entity's full financial 
statements.69 Whether the other entity had filed all required 
Exchange Act reports would not affect the registrant's ability to 
include abbreviated financial statements of that entity. The same 
criteria would apply to the use of abbreviated financial statements of 
the company being acquired in a registration statement on Form S-4 or 
F-4 or a merger proxy or information statement.

    \67\ Rules 3-05, 3-09 and 3-10 of Regulation S-X [17 CFR 210.3-
05, 3-09 and 3-10] and Item 310(c) of Regulation S-B [17 CFR 
228.310(c)] require the financial statements of a business acquired 
or to be acquired, 50 percent or less owned entity accounted for by 
the equity method, or guarantor to be included in registrants' 
disclosure documents in certain circumstances.
    \68\ Proposed Item 305(a) of Regulation S-K.
    \69\ Proposed Item 305(d) of Regulation S-K. Financial 
statements of other entities may be included in Commission filings 
in certain circumstances other than those specified by Rules 3-05, 
3-09 and 3-10 of Regulation S-X. The proposed rules also would 
permit the use of abbreviated financial statements of those 
entities, provided that all conditions for their use are otherwise 
met.
---------------------------------------------------------------------------

    Comment is requested as to whether this eligibility standard is 
appropriate regarding financial statements of a company other than the 
registrant. Comment also is requested concerning 

[[Page 35611]]
whether the ability of a registrant to include abbreviated financial 
statements of a third party should be based solely on the registrant's 
eligibility, or whether different or additional eligibility criteria 
should be established. For example, should a Form S-4 registrant be 
permitted to include abbreviated financial statements of a target 
company if the target company has an acceptable independent 
accountant's report on its full financial statements but the registrant 
does not satisfy the abbreviated financial statement eligibility 
criteria?
    Investment companies registered under the Investment Company Act of 
1940,70 and business development companies, a type of investment 
company with securities registered under Section 12 of the Exchange 
Act, would not be eligible to use abbreviated financial statements. The 
Commission does not believe that it is necessary to extend the proposed 
amendments to these types of companies because they generally have 
fewer note disclosures. As proposed, the amendments would allow 
insurance companies that are the issuers of variable life insurance 
contracts and register on Form S-6 under the Securities Act to provide 
abbreviated financial statements in the prospectus for these types of 
securities. Insurance companies that issue variable annuity contracts 
and register on Forms N-3 71 or N-4 72 would continue to be 
required to provide their full financial statements, which currently 
are made available to investors only upon request in a Statement of 
Additional Information. The Commission requests comment on whether 
insurance companies should be permitted to use abbreviated financial 
statements in connection with the sale of variable annuity contracts.

    \70\ 15 U.S.C. 80a-1, et seq.
    \71\ 17 CFR 274.11b.
    \72\ 17 CFR 274.11c.
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D. Foreign Issuers

    Pursuant to the proposed amendments, foreign issuers that meet the 
eligibility requirements would be able to elect to include abbreviated 
financial statements in delivered disclosure documents. This would 
include Canadian issuers using the multijurisdictional disclosure 
system (``MJDS'').73 As is currently the case with full financial 
statements of foreign issuers, the informational content of the 
abbreviated financial statements of foreign issuers would have to be 
substantially similar to the abbreviated financial statements of 
domestic issuers 74 and would be provided for the periods 
specified by Rule 3-19 of Regulation S-X.75

    \73\ In order to provide Canadian issuers using the MJDS with 
the same flexibility to deliver disclosure documents with 
abbreviated financial statements as all other issuers, the 
Commission proposes to amend the MJDS registration forms to permit 
eligible Canadian issuers to include abbreviated financial 
statements in MJDS disclosure documents delivered to U.S. investors, 
notwithstanding the Canadian requirements that would otherwise 
apply.
    \74\ See Items 17 and 18 of Form 20-F.
    \75\ 17 CFR 210.3-19. Proposed Item 305(f)(2) of Regulation S-K.
    As with full financial statements of foreign issuers, the 
abbreviated financial statements could be prepared either on the basis 
of U.S. GAAP or on a comprehensive body of accounting principles other 
than U.S. GAAP.76 If the abbreviated financial statements were 
prepared on a basis other than U.S. GAAP, the required note disclosures 
would include the same matters as those required in the abbreviated 
financial statements of domestic issuers, and an additional note 
containing the quantitative reconciling information required by Item 
17(c) or Item 18(c), as applicable, of Form 20-F also would be 
provided. However, a foreign issuer that follows Item 17 of Form 20-F 
in preparing its full financial statements would omit from the notes to 
the abbreviated financial statements any disclosures that are not 
required by Item 17, even if those disclosures otherwise would be 
required by proposed Item 305. Comment is solicited as to whether a 
more abbreviated or otherwise different reconciliation should be 
required.

    \76\ Proposed Item 305(f)(1) of Regulation S-K.
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E. Use of Abbreviated Financial Statements to be at Registrant's Option

    Under the proposed amendments, a registrant would have the option 
whether or not to include abbreviated financial statements each time it 
prepared one of the specified disclosure documents for delivery to 
investors, provided that the registrant met the eligibility criteria 
for using abbreviated statements described above. For example, a 
registrant could elect to include abbreviated financial statements in 
its annual report to shareholders delivered to investors, but decide to 
include full financial statements in a Securities Act prospectus 
delivered a few months later, or vice versa. The registrant also might 
choose to include abbreviated financial statements relating to its 
existing business in a proxy statement and full financial statements 
relating to an acquired business in the same proxy statement, or vice 
versa.
    However, with respect to a particular disclosure document, for 
purposes of comparability and consistency, the proposed rules would 
require the interim financial statements of a particular entity to be 
presented in the same manner as the annual financial statements of that 
entity. For example, if a prospectus included abbreviated annual 
financial statements of the registrant, the interim financial 
statements of the registrant included in the same prospectus also would 
have to be abbreviated.77

    \77\ Proposed Item 305(b)(5)(i) of Regulation S-K. While interim 
financial statements prepared under existing rules (Article 10 of 
Regulation S-X) omit substantially all footnote disclosures required 
under GAAP, disclosures required to be included under Article 10 
differ in certain respects from those proposed for annual 
abbreviated financial statements. For example, Article 10 calls for 
disclosure of material changes in the status of long-term contracts, 
while Item 305(b)(3) does not. If issuers were not required to 
conform the basis of presentation of annual and interim financial 
statements, certain matters required to be disclosed in interim 
financial statements would be included in a disclosure document that 
would not have been disclosed in the abbreviated annual financial 
statements, had the matter occurred during the most recently 
completed fiscal year.
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    Comment is solicited as to whether registrants should be able to 
include abbreviated financial statements in some of the specified 
delivery documents and not others, or whether they should be required 
to make an election and consistently include abbreviated or full 
financial statements in their delivery documents. Comment also is 
solicited as to whether interim financial statements of a particular 
entity should be presented in the same manner as the entity's annual 
financial statements. Additional comment is requested on whether it 
would be appropriate for a registrant to select one option with respect 
to its own financial statements and a different one regarding the 
financial statements of another entity whose financial statements are 
required in the disclosure document.
F. Report of the Independent Accountant on the Abbreviated Financial 
Statements

    Proposed Item 305 would require the abbreviated financial 
statements delivered to investors to be accompanied by a report of the 
independent accountant. The rule would specify that the report must 
contain: (1) a statement that the abbreviated financial statements were 
examined in connection with an audit of the registrant or other 
entity's full financial statements; (2) a complete description of the 
opinion rendered by the independent accountant on the full financial 
statements, including any explanatory language included in the report 
on the full financial statements; 

[[Page 35612]]
and (3) a statement of the independent accountant's opinion that the 
content of the abbreviated financial statements complies with Item 
305.78 It is contemplated that an independent accountant's report 
satisfying the requirements of proposed Item 305 would fall within the 
auditing guidance contained in SAS No. 62,79 which governs 
reporting on financial statements prepared on a basis of accounting 
prescribed in a regulatory provision that results in an incomplete 
presentation but one that is otherwise in conformity with GAAP. Comment 
is solicited as to whether a report in the form prescribed by proposed 
Item 305 is appropriate and sufficient, or whether additional or 
different statements or explanations would be desirable. Also, comment 
is requested as to whether auditing guidance other than SAS No. 62 
would be applicable to a report on abbreviated financial statements, or 
whether the reporting objectives under the proposed rule would require 
the accounting profession to develop new guidance governing the form of 
such report and procedures necessary to its issuance.

    \78\ Proposed Item 305(b)(4) of Regulation S-K.
    \79\ Special Reports.
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G. Abbreviated Interim Financial Statements

    Proposed Item 305 also would state that, like full financial 
statements, abbreviated financial statements required with respect to 
an interim period should be prepared in conformity with GAAP and 
Regulation S-X,80 except that note disclosures to the abbreviated 
interim financial statements would be limited only to any of the 
thirteen items set forth above not previously disclosed in the 
abbreviated annual financial statements. As currently required in 
interim financial statements, loss contingencies would have to be 
disclosed even though a significant change since year end may not have 
occurred.81

    \80\ Article 10 of Regulation S-X specifies the content of 
interim financial statements.
    \81\ Proposed Item 305(b)(5)(ii) of Regulation S-K.
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H. Delivery of Full Financial Statements to Requesting Investors

    Registrants choosing to include abbreviated financial statements in 
disclosure documents delivered to investors would have to furnish the 
full audited financial statements and the independent accountant's 
report thereon to any person making a written or oral request, at no 
cost to the person making the request.82 Comment is solicited on 
whether registrants should be permitted to send only the remaining 
financial information rather than the complete full financial 
statements. Which format would be more useful to investors? Comment 
also is solicited on whether a means should be provided that would 
enable security holders who receive abbreviated financial statements in 
an annual report and request delivery of the full financial information 
also to indicate that they would like to receive automatically full 
financial information or the entire Form 10-K or 10-KSB in future 
years.

    \82\ Proposed Item 305(e) of Regulation S-K.
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    As proposed, if Form 10-K (and/or Form 10-Q) financial statements 
were delivered to investors in compliance with the delivery 
requirement, registrants could deliver only the portion of those 
reports that contain the financial statements.83 The delivered 
information would have to be for the same periods covered by the 
abbreviated financial statements.84

    \83\ Id.
    \84\ Id.
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    A statement setting forth the registrant's obligation to furnish 
the full financial statements and the name, address and telephone 
number of the person designated by the registrant to receive requests 
would have to be included in the disclosure document.85

    \85\ With respect to delivery of annual reports or proxy or 
information statements that include abbreviated financial 
statements, in addition to setting forth this statement, registrants 
would continue to be required to provide the Rule 14a-3(b)(10) [17 
CFR 240.14a-3(b)(10)] undertaking to provide persons from whom proxy 
authority is solicited with a Form 10-K or 10-KSB upon written 
request.
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    The registrant would be required to deliver the requested 
information by a means reasonably calculated to result in the 
information reaching the requesting investor within five business days 
from the date the request is received. Comment is solicited as to 
whether a delivery period should be specified in the rule, and if so, 
whether the proposed time period is appropriate, both from an 
investor's and registrant's perspective, or should it be shorter or 
longer. Should the rule simply require prompt delivery, with promptness 
being determined according to the context? Comment also is solicited as 
to whether the delivery period should be shorter than five business 
days when the abbreviated financial statements are delivered to 
investors in connection with certain types of transactions, e.g., 
mergers and exchange offers, where the investor does not initiate the 
transaction, has no control over the timing of the transaction, and 
will be affected financially by the transaction even if the investor 
does not act. Commenters also should address whether the delivery 
period should be longer when the requested delivery is not in 
connection with any specific transaction.
    Further comment is solicited on whether the rule should specify the 
appropriate means of delivery, and, if so, the means that should be 
specified. Finally, comment is requested as to whether availability of 
the full financial statements by public filing at the Commission, and 
from the registrant upon investor request, is sufficiently practical, 
timely and effective for meeting investor requirements.

I. Safe Harbor Provisions

    The Commission recognizes that the utility of the abbreviated 
financial statement proposal will depend on companies' perception of 
their vulnerability to liability for the omission of certain financial 
statement notes pursuant to the provisions of proposed Item 305.86 
The proposed rules, therefore, include a safe harbor provision stating 
that disclosure contained in disclosure documents will not be 
materially misleading or omit to state a material fact on the basis of 
the exclusion from the abbreviated financial statements of the 
information permitted to be excluded from the financial statement notes 
pursuant to proposed Item 305. The safe harbor would cover cases where, 
for example, an investor claimed that the information included in the 
abbreviated financial statements in the delivered document failed to 
include information that was in the full financial statements included 
in the filed document. Comment is requested as to both the efficacy of 
the proposed safe harbor provisions and their appropriateness.

    \86\ Safe harbors with respect to the omission of notes from 
abbreviated financial statements would be provided in proposed 
Securities Act Rule 435 and Exchange Act Rules 13e-3, 13e-4, 14a-16, 
14c-8 and 14d-1. These rules also would provide that the omitted 
information is deemed part of the disclosure document.
    As discussed above in Part II.A, proposed Item 305 would not 
provide for inclusion of note disclosures regarding matters other than 
those specified by the Item,87 although comment is solicited on 
whether registrants should be permitted to add discretionary note 
disclosures. As proposed, the safe harbor would not be available to 
issuers that included additional notes. Commenters are asked to address 
whether the protection of the safe harbor provisions should be 
available to registrants who add 

[[Page 35613]]
discretionary note disclosures, and if so, should the protection extend 
only to the note disclosures specified by Item 305, or to the 
voluntarily included notes as well?

    \87\ This would not preclude the registrant from discussing such 
information in the delivered disclosure document, but only cause 
that discussion to be set forth outside of the abbreviated financial 
statements.
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III. Request for Comment

    Any interested person wishing to submit written comments on the 
proposed amendments that would permit abbreviated financial statements 
to be included in disclosure documents, as well as other matters that 
might have an impact on the proposed amendments, is requested to do so. 
Comment is solicited from the point of view of investors, registrants, 
accountants and financial analysts. Comment is specifically requested 
on the extent to which the information currently contained in notes to 
the financial statements is used by investors to conduct a thorough 
analysis of a registrant's financial condition and future prospects. 
The Commission also requests comment on whether the proposed rules, if 
adopted, would have an adverse impact on competition that is neither 
necessary nor appropriate in furthering the purposes of the Exchange 
Act. Comments responsive to this inquiry will be considered by the 
Commission in complying with its responsibilities under Section 23(a) 
of the Exchange Act.88

    \88\ 15 U.S.C. 78w(a).
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IV. Cost-Benefit Analysis

    To evaluate fully the costs and benefits associated with the 
proposals, the Commission requests commenters to provide views and 
empirical data as to the costs and benefits associated therewith. The 
proposals are expected to benefit registrants by allowing more 
flexibility in accounting and lowering costs associated with printing 
and mandated across the board delivery of information that may be used 
directly only by a portion of investors. Full financial statements of 
these entities will continue to be required in Commission filings. 
Furthermore, the proposals are expected to make financial statement 
note disclosures more useful and meaningful to the individual investor.

V. Summary of Initial Regulatory Flexibility Analysis

    An Initial Regulatory Flexibility Analysis has been prepared in 
accordance with 5 U.S.C. 603 concerning the proposed amendments. The 
analysis notes that the proposed amendments are intended to respond to 
concerns regarding the increasing volume and complexity of financial 
information that is included in prospectuses and other documents 
delivered to investors. The proposed amendments are intended to make 
the financial information presented to investors more readable and 
understandable by streamlining the note disclosure and focusing on 
matters of particular significance to investors.
    As discussed more fully in the analysis, some of the registrants 
that the proposed amendments would affect are small entities, as 
defined by the Commission's rules. The proposed amendments would 
decrease the cost for all issuers choosing to rely on them, including 
small businesses.
    The analysis discusses several possible alternatives to the 
proposed amendments including, among others, establishing different 
compliance or reporting requirements for small entities or exempting 
them from all or part of the proposed requirements. Given the fact that 
small business issuers would receive a favorable impact from the 
proposed rules and that use of the proposed rules would be at the 
issuer's option, the Commission does not believe that any of the 
alternatives are preferable at this time.
    Comments are encouraged on any aspect of this analysis. A copy of 
the analysis may be obtained by contacting William B. Haseltine, Office 
of Disclosure Policy, Division of Corporation Finance, Securities and 
Exchange Commission, 450 Fifth Street NW., Washington, DC 20549.

VI. Statutory Basis

    The amendments to Forms 1-A, S-1, S-2, S-3, S-4, S-6, S-8, S-11, 
SB-1, SB-2, F-1, F-2, F-3, F-4, F-7, F-8, F-9, F-10 and F-80 and new 
Rule 435 are being proposed pursuant to Sections 6, 7, 10 and 19(a) of 
the Securities Act. The amendments to Rules 13e-3, 13e-4, 14a-3, 14c-3, 
14d-1 and 14d-6, Schedules 13E-4F, 14A, 14C, 14D-1F and 14D-9F and 
Forms 10-K and 10-KSB and new Rules 14a-16 and 14c-8 are being proposed 
pursuant to Sections 12, 13, 14 and 23(a) of the Exchange Act.

List of Subjects in 17 CFR 228, 229, 230, 239, 240 and 249

    Accountants, Accounting, Reporting and recordkeeping requirements, 
and Securities.

Text of the Proposals

    In accordance with the foregoing, Title 17, Chapter II of the Code 
of Federal Regulations is proposed to be amended as follows:

PART 228--INTEGRATED DISCLOSURE SYSTEM FOR SMALL BUSINESS ISSUERS

    1. The authority citation for part 228 continues to read as 
follows:

    Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 
77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77jjj, 77nnn, 77sss, 
78l, 78m, 78n, 78o, 78w, 78ll, 80a-8, 80a-29, 80a-30, 80a-37, 80b-
11, unless otherwise noted.

    2. By amending Part 228 by adding Sec. 228.305 to read as follows:


Sec. 228.305  (Item 305) Abbreviated financial statements.

    Note: The term full financial statements as used throughout this 
Item refers to financial statements filed with the Commission 
meeting the requirements of Item 310 of Regulation S-B 
(Sec. 228.310).

    (a) Eligibility. A small business issuer, other than an investment 
company registered under the Investment Company Act of 1940 [15 U.S.C. 
80a-1 et seq.] or a business development company under that Act, that 
meets the following conditions may furnish abbreviated financial 
statements in a document to be furnished to investors or security 
holders, as permitted by the Form or Schedule governing the 
requirements of that document:
    (1) The small business issuer has filed with its full financial 
statements an independent accountant's report that complies with the 
requirements of Article 2 of Regulation S-X (17 CFR 210.2) and does not 
contain a qualification as to scope of audit, or as to accounting 
principles used, or a disclaimer of opinion. However, if the full 
financial statements of the small business issuer filed with the 
Commission are not required to be audited, neither this condition nor 
the requirement to provide an independent accountant's report pursuant 
to paragraph (b)(4) of this Item shall apply; and
    (2) If the small business issuer is a reporting company, all 
reports due must have been filed.
    (b) Information to be included in abbreviated financial statements. 
Abbreviated financial statements shall include the following 
information:
    (1) A balance sheet as of the end of the most recent fiscal year 
and statements of income and cash flows for each of the two most recent 
fiscal years prepared in conformity with accounting principles 
generally accepted in the United States (``U.S. GAAP''), except that 
note disclosures specified by U.S. GAAP shall not be included unless 
specified in paragraph (b)(3) of this Item. The face of the financial 
statements shall include a prominent 

[[Page 35614]]
statement identifying them as ``abbreviated financial statements.''
    (2) A statement of changes in stockholders' equity prepared in 
conformity with Item 310(a) of Regulation S-B (Sec. 228.310(a)) for 
each of the two most recent fiscal years.
    (3) Notes to the financial statements. The disclosures required in 
the notes to the abbreviated financial statements shall be an 
extraction of all note disclosures included in the small business 
issuer's full financial statements that are responsive to the matters 
specified in paragraphs (b)(3)(ii) through (b)(3)(xiii) of this Item. 
To facilitate the extraction of all disclosures responsive to the 
specified matters, the primary authoritative pronouncements concerning 
the specified matters are identified in paragraphs (b)(3)(ii) through 
(b)(3)(xiii) of this Item. The term ``related pronouncements'' as used 
in paragraphs (b)(3)(ii) through (b)(3)(xiii) of this Item refers to 
pronouncements constituting U.S. GAAP as defined in Statement of 
Auditing Standards (``SAS'') No. 69 that requires disclosure regarding 
the matter specified for disclosure in the abbreviated financial 
statements. The notes shall disclose the following:
    (i) Basis of presentation. The small business issuer shall state 
that the abbreviated financial statements have been prepared using U.S. 
GAAP for measurement and classification. The registrant also shall 
state that substantially all note disclosures necessary for a fair 
presentation under U.S. GAAP have been omitted, and that the note 
disclosures are limited to those matters specified by Commission rules 
for inclusion in abbreviated financial statements. Additionally, the 
small business issuer shall state that the note disclosures comply with 
Commission rules for presentation of abbreviated financial statements. 
A reference to the complete disclosures in the full financial 
statements shall be provided.
    (ii) Accounting policies. The small business issuer shall provide a 
description of all significant accounting policies used in the 
preparation of the financial statements. Disclosure of accounting 
policies shall identify and describe the accounting principles followed 
by the reporting entity and the methods of applying those principles 
that materially affect the determination of financial position, cash 
flows or results of operations, as specified by Accounting Principles 
Board (``APB'') Opinion No. 22 and related pronouncements.
    (iii) Changes in accounting principle. The small business issuer 
shall disclose the nature of, and justification for, a change in 
accounting principle, and the effects of the change, as specified by 
APB Opinion No. 20 and related pronouncements.
    (iv) Restatements and reclassifications. The small business issuer 
shall disclose the following matters:
    (A) The nature and effects of a correction of an error in 
previously issued financial statements, as specified by APB Opinion No. 
20 and related pronouncements.
    (B) The nature and reasons for a change in the reporting entity, 
and effects of the change, as specified by APB Opinion No. 20 and 
related pronouncements. Combinations of entities under common control 
and similar reorganizations described in APB Opinion No. 16 and related 
pronouncements shall be considered changes in the reporting entity for 
purposes of this item.
    (C) The nature and effects of reclassifications materially 
affecting amounts reported in previously issued financial statements.
    (v) Changes in accounting estimate. The small business issuer shall 
disclose the nature and effects of a change in accounting estimate, as 
specified by APB Opinion No. 20 and related pronouncements.
    (vi) Business combinations. The small business issuer shall 
disclose the following with respect to business combinations:
    (A) The nature of business combinations accounted for as a pooling 
of interests and the disclosures of the effects of the business 
combinations, as specified by APB Opinion No. 16 and related 
pronouncements.
    (B) The nature of business combinations accounted for as a purchase 
and the disclosures specified by APB Opinion No. 16 and related 
pronouncements.
    (vii) Discontinued operations. The small business issuer shall 
disclose the nature of discontinued operations and provide the 
quantitative disclosures of the effects of the discontinued operations, 
as specified by APB Opinion No. 30 and related pronouncements.
    (viii) Circumstances identified in explanatory language added to 
the independent accountant's standard report. The small business issuer 
shall disclose the nature and effects of circumstances for which the 
independent accountant's report on the full financial statements 
includes explanatory language. These circumstances are identified in 
paragraph 11 of SAS No. 58. The notes shall include all disclosures 
regarding the matter considered necessary by the independent accountant 
in rendering an opinion on the full financial statements unqualified as 
to adequacy of disclosure. However, disclosure need not be provided 
where the explanatory language merely reports that the independent 
accountant's opinion is based in part on the work of another 
independent accountant. Disclosure shall be provided for explanatory 
paragraphs that emphasize a matter regarding the financial statements.
    (ix) Loss contingencies. The small business issuer shall disclose 
the nature of loss contingencies and estimated amount or range of 
reasonably possible loss in excess of amounts accrued in the financial 
statements, as specified by Statement of Financial Accounting Standards 
(``SFAS'') No. 5 and related pronouncements. A statement that the 
amount or range of probable or reasonably possible loss cannot be 
reasonably estimated shall be included if applicable.
    (x) Events of default under credit agreements. The small business 
issuer shall disclose the facts and amounts concerning any default in 
principal, interest, sinking fund, or redemption provisions with 
respect to any material issue of securities or credit agreements, or 
any breach of covenant of a related indenture or agreement, which 
default or breach existed at the date of the most recent balance sheet 
being filed and which has not been subsequently cured. If a default or 
breach exists but acceleration of the obligation has been waived for a 
stated period of time beyond the date of the most recent balance sheet 
being filed, the small business issuer shall state the amount of the 
obligation and the period of the waiver.
    (xi) Related party transactions. The small business issuer shall 
disclose the nature of related party relationships, and a description 
of transactions, amounts and balances as specified by SFAS No. 57 and 
related pronouncements.
    (xii) Bankruptcies and quasi-reorganizations. (A) Bankruptcies. 
Small business issuers entering into, operating under, or emerging from 
proceedings under the federal bankruptcy code during the most recent 
fiscal year shall provide all of the disclosures required by AICPA 
Statement of Position No. 90-7.
    (B) Quasi-reorganizations. Small business issuers effecting a 
quasi-reorganization during the most recent fiscal year shall disclose 
the nature and effects of the quasi-reorganization.
    (xiii) Subsequent events. The small business issuer shall disclose 
all events occurring subsequent to the date of the 

[[Page 35615]]
most recent balance sheet for which disclosure was required in the full 
financial statements.
    (4) An independent accountant's report. The report shall state that 
the abbreviated annual financial statements have been examined in 
connection with the audit of the full financial statements. The report 
shall state clearly the opinion of the independent accountant that the 
abbreviated financial statements comply with the requirements in 
paragraph (b) of this Item for presentation of abbreviated financial 
statements. The report shall describe the opinion rendered by the 
independent accountant on the full financial statements, including any 
explanatory language.
    (5) Abbreviated interim financial statements. (i) Where interim 
financial statements of the registrant are required in a document that 
includes abbreviated annual financial statements of the registrant, 
those interim financial statements shall be abbreviated. Where interim 
financial statements of the registrant are required in a document that 
includes full annual financial statements of the registrant, those 
interim financial statements shall not be abbreviated.
    (ii) Abbreviated interim financial statements shall be furnished 
for the same periods as prescribed by Item 310(b) of Regulation S-B 
(Sec. 228.310(b)). The abbreviated interim financial statements shall 
be prepared in conformity with generally accepted accounting 
principles, except that note disclosures required by generally accepted 
accounting principles shall not be included unless specified in 
paragraph (b)(3) of this Item. However, disclosures that would 
substantially duplicate the disclosure contained in the most recent 
annual abbreviated financial statements may be omitted, except that 
contingencies shall be disclosed pursuant to paragraph (b)(3)(ix) of 
this Item even though a significant change since year end may not have 
occurred. The abbreviated interim financial statements shall comply 
with all requirements of Item 310(b) of Regulation S-B governing 
classification of items on the face of the balance sheet, statement of 
income, and statement of cash flows.
    (c) Age of abbreviated financial statements at effective date of 
registration statement or mailing date of proxy statement. Small 
business issuers shall update the abbreviated financial statements to 
cover the same periods as required pursuant to Item 310(g) of 
Regulation S-B (Sec. 228.310(g)).
    (d) Abbreviated financial statements of entities other than the 
registrant. In those instances where full financial statements of 
businesses acquired or to be acquired are required by Item 310(c) of 
Regulation S-B (Sec. 228.310(c)), or full financial statements of other 
entities are required to be included in a small business issuer's 
filing with the Commission on a form that permits the abbreviation of 
financial statements, abbreviated financial statements may be furnished 
for those entities provided that the small business issuer meets the 
conditions in paragraph (a) of this Item and those entities meet the 
condition in paragraph (a)(1) of this Item. Abbreviated financial 
statements of businesses acquired or to be acquired shall be prepared 
in accordance with this Item for the respective periods specified by 
Item 310(c) of Regulation S-B. Where abbreviated financial statements 
of entities other than the small business issuer are furnished, full 
financial statements shall also be filed with the Commission as 
provided in the respective form requirements.
    (e) Delivery of full financial statements to requesting investors. 
Small business issuers including abbreviated financial statements in 
disclosure documents shall deliver without charge to each person to 
whom the document is furnished, upon the written or oral request of 
such person and by a means reasonably calculated to result in the 
information reaching the requesting person within five business days 
from the date of the request, a copy of the small business issuer's 
full financial statements and the independent accountant's report 
thereon filed with the Commission for the same periods covered by the 
abbreviated financial statements. The small business issuer shall 
include a statement in bold face or otherwise reasonably prominent type 
in the disclosure document that the small business issuer will provide 
a copy of its full financial statements and the independent 
accountant's report thereon without charge to each person to whom the 
document is furnished, upon the written or oral request by such person, 
and shall state the name, address, and telephone number of the person 
(including title and department) to whom the request for full financial 
statements should be directed. If Form 10-KSB (17 CFR 249.310b) and/or 
Form 10-QSB (17 CFR 249.308b) financial statements are permitted to be 
furnished to requesting persons in satisfaction of the delivery 
requirement, only the portion of those reports containing the financial 
statements, and the independent accountant's report thereon, need be 
delivered.
    (f) Special provisions as to abbreviated financial statements for 
foreign private issuers. (1) The abbreviated financial statements may 
be prepared according to U.S. GAAP, except that note disclosures shall 
be limited to those specified in paragraph (b)(3) of this item. 
Alternatively, such abbreviated financial statements may be prepared 
according to a comprehensive body of accounting principles other than 
U.S. GAAP. Where the abbreviated financial statements are prepared 
according to a comprehensive body of accounting principles other than 
U.S. GAAP, the disclosures specified by Item 18(c) of Form 20-F (17 CFR 
249.220f) shall be furnished, except that note disclosures shall be 
limited to those specified in paragraph (b)(3) of this item. However, 
foreign private issuers that comply with Item 17 of Form 20-F rather 
than Item 18 may furnish the disclosure specified by Item 17(c) in the 
notes to the abbreviated financial statements. Where Item 17(c) permits 
the omission of a disclosure from the notes to the full financial 
statements, that disclosure shall not be included in the notes to the 
abbreviated financial statements even if specified for disclosure by 
paragraph (b)(3) of this Item.
    (2) Abbreviated financial statements shall be provided for the 
periods specified by Rule 3-19 of Regulation S-X.
PART 229--STANDARD INSTRUCTIONS FOR FILING FORMS UNDER SECURITIES 
ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934 AND ENERGY POLICY AND 
CONSERVATION ACT OF 1975--REGULATION S-K

    3. The authority citation for part 229 continues to read in part as 
follows:

    Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 
77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77iii, 77jjj, 77nnn, 
77sss, 78c, 78i, 78j, 78l, 78m, 78n, 78o, 78w, 78ll(d), 79e, 79n, 
79t, 80a-8, 80a-29, 80a-30, 80a-37, 80b-11, unless otherwise noted.
* * * * *
    4. By amending Part 229 by adding Sec. 229.305 to read as follows:


Sec. 229.305  (Item 305) Abbreviated financial statements.

    Note: The term full financial statements as used throughout this 
Item refers to financial statements filed with the Commission 
meeting the requirements of Regulation S-X (17 CFR part 210).

    (a) Eligibility. A registrant, other than an investment company 
registered under the Investment Company Act of 1940 [15 U.S.C. 80a-1 et 
seq.], or a business development company under 

[[Page 35616]]
that Act, that meets the following conditions may furnish abbreviated 
financial statements in a document to be furnished to investors or 
security holders, as permitted by the Form or Schedule governing the 
requirements of that document:
    (1) The registrant has filed with its full financial statements an 
independent accountant's report that complies with the requirements of 
Article 2 of Regulation S-X (17 CFR 210.2) and does not contain a 
qualification as to scope of audit or as to accounting principles used, 
or a disclaimer of opinion.
    However, if the full financial statements of the registrant filed 
with the Commission are not required to be audited, neither this 
condition nor the requirement to provide an independent accountant's 
report pursuant to paragraph (b)(4) of this Item shall apply; and
    (2) If the registrant is subject to the requirement to file reports 
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 
1934 (15 U.S.C. 78m(a) or 78o(d)), it has filed all reports and other 
materials required to be filed by such requirements.
    (b) Information to be included in abbreviated financial statements. 
Abbreviated financial statements shall include the following 
information:
    (1) Balance sheets as of the end of each of the two most recent 
fiscal years and statements of income and cash flows for each of the 
three most recent fiscal years prepared in conformity with accounting 
principles generally accepted in the United States (``U.S. GAAP'') and 
Regulation S-X (17 CFR 210), except that note disclosures specified by 
U.S. GAAP and Articles 4, 5, 7, and 9 of Regulation S-X (17 CFR 210.4, 
210.5, 210.7 and 210.9) shall not be included unless specified in 
paragraph (b)(3) of this Item. The abbreviated annual financial 
statements shall comply with all requirements of Regulation S-X 
governing classification of items on the face of the balance sheet, 
statement of income, and statement of cash flows, and shall include all 
disclosures required by Regulation S-X to be included on the face of 
the balance sheet, statement of income, and statement of cash flows. 
The face of the financial statements shall include a prominent 
statement identifying them as ``abbreviated financial statements.''
    (2) A statement of changes in stockholders' equity prepared in 
conformity with Rule 3-04 of Regulation S-X (17 CFR 210.3-04) for each 
of the registrant's three most recent fiscal years.
    (3) Notes to the financial statements. The disclosures required in 
the notes to the abbreviated financial statements shall be an 
extraction of all note disclosures included in the registrant's full 
financial statements that are responsive to the matters specified in 
paragraphs (b)(3)(ii) through (b)(3)(xiii) of this Item. To facilitate 
the extraction of all disclosures responsive to the specified matters, 
the primary authoritative pronouncements concerning the specified 
matters are identified in paragraphs (b)(3)(ii) through (b)(3)(xiii) of 
this Item. The term ``related pronouncements'' as used in paragraphs 
(b)(3)(ii) through (b)(3)(xiii) of this Item refers to pronouncements 
constituting U.S. GAAP as defined in Statement of Auditing Standards 
(``SAS'') No. 69 that require disclosure regarding the matter specified 
for disclosure in the abbreviated financial statements. The notes shall 
disclose the following:
    (i) Basis of presentation. The registrant shall state that the 
abbreviated financial statements have been prepared using U.S. GAAP for 
measurement and classification. The registrant also shall state that 
substantially all note disclosures necessary for a fair presentation 
under U.S. GAAP and Regulation S-X (17 CFR 210) have been omitted, and 
that the note disclosures are limited to those specified by Commission 
rules for inclusion in abbreviated financial statements. Additionally, 
the registrant shall state that the note disclosures comply with 
Commission rules for presentation of abbreviated financial statements. 
A reference to the complete disclosures in the full financial 
statements shall be provided.
    (ii) Accounting policies. The registrant shall provide a 
description of all significant accounting policies used in the 
preparation of the financial statements. Disclosure of accounting 
policies shall identify and describe the accounting principles followed 
by the reporting entity and the methods of applying those principles 
that materially affect the determination of financial position, cash 
flows or results of operations, as specified by Accounting Principles 
Board (``APB'') Opinion No. 22 and related pronouncements.
    (iii) Changes in accounting principle. The registrant shall 
disclose the nature of, and justification for, a change in accounting 
principle, and the effects of the change, as specified by APB Opinion 
No. 20 and related pronouncements.
    (iv) Restatements and reclassifications. The registrant shall 
disclose the following matters:
    (A) The nature and effects of a correction of an error in 
previously issued financial statements, as specified by APB Opinion No. 
20 and related pronouncements.
    (B) The nature and reasons for a change in the reporting entity, 
and effects of the change, as specified by APB Opinion No. 20 and 
related pronouncements. Combinations of entities under common control 
and similar reorganizations described in APB Opinion No. 16 and related 
pronouncements shall be considered changes in the reporting entity for 
purposes of this Item.
    (C) The nature and effects of reclassifications materially 
affecting amounts reported in previously issued financial statements.
    (v) Changes in accounting estimate. The registrant shall disclose 
the nature and effects of a change in accounting estimate, as specified 
by APB Opinion No. 20 and related pronouncements.
    (vi) Business combinations. The registrant shall disclose the 
following with respect to business combinations:
    (A) The nature of business combinations accounted for as a pooling 
of interests and the disclosures of the effects of the business 
combinations, as specified by APB Opinion No. 16 and related 
pronouncements.
    (B) The nature of business combinations accounted for as a purchase 
and the disclosures specified by APB Opinion No. 16 and related 
pronouncements.
    (vii) Discontinued operations. The registrant shall disclose the 
nature of discontinued operations and provide the quantitative 
disclosures of the effects of the discontinued operations, as specified 
by APB Opinion No. 30 and related pronouncements.
    (viii) Circumstances identified in explanatory language added to 
the independent accountant's standard report. The registrant shall 
disclose the nature and effects of circumstances for which the 
independent accountant's report on the full financial statements 
includes explanatory language. These circumstances are identified in 
paragraph 11 of SAS No. 58. The notes shall include all disclosures 
regarding the matter considered necessary by the independent accountant 
in rendering an opinion on the full financial statements unqualified as 
to adequacy of disclosure. However, disclosure need not be provided 
where the explanatory language merely reports that the independent 
accountant's opinion is based in part on the work of another 
independent accountant. Disclosure shall be provided for explanatory 

[[Page 35617]]
paragraphs that emphasize a matter regarding the financial statements.
    (ix) Loss contingencies. The registrant shall disclose the nature 
of loss contingencies and estimated amount or range of reasonably 
possible loss in excess of amounts accrued in the financial statements, 
as specified by Statement of Financial Accounting Standards (``SFAS'') 
No. 5 and related pronouncements. A statement that the amount or range 
of probable or reasonably possible loss cannot be reasonably estimated 
should be included if applicable.
    (x) Events of default under credit agreements. The registrant shall 
disclose the facts and amounts concerning any default in principal, 
interest, sinking fund, or redemption provisions with respect to any 
material issue of securities or credit agreements, or any breach of 
covenant of a related indenture or agreement, which default or breach 
existed at the date of the most recent balance sheet being filed and 
which has not been subsequently cured. If a default or breach exists 
but acceleration of the obligation has been waived for a stated period 
of time beyond the date of the most recent balance sheet being filed, 
the registrant shall state the amount of the obligation and the period 
of the waiver.
    (xi) Related party transactions. The registrant shall disclose the 
nature of related party relationships, and a description of 
transactions, amounts and balances as specified by SFAS No. 57 and 
related pronouncements.
    (xii) Bankruptcies and quasi-reorganizations. (A) Bankruptcies. 
Registrants entering into, operating under, or emerging from 
proceedings under the federal bankruptcy code during the most recent 
fiscal year shall provide all of the disclosures required by AICPA 
Statement of Position No. 90-7.
    (B) Quasi-reorganizations. Registrants effecting a quasi-
reorganization during the most recent fiscal year shall disclose the 
nature and effects of the quasi-reorganization.
    (xiii) Subsequent events. The registrant shall disclose all events 
occurring subsequent to the date of the most recent balance sheet for 
which disclosure was required in the full financial statements.
    (4) An independent accountant's report. The report shall state that 
the abbreviated annual financial statements have been examined in 
connection with the audit of the full financial statements. The report 
shall state clearly the opinion of the independent accountant that the 
abbreviated financial statements comply with the requirements in 
paragraph (b) of this Item for presentation of abbreviated financial 
statements. The report shall describe the opinion rendered by the 
independent accountant on the full financial statements, including any 
explanatory language.
    (5) Abbreviated interim financial statements. (i) Where interim 
financial statements of the registrant are required in a document that 
includes abbreviated annual financial statements of the registrant, 
those interim financial statements shall be abbreviated. Where interim 
financial statements of the registrant are required in a document that 
includes full annual financial statements of the registrant, those 
interim financial statements shall not be abbreviated.
    (ii) Abbreviated interim financial statements shall be furnished 
for the same periods as prescribed by Rules 3-01 and 3-02 of Regulation 
S-X (17 CFR 210.3-01 and 210.3-02). The abbreviated interim financial 
statements shall be prepared in conformity with generally accepted 
accounting principles and Article 10 of Regulation S-X (17 CFR 210.10), 
except that note disclosures specified by generally accepted accounting 
principles and Regulation S-X shall not be included unless specified in 
paragraph (b)(3) of this Item. However, disclosures that would 
substantially duplicate the disclosure contained in the most recent 
annual abbreviated financial statements may be omitted, except that 
contingencies shall be disclosed pursuant to (b)(3)(ix) of this Item 
even though a significant change since year end may not have occurred. 
The abbreviated interim financial statements shall comply with all 
requirements of Article 10 of Regulation S-X governing classification 
of items on the face of the balance sheet, statement of income, and 
statement of cash flows.
    (c) Age of abbreviated financial statements at effective date of 
registration statement or at mailing date of proxy statement. 
Registrants shall update the abbreviated financial statements to cover 
the same periods as required pursuant to Rule 3-12 of Regulation S-X 
(17 CFR 210.3-12).
    (d) Abbreviated financial statements of entities other than the 
registrant. In those instances where full financial statements of 
entities other than the registrant are required by Rule 3-05, 3-09 or 
3-10 of Regulation S-X (17 CFR 210.3-05, 210.3-09, or 210.3-10), or are 
otherwise required to be included in a registrant's filing with the 
Commission on a form that permits the abbreviation of financial 
statements, abbreviated financial statements may be furnished for those 
other entities provided that the registrant meets the conditions in 
paragraph (a) of this Item and those other entities meet the condition 
in paragraph (a)(1) of this Item. Abbreviated financial statements of 
entities other than the registrant shall be prepared in accordance with 
this Item for the respective periods specified by Rule 3-05, 3-09 or 3-
10 of Regulation S-X. Where abbreviated financial statements of 
entities other than the registrant are furnished, full financial 
statements shall also be filed with the Commission as provided in the 
respective form requirements.
    (e) Delivery of full financial statements to requesting investors. 
Registrants including abbreviated financial statements in a disclosure 
document shall deliver without charge to each person to whom the 
document is furnished, upon the written or oral request of such person 
and by a means reasonably calculated to result in the information 
reaching the requesting person within five business days from the date 
of the request, a copy of the full financial statements and the 
independent accountant's report thereon filed with the Commission for 
the same periods covered by the abbreviated financial statements. The 
registrant shall include a statement in bold face or otherwise 
reasonably prominent type in the disclosure document that the 
registrant will provide a copy of its full financial statements and the 
independent accountant's report thereon without charge to each person 
to whom the document is furnished, upon the written or oral request of 
such person, and shall state the name, address, and telephone number of 
the person (including title and department) to whom the request for 
full financial statements should be directed. If Form 10-K (17 CFR 
249.310) and/or Form 10-Q (17 CFR 249.308a) financial statements are 
permitted to be furnished to requesting persons in satisfaction of the 
delivery requirement, only the portion of those reports containing the 
financial statements, and the independent accountant's report thereon, 
need be delivered.
    (f) Special provisions as to abbreviated financial statements for 
foreign private issuers. (1) The abbreviated financial statements may 
be prepared according to U.S. GAAP, except that note disclosures shall 
be limited to those specified in paragraph (b)(3) of this Item. 
Alternatively, such abbreviated financial statements may be prepared 
according to a comprehensive body of accounting principles other than 
U.S. GAAP. Where the abbreviated financial statements are prepared 

[[Page 35618]]
according to a comprehensive body of accounting principles other than 
U.S. GAAP, the disclosures specified by Item 18(c) of Form 20-F (17 CFR 
249.220f) shall be furnished, except that note disclosures shall be 
limited to those specified in paragraph (b)(3) of this Item. However, 
foreign private issuers that comply with Item 17 of Form 20-F rather 
than Item 18 may furnish the disclosure specified by Item 17(c) in the 
notes to the abbreviated financial statements. Where Item 17(c) permits 
the omission of a disclosure from the notes to the full financial 
statements, that disclosure shall not be included in the notes to the 
abbreviated financial statements even if specified for disclosure by 
paragraph (b)(3) of this Item.
    (2) Abbreviated financial statements shall be provided for the 
periods specified by Rule 3-19 of Regulation S-X (17 CFR 210.3-19).
PART 230--GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933

    5. The authority citation for Part 230 continues to read in part as 
follows:

    Authority: 15 U.S.C. 77b, 77f, 77g, 77h, 77j, 77s, 77sss, 78c, 
78l, 78m, 78n, 78o, 78w, 78ll(d), 79t, 80a-8, 80a-29, 80a-30, and 
80a-37, unless otherwise noted.
* * * * *
    6. By amending Part 230 by adding Sec. 230.435 to read as follows:


Sec. 230.435  Abbreviated financial statements.

    (a) For purposes of this section:
    (1) The term full financial statements shall mean financial 
statements filed with the Commission meeting the requirements of 
Regulation S-X (17 CFR 210), or, for small business issuers, Item 310 
of Regulation S-B (Sec. 228.310 of this chapter).
    (2) The term abbreviated financial statements shall mean financial 
statements that include the information specified in Item 305(b) of 
Regulation S-B (Sec. 228.305(b) of this chapter) or Item 305(b) of 
Regulation S-K (Sec. 229.305(b) of this chapter).
    (b) A prospectus containing abbreviated financial statements shall 
not be deemed materially misleading or omitting material facts from the 
prospectus within the meaning of the federal securities laws based on 
the omission from the prospectus of those financial statement footnotes 
permitted by Item 305 of Regulation S-B (Sec. 228.305 of this chapter) 
or Item 305 of Regulation S-K (Sec. 229.305 of this chapter) deemed a 
part of the prospectus, provided the registrant has complied with Item 
305 of Regulation S-B or Item 305 of Regulation S-K.
    (c) The full financial statements that are omitted from a 
prospectus shall be deemed to be part of the prospectus.
    7. By amending Sec. 230.502 of Regulation D by adding a sentence at 
the end of paragraph (b)(2)(i)(B)(1) to read as follows:


Sec. 230.502  General conditions to be met.

* * * * *
    (b) Information requirements. * * *
    (2) Type of information to be furnished. * * *
    (i) * * *
    (B) Financial statement information. * * *
    (1) Offerings up to $2,000,000. * * * If the issuer satisfies the 
eligibility criteria in Item 305(a) of Regulation S-B (Sec. 228.305(a) 
of this chapter), the issuer may provide the abbreviated financial 
statements required by Item 305 of Regulation S-B (Sec. 228.305 of this 
chapter) rather than the information required in Item 310 of Regulation 
S-B (Sec. 228.310 of this chapter).
* * * * *

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

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

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77sss, 78c, 78l, 
78m, 78n, 78o(d), 78w(a), 78ll(d), 79e, 79f, 79g, 79j, 79l, 79m, 
791, 79t, 80a-8, 80a-29, 80a-30 and 80a-37, unless otherwise noted.
* * * * *
    9. By amending Form SB-1 (referenced in Sec. 239.9) by revising 
Part F/S and adding Item 7 to Part II to read as follows:

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

Form SB-1

Registration Statement Under the Securities Act of 1933

* * * * *

Part F/S--Financial Information Required in Prospectus

    Furnish either: (1) the full financial statements required by 
Item 310 of Regulation S-B (Sec. 228.310 of this chapter); or (2) 
the abbreviated financial statements required by Item 305 of 
Regulation S-B (Sec. 228.305 of this chapter). The option to furnish 
abbreviated financial statements is available only to registrants 
satisfying the eligibility criteria in Item 305(a) of Regulation S-
B.

Instruction to Part F/S

    Abbreviated financial statements meeting the requirements of 
Item 305 of Regulation S-B may be furnished with respect to 
businesses acquired or to be acquired, except that the information 
need only be provided for the periods specified by Item 310(c) of 
Regulation S-B. This option is available only if the business 
acquired or to be acquired satisfies the eligibility criteria in 
Item 305(a)(1) of Regulation S-B.
* * * * *

Part II--Information Not Required in Prospectus

* * * * *

Item 7. Financial Statements

    If abbreviated financial statements are furnished in the 
prospectus pursuant to Part F/S of this Form SB-1, furnish the full 
financial statements required by Item 310 of Regulation S-B and the 
independent accountant's report thereon.
* * * * *
    10. By amending Form SB-2 (referenced in Sec. 239.10) by revising 
Item 22 to Part I and adding Item 29 to Part II to read as follows:

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

Form SB-2

Registration Statement Under the Securities Act of 1933

* * * * *

Item 22. Financial Statements

    Furnish either: (a) the full financial statements required by 
Item 310 of Regulation S-B (Sec. 228.310 of this chapter); or (b) 
the abbreviated financial statements required by Item 305 of 
Regulation S-B (Sec. 228.305 of this chapter). The option to furnish 
abbreviated financial statements is available only to registrants 
satisfying the eligibility criteria in Item 305(a) of Regulation S-
B.

Instruction to Item 22

    Abbreviated financial statements meeting the requirements of 
Item 305 of Regulation S-B may be furnished with respect to 
businesses acquired or to be acquired, except that the information 
need only be provided for the periods specified by Item 310(c) of 
Regulation S-B. This option is available only if the business 
acquired or to be acquired satisfies the eligibility criteria in 
Item 305(a)(1) of Regulation S-B.
* * * * *

Part II--Information Not Required in Prospectus

* * * * *

Item 29. Financial Statements

    If abbreviated financial statements are furnished pursuant to 
Item 22(b), furnish the full financial statements required by Item 
310 of Regulation S-B and the independent accountant's report 
thereon.
* * * * *
    11. By amending Form S-1 (referenced in Sec. 239.11) by revising 
Item 11(e), adding an Instruction to Item 11(e), removing the words 
``and Financial Statement Schedules'' from the caption to Item 16, 
removing 

[[Page 35619]]
paragraph (b) of Item 16, and adding Item 18 to read as follows:

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

Form S-1

Registration Statement Under the Securities Act of 1933

* * * * *
Item 11. Information with Respect to the Registrant

* * * * *
    (e) Full financial statements meeting the requirements of 
Regulation S-X (17 CFR Part 210) (Schedules required under 
Regulation S-X shall be filed pursuant to Item 18 ``Financial 
Statements and Schedules,'' of this Form) as well as any financial 
information required by Rule 3-05 and Article 11 of Regulation S-X; 
or abbreviated financial statements meeting the requirements of Item 
305 of Regulation S-K shall be filed, as well as any financial 
information required by Rule 3-05 and Article 11 of Regulation S-X. 
The option to furnish abbreviated financial statements is available 
only to registrants satisfying the eligibility criteria in Item 
305(a) of Regulation S-K (Sec. 229.305(a) of this chapter).

Instruction to Item 11(e)

    Abbreviated financial statements meeting the requirements of 
Item 305 of Regulation S-K may be furnished with respect to 
businesses acquired or to be acquired, except that the information 
need only be provided for the periods specified by Rule 3-05 of 
Regulation S-X (Sec. 210.3-05 of this chapter). This option is 
available only if the business acquired or to be acquired satisfies 
the eligibility criteria in Item 305(a)(1) of Regulation S-K.
* * * * *

Part II--Information Not Required in Prospectus

* * * * *

Item 18. Financial Statements and Schedules

    (a) If abbreviated financial statements are furnished pursuant 
to Item 11(e) of this Form, furnish the full financial statements 
required by Regulation S-X and the independent accountant's report 
thereon.
    (b) Regardless of whether full or abbreviated financial 
statements are furnished pursuant to Item 11(e) of this Form, 
furnish the financial statement schedules required by Regulation S-
X. These schedules shall be lettered or numbered in the manner 
described for exhibits in Item 601 of Regulation S-K (Sec. 229.601 
of this chapter).
* * * * *
    12. By amending Form S-2 (referenced in Sec. 239.12) by revising 
the last sentence in General Instruction II.C, adding paragraph (iv) to 
Item 11(a)(2), adding a sentence at the end of Item 11(a)(3), adding 
paragraphs (A), (B), and (C) to Item 11(b)(2), adding instructions to 
Item 11(a)(2), (a)(3), and Item 11(b)(2), and adding Item 18 to read as 
follows:

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

Form S-2

Registration Statement under the Securities Act of 1933

* * * * *

General Instructions

* * * * *

II. Application of General Rules and Regulations

* * * * *
    C. * * * If, however, the small business issuer satisfies the 
eligibility criteria in Item 305(a) of Regulation S-B 
(Sec. 228.305(a) of this chapter), the small business issuer may 
provide the abbreviated financial statements required by Item 305 of 
Regulation S-B rather than the financial information in Item 310 of 
Regulation S-B (Sec. 228.310 of this chapter).
* * * * *

Item 11. Information with Respect to the Registrant

    (a) * * *
    (2) * * *
    (iv) If the registrant satisfies the eligibility criteria in 
Item 305(a) of Regulation S-K, abbreviated interim financial 
statements of the registrant meeting the requirements of Item 
305(b)(5) of Regulation S-K may be furnished pursuant to paragraphs 
(a)(2)(i) or (a)(2)(iii) of this Item.
    (3) * * * Abbreviated financial statements meeting the 
requirements of Item 305 of Regulation S-K may be furnished with 
respect to businesses acquired or to be acquired, except that the 
information need only be provided for the periods specified by Rule 
3-05 of Regulation S-X (Sec. 210.3-05 of this chapter). This option 
is available only if the business acquired or to be acquired 
satisfies the eligibility criteria in Item 305(a)(1) of Regulation 
S-K.
* * * * *
    (b) * * *
    (2) Include either: financial * * *
    (A) If the registrant satisfies the eligibility criteria in Item 
305(a) of Regulation S-K, abbreviated interim financial statements 
meeting the requirements of Item 305(b)(5) of Regulation S-K may be 
furnished pursuant to paragraph (b)(2)(i) of this Item.
    (B) Abbreviated financial statements meeting the requirements of 
Item 305 of Regulation S-K may be furnished with respect to 
businesses acquired or to be acquired, except that the information 
need only be provided for the periods specified by Rule 3-05 of 
Regulation S-X. This option is available only if the business 
acquired or to be acquired satisfies the eligibility criteria in 
Item 305(a)(1) of Regulation S-K.
    (C) If the registrant satisfies the eligibility criteria in Item 
305(a) of Regulation S-K, abbreviated financial statements meeting 
the requirements of Item 305 of Regulation S-K may be furnished 
pursuant to paragraph (b)(2) of this Item with respect to restated 
financial statements of the registrant required by this Item.
* * * * *

Instruction to Item 11(a)(2), (a)(3) and (b)(2)

    Abbreviated financial statements meeting the requirements of 
Item 305 of Regulation S-K may be furnished with respect to 
businesses acquired or to be acquired, except that the information 
need only be provided for the periods specified by Rule 3-05 of 
Regulation S-X. This option is available only if the business 
acquired or to be acquired satisfies the eligibility criteria in 
Item 305(a)(1) of Regulation S-K.
* * * * *

PART II--INFORMATION NOT REQUIRED IN PROSPECTUS

* * * * *

Item 18. Financial Statements and Schedules

    If abbreviated financial statements are furnished pursuant to 
Item 11(a)(3) or (b)(2)(B) with respect to businesses acquired or to 
be acquired, furnish the full financial statements required by 
Regulation S-X and the independent accountant's report thereon. If 
abbreviated financial statements are furnished pursuant to Item 
11(b)(2)(C) with respect to restated financial statements of the 
registrant, furnish the full financial statements required by 
Regulation S-X and the independent accountant's report thereon.
* * * * *
    13. By amending Form S-3 (referenced in Sec. 239.13) by revising 
the last sentence of General Instruction II.C, adding Item 11(c) and 
Item 18 to read as follows:

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

Form S-3

Registration Statement Under the Securities Act of 1933

* * * * *

General Instructions

* * * * *

II. Application of General Rules and Regulations

* * * * *
    C. * * * If, however, the small business issuer satisfies the 
eligibility criteria in Item 305(a) of Regulation S-B 
(Sec. 228.305(a) of this chapter), the small business issuer may 
provide the abbreviated financial statements required by Item 305 of 
Regulation S-B rather than the financial information in Item 310 of 
Regulation S-B (Sec. 228.310 of this chapter).
* * * * *

Item 11. Material Changes

* * * * *
    (c) If the registrant satisfies the eligibility criteria in Item 
305(a) of Regulation S-K:
    (1) Abbreviated financial statements meeting the requirements of 
Item 305 of Regulation S-K may be furnished pursuant to Item 
11(b)(i) with respect to businesses acquired or to be acquired, 
except that the information need only be provided for the periods 
specified by Rule 3-05 of Regulation S-X. This option is available 
only if the business acquired or to be acquired satisfies 

[[Page 35620]]
the eligibility criteria in Item 305(a)(1) of Regulation S-K.
    (2) Abbreviated financial statements meeting the requirements of 
Item 305 of Regulation S-K may be furnished pursuant to Items 
11(b)(ii), 11(b)(iii) and 11(b)(iv) with respect to restated 
financial statements of the registrant.
* * * * *

PART II--INFORMATION NOT REQUIRED IN PROSPECTUS

* * * * *

Item 18. Financial Statements and Schedules

    If abbreviated financial statements are furnished pursuant to 
Item 11(c)(1) with respect to businesses acquired or to be acquired, 
furnish the full financial statements required by Regulation S-X and 
the independent accountant's report thereon. If abbreviated 
financial statements are furnished pursuant to Item 11(c)(2) with 
respect to restated financial statements of the registrant, furnish 
the full financial statements required by Regulation S-X and the 
independent accountant's report thereon.
* * * * *
    14. By amending Form S-6 (referenced in Sec. 239.16) by designating 
the undesignated paragraph following paragraph (c)(2) of Instruction 1 
of Instructions as to the Prospectus as paragraph (c)(3) and adding 
paragraph (c)(4) and by adding paragraph 6 to the Instructions as to 
Exhibits to read as follows:

    Note--The text of Form S-6 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

Form S-6

For Registration Under the Securities Act of 1933 of Securities of Unit 
Investment Trusts Registered on Form N-8B-2

* * * * *

Instructions as to the Prospectus

Instruction 1. Information to be Contained in Prospectus

* * * * *
    (c) * * *
    (4) Abbreviated financial statements meeting the requirements of 
Item 305 of Regulation S-K (Sec. 229.305 of this chapter) may be 
included in the prospectus in lieu of the financial statements 
required by paragraphs (c)(1) and (2) above. The option to include 
abbreviated financial statements is available only to registrants 
satisfying the eligibility criteria in Item 305(a) of Regulation S-
K.
* * * * *

Instructions as to Exhibits

* * * * *
    6. If abbreviated financial statements are furnished pursuant to 
Instruction 1(c)(4) of the Instructions as to the Prospectus, 
furnish the full financial statements required by Instructions 
1(c)(1) and (2) of the Instructions as to the Prospectus and the 
independent accountant's report thereon.

    15. By amending Form S-8 (referenced in Sec. 239.16b) by adding an 
Instruction to Item 3(a) to read as follows:

    Note--The text of Form S-8 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

Form S-8

Registration Statement Under the Securities Act of 1933

* * * * *

PART II--INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

Item 3. Incorporation of Documents by Reference

* * * * *
    (a) * * *
    Instruction to Item 3(a). If the registrant's latest prospectus 
filed pursuant to Rule 424(b) under the Act contains abbreviated 
financial statements, the registrant shall not incorporate such 
prospectus by reference into the Form S-8. In lieu thereof, the 
registrant shall incorporate its latest effective registration 
statement filed under the Act that contains audited full financial 
statements for the registrant's latest fiscal year for which such 
statements have been filed.
* * * * *
    16. By amending Form S-11 (referenced in Sec. 239.18) by revising 
Item 27 and adding paragraph (c) to Item 35 to read as follows:

    Note--The text of Form S-11 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

Form S-11

For Registration Under the Securities Act of 1933 of Securities of 
Certain Real Estate Companies

* * * * *
Item 27. Financial Statements and Information

    Include in the prospectus either full financial statements 
meeting the requirements of Regulation S-X (17 CFR 210) or 
abbreviated financial statements meeting the requirements of Item 
305 of Regulation S-K (Sec. 229.305 of this chapter). The option to 
furnish abbreviated financial statements is available only to 
registrants satisfying the eligibility criteria in Item 305(a) of 
Regulation S-K. In addition, include the supplementary financial 
information required by Item 302 of Regulation S-K (Sec. 229.302 of 
this chapter) and the information concerning changes in and 
disagreements with accountants on accounting and financial 
disclosure required by Item 304 of Regulation S-K (Sec. 229.304 of 
this chapter). Although all schedules required by Regulation S-X are 
to be included in the registration statement, all such schedules 
other than those prepared in accordance with Rules 12-12, 12-28 and 
12-29 of the Regulation may be omitted from the prospectus.
* * * * *

INFORMATION NOT REQUIRED IN PROSPECTUS

* * * * *

Item 35. Financial statements and Exhibits

* * * * *
    (c) If abbreviated financial statements are furnished pursuant 
to Item 27 of this Form, file the full financial statements meeting 
the requirements of Regulation S-X and the independent accountant's 
report thereon.
* * * * *
    17. By amending Form S-4 (referenced in Sec. 239.25) by revising 
the last sentence of General Instruction D.3; adding Item 10(b)(5), 
paragraph (iv) to Item 12(a)(2), a sentence at the end of Item 
12(a)(3); revising Item 14(e), adding a sentence at the end of Items 
15, 16(a), 17(a) and 17(b)(8); removing the words ``and Financial 
Statement Schedules'' from the caption to Item 21; removing Item 21(b), 
and redesignating Item 21(c) as Item 21(b); and adding Item 23 to read 
as follows:

    Note--The text of Form S-4 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

Form S-4

Registration Statement Under the Securities Act of 1933

* * * * *

General Instructions

* * * * *

D. Application of General Rules and Regulations

* * * * *
    3. * * * Small business issuers shall provide or incorporate by 
reference the information called for by Item 310 of Regulation S-B 
(Sec. 228.310 of this chapter), or, if the small business issuer 
satisfies the eligibility criteria in Item 305(a) of Regulation S-B 
(Sec. 228.305(a) of this chapter), the abbreviated information in 
Item 305 of Regulation S-B.
* * * * *

Item 10. Information with Respect to S-3 Registrants

* * * * *
    (b) * * *
    (5) If the registrant satisfies the eligibility criteria in Item 
305(a) of Regulation S-K:
    (i) Abbreviated financial statements meeting the requirements of 
Item 305 of Regulation S-K may be furnished pursuant to paragraph 
(b)(1) of this Item with respect to businesses acquired or to be 
acquired, except that the information need only be provided for the 
periods specified by Rule 3-05 of Regulation S-X (Sec. 210.3-05 of 
this chapter). This option is available only if the business 
acquired or to be acquired satisfies the eligibility criteria in 
Item 305(a)(1) of Regulation S-K.
    (ii) Abbreviated financial statements meeting the requirements 
of Item 305 of Regulation S-K may be furnished pursuant to 
paragraphs (b)(2), (b)(3) and (b)(4) of this Item 

[[Page 35621]]
with respect to restated financial statements of the registrant.
* * * * *

Item 12. Information With Respect to S-2 or S-3 Registrants

* * * * *
    (a) * * *
    (2) * * *
    (iv) If the registrant satisfies the eligibility criteria in 
Item 305(a) of Regulation S-K, abbreviated interim financial 
statements of the registrant meeting the requirements of Item 
305(b)(5) of Regulation S-K may be furnished pursuant to paragraphs 
(a)(2)(i) or (a)(2)(iii) of this Item.
    (3) * * * Abbreviated financial statements meeting the 
requirements of Item 305 of Regulation S-K may be furnished with 
respect to the businesses acquired or to be acquired, except that 
the information need only be provided for the periods specified by 
Rule 3-05 of Regulation S-X. This option is available only if the 
business acquired or to be acquired satisfies the eligibility 
criteria in Item 305(a)(1) of Regulation S-K.
* * * * *
    (b) * * *
    (2) * * *
    (vi) If the registrant satisfies the eligibility criteria in 
Item 305(a) of Regulation S-K, abbreviated interim financial 
statements of the registrant meeting the requirements of Item 
305(b)(5) of Regulation S-K may be furnished pursuant to paragraph 
(b)(2)(i) of this Item.
    (vii) Abbreviated financial statements meeting the requirements 
of Item 305 of Regulation S-K may be furnished pursuant to paragraph 
(b)(2)(ii) of this Item with respect to businesses acquired or to be 
acquired, except that the information need only be provided for the 
periods specified by Rule 3-05 of Regulation S-X. This option is 
available only if the business acquired or to be acquired satisfies 
the eligibility criteria in Item 305(a)(1) of Regulation S-K.
    (viii) If the registrant satisfies the eligibility criteria in 
Item 305(a) of Regulation S-K, abbreviated financial statements 
meeting the requirements of Item 305 of Regulation S-K may be 
furnished pursuant to paragraphs (b)(2)(iii), (iv) and (v) of this 
Item with respect to restated financial statements of the registrant 
required by this Item.
* * * * *

Item 14. Information with Respect to Registrants Other than S-2 or S-3 
Registrants

* * * * *
    (e) Financial statements required by either paragraph (e)(1) or 
(e)(2) of this Item:
    (1) Financial statements of the registrant meeting the 
requirements of Regulation S-X (17 CFR Part 210) (Schedules required 
under Regulation S-X shall be filed pursuant to Item 23 ``Financial 
Statements and Schedules,'' of this Form) as well as any financial 
information required by Rule 3-05 and Article 11 of Regulation S-X; 
or
    (2) If the registrant satisfies the eligibility criteria in Item 
305(a) of Regulation S-K, abbreviated financial statements of the 
registrant meeting the requirements of Item 305 of Regulation S-K, 
as well as any financial information required by Rule 3-05 and 
Article 11 of Regulation S-X.
    (3) Abbreviated financial statements meeting the requirements of 
Item 305 of Regulation S-K may be furnished pursuant to paragraphs 
(1) and (2) of this Item with respect to businesses acquired or to 
be acquired, except that the information need only be provided for 
the periods specified by Rule 3-05 of Regulation S-X. This option is 
available only if the business acquired or to be acquired satisfies 
the eligibility criteria in Item 305(a)(1) of Regulation S-K.
* * * * *

Item 15. Information with Respect to S-3 Companies

    * * * Abbreviated financial statements meeting the requirements 
of Item 305 of Regulation S-K may be furnished for the company being 
acquired pursuant to Items 10 and 11 of this Form if the company 
being acquired satisfies the eligibility criteria in Item 305(a)(1) 
of Regulation S-K and the registrant satisfies the eligibility 
criteria in Item 305(a) of Regulation S-K.

Item 16. Information with Respect to S-2 or S-3 Companies

    (a) * * * Abbreviated financial statements meeting the 
requirements of Item 305 of Regulation S-K may be furnished for the 
company being acquired pursuant to Items 12 and 13 of this Form if 
the company being acquired satisfies the eligibility criteria in 
Item 305(a)(1) of Regulation S-K and the registrant satisfies the 
eligibility criteria in Item 305(a) of Regulation S-K.
* * * * *
Item 17. Information With Respect to Companies Other Than S-2 or S-3 
Companies

* * * * *
    (a) * * * Abbreviated financial statements meeting the 
requirements of Item 305 of Regulation S-K may be furnished for the 
company being acquired pursuant to Item 14 of this Form if the 
company being acquired satisfies the eligibility criteria in Item 
305(a)(1) of Regulation S-K and the registrant satisfies the 
eligibility criteria in Item 305(a) of Regulation S-K.
    (b) * * *
    (8) * * * If the registrant satisfies the eligibility criteria 
in Item 305(a) of Regulation S-K, abbreviated interim financial 
statements of the company being acquired meeting the requirements of 
Item 305(b)(5) of Regulation S-K may be furnished pursuant to this 
paragraph.
* * * * *

PART II--INFORMATION NOT REQUIRED IN PROSPECTUS

* * * * *

Item 23. Financial Statements

    (a) S-3 Registrants. If abbreviated financial statements are 
furnished pursuant to Item 10(b)(5)(i) with respect to the 
businesses acquired or to be acquired, furnish the full financial 
statements required by Regulation S-X and the independent 
accountant's report thereon. If abbreviated financial statements are 
furnished pursuant to Item 10(b)(5)(ii) with respect to the restated 
financial statements of the registrant, furnish the full financial 
statements required by Regulation S-X and the independent 
accountant's report thereon.
    (b) S-2 or S-3 Registrants. If abbreviated financial statements 
are furnished pursuant to Item 12(a)(3) or 12(b)(2)(vii) with 
respect to the businesses acquired or to be acquired, furnish the 
full financial statements required by Regulation S-X and the 
independent accountant's report thereon. If abbreviated financial 
statements are furnished pursuant to Item 12(b)(2)(viii) with 
respect to the restated financial statements of the registrant, 
furnish the full financial statements required by Regulation S-X and 
the independent accountant's report thereon.
    (c) Registrants Other Than S-2 or S-3 Registrants. If 
abbreviated financial statements are furnished pursuant to Item 
14(e)(2) with respect to the financial statements of the registrant, 
furnish the full financial statements required by Regulation S-X and 
the independent accountant's report thereon. If abbreviated 
financial statements are furnished pursuant to Item 14(e)(3) with 
respect to the businesses acquired or to be acquired, furnish the 
full financial statements required by Regulation S-X and the 
independent accountant's report thereon.
    (d) S-3 Companies. If abbreviated financial statements of the 
company being acquired are furnished pursuant to Item 15, furnish 
the full financial statements required by Regulation S-X and the 
independent accountant's report thereon.
    (e) S-2 or S-3 Companies. If abbreviated financial statements of 
the company being acquired are furnished pursuant to Item 16, 
furnish the full financial statements required by Regulation S-X and 
the independent accountant's report thereon.
    (f) Companies Other Than S-2 or S-3 Companies. If abbreviated 
financial statements of the company being acquired are furnished 
pursuant to Item 17(a), furnish the full financial statements 
required by Regulation S-X and the independent accountant's report 
thereon. If abbreviated financial statements are furnished pursuant 
to Item 17(a) with respect to the other businesses acquired or to be 
acquired, furnish the full financial statements required by 
Regulation S-X and the independent accountant's report thereon. If 
abbreviated financial statements are furnished pursuant to Item 
17(b)(7) with respect to the company being acquired, furnish the 
full financial statements required by Regulation S-X and the 
independent accountant's report thereon.
    (g) Furnish the financial statement schedules required by 
Regulation S-X (17 CFR Part 210) and Item 14(e), Item 17(a), or Item 
17(b)(9) of this Form. These schedules should be lettered or 
numbered in the manner described for exhibits in paragraph (a) of 
Item 21.
* * * * *
    18. By amending Form F-1 (referenced in Sec. 239.31) by revising 
Items 11(b) and (c), removing the words ``and Financial Statement 
Schedules'' from the caption to Item 16, removing paragraph (b) of Item 
16, and adding Item 18 to read as follows:


[[Page 35622]]

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

Form F-1

Registration Statement Under the Securities Act of 1933

* * * * *

Item 11. Information with respect to the Registrant

    Furnish the following information with respect to the 
Registrant:
* * * * *
    (b) Information required by either paragraph (b)(1) or (b)(2) of 
this Item:
    (1) Information required by Item 18 of Form 20-F (Schedules 
required under Regulation S-X shall be filed pursuant to Item 18 
``Financial Statements and Schedules,'' of this Form) as well as any 
information required by Rule 3-05 and Article 11 of Regulation S-X 
(Sec. 210 of this chapter), except as provided by paragraph (c) of 
this Item; or
    (2) If the registrant satisfies the eligibility criteria in Item 
305(a) of Regulation S-K (Sec. 229.305(a) of this chapter), 
abbreviated financial statements of the registrant meeting the 
requirements of Item 305 of Regulation S-K, as well as any 
information required by Rule 3-05 and Article 11 of Regulation S-X.
    (3) Abbreviated financial statements meeting the requirements of 
Item 305 of Regulation S-K may be furnished with respect to 
businesses acquired or to be acquired, except that the information 
need only be provided for the periods specified by Rule 3-05 of 
Regulation S-X. This option is available only if the business 
acquired or to be acquired satisfies the eligibility criteria in 
Item 305(a)(1) of Regulation S-K.
    (c) Information required by either paragraph (1) or (2) of this 
Item:
    (1) Information required by Item 17 of Form 20-F may be 
furnished in lieu of the information specified by Item 18 thereof if 
the only securities to be issued pursuant to this registration 
statement are non-convertible securities that are ``investment grade 
securities,'' as defined below, or the only securities to be issued 
hereunder are to be offered: (1) upon the exercise of outstanding 
rights granted by the issuer of the securities to be offered, if 
such rights are granted on a pro rata basis to all existing security 
holders of the class of securities to which the rights attach and 
there is no standby underwriting in the United States or similar 
arrangement; or (2) pursuant to a dividend or interest reinvestment 
plan; or (3) upon the conversion of outstanding transferable 
warrants issued by the issuer of the securities to be offered, or by 
an affiliate of such issuer; or
    (2) If the registrant satisfies the eligibility criteria in Item 
305(a) of Regulation S-K, abbreviated financial statements of the 
registrant meeting the requirements of Item 305 of Regulation S-K, 
as well as any information required by Rule 3-05 and Article 11 of 
Regulation S-X.
    (3) Abbreviated financial statements meeting the requirements of 
Item 305 of Regulation S-K may be furnished with respect to 
businesses acquired or to be acquired, except that the information 
need only be provided for the periods specified by Rule 3-05 of 
Regulation S-X. This option is available only if the business 
acquired or to be acquired satisfies the eligibility criteria in 
Item 305(a)(1) of Regulation S-K.
* * * * *

Item 18. Financial Statements and Schedules

    (a) If abbreviated financial statements are furnished pursuant 
to Items 11 (b)(2) or (3) of this Form, furnish the full financial 
statements required by Item 18 of Form 20-F and the independent 
accountant's report thereon.
    (b) If abbreviated financial statements are furnished pursuant 
to Items 11 (c)(2) or (3) of this Form, furnish the full financial 
statements required by Item 17 of Form 20-F and the independent 
accountant's report thereon.
* * * * *
    19. By amending Form F-2 (referenced in Sec. 239.32) by amending 
General Instructions I.D and I.G by adding a sentence at the end of 
each Instruction, adding paragraphs (b)(1)(A)-(C) to Item 11, adding a 
sentence at the end of paragraph (b)(2) of Item 11, revising Item 12, 
revising Instruction 4 to Item 12, and adding Item 18 to read as 
follows:

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

Form F-2

Registration Statement Under the Securities Act of 1933

* * * * *

General Instructions

I. Eligibility Requirements for Use of Form F-2

* * * * *
    D. * * * This instruction does not apply to any abbreviated 
financial statements included in the prospectus pursuant to Item 
11(b) or 12(b) of this Form.
* * * * *
    G. * * * If the subsidiary satisfies the eligibility criteria in 
Item 305(a) of Regulation S-K (Sec. 229.305(a) of this chapter), 
abbreviated financial statements meeting the requirements of Item 
305 of Regulation S-K may be furnished as specified in Form S-2.
* * * * *

Item 11. Material Changes

    (b) * * *
    (1) * * *
    (A) Abbreviated financial statements meeting the requirements of 
Item 305 of Regulation S-K may be furnished with respect to the 
businesses acquired or to be acquired, except that the information 
need only be provided for the periods specified by Rule 3-05 of 
Regulation S-X. This option is available only if the business 
acquired or to be acquired satisfies the eligibility criteria in 
Item 305(a)(1) of Regulation S-K.
    (B) If the registrant satisfies the eligibility criteria in Item 
305(a) of Regulation S-K, abbreviated financial statements meeting 
the requirements of Item 305 of Regulation S-K may be furnished 
pursuant to paragraphs (b)(1)(ii), (iii) or (iv) above with respect 
to restated financial statements of the registrant required by these 
paragraphs.
    (2) * * *
    If the registrant satisfies the eligibility criteria in Item 
305(a) of Regulation S-K, abbreviated interim financial statements 
meeting the requirements of Item 305 of Regulation S-K may be 
furnished pursuant to paragraph (b)(2)(i) above.

Item 12. Information with Respect to the Registrant

    The registrant shall incorporate by reference the latest Form 
20-F, Form 40-F or Form 10-K filed pursuant to the Exchange Act that 
contains certified financial statements for the registrant's latest 
fiscal year for which a Form 20-F, Form 40-F or Form 10-K was 
required to have been filed and any report on Form 10-Q or Form 8-K 
filed since the end of the fiscal year covered by such annual 
report. The registrant may incorporate by reference any other Form 
10-Q or Form 8-K, and any Form 6-K containing information meeting 
the requirements of this Form. The registrant shall deliver with the 
prospectus the information required by paragraph (a) or (b) of this 
Item, except that only registrants satisfying the eligibility 
criteria in Item 305(a) of Regulation S-K may choose to deliver the 
information in paragraph (b).
    (a) The latest Form 20-F, Form 40-F or Form 10-K and any report 
on Form 10-Q or Form 8-K required to be incorporated by reference 
into this Form, along with any other Form 10-Q, Form 8-K or Form 6-K 
incorporated by reference into this Form at the registrant's option.
    (b) The information required by Part I of Form 20-F and 
abbreviated financial statements of the registrant meeting the 
requirements of Item 305 of Regulation S-K, as well as any 
information required by Rule 3-05 and Article 11 of Regulation S-X. 
Abbreviated financial statements meeting the requirements of Item 
305 of Regulation S-K may be furnished with respect to businesses 
acquired or to be acquired, except that the information need only be 
provided for the periods specified by Rule 3-05 of Regulation S-X. 
This option is available only if the business acquired or to be 
acquired satisfies the eligibility criteria in Item 305(a)(1) of 
Regulation S-K. The registrant also shall deliver any Form 10-Q, 
Form 8-K or Form 6-K incorporated by reference into this Form at the 
registrant's option.

Instructions

* * * * *
    4. If the registrant elects to comply with paragraph (a) of this 
Item, the Form 20-F, Form 40-F or Form 10-K shall be delivered with 
the preliminary prospectus but need not be redelivered with the 
final prospectus to a recipient that had previously received the 
Form 20-F, Form 40-F or Form 10-K with the preliminary prospectus.
* * * * *

Item 18. Financial Statements and Schedules

    If abbreviated financial statements are furnished pursuant to 
Item 11(b)(1)(A) or 

[[Page 35623]]
Item 12(b) with respect to businesses acquired or to be acquired, 
furnish the full financial statements required by Regulation S-X and 
the independent accountant's report thereon. If abbreviated 
financial statements are furnished pursuant to Item 11(b)(1)(B) with 
respect to restated financial statements of the registrant, furnish 
the full financial statements required by Regulation S-X and the 
independent accountant's report thereon.

    20. By amending Form F-3 (referenced in Sec. 239.33) by adding a 
sentence to the end of the note to General Instruction I.A.5, by adding 
a sentence to the end of General Instruction I.B.1, I.B.2, I.B.3 and 
I.B.4, adding Item 11(c), and Item 18 to read as follows:

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

Form F-3

Registration Statement Under the Securities Act of 1933

* * * * *

General Instructions

I. Eligibility Requirements for Use of Form F-3

* * * * *
    A. Registrant Requirements * * *
    5. Majority-owned subsidiaries * * *

    Note: * * * If such subsidiary satisfies the eligibility 
criteria in Item 305(a) of Regulation S-K (Sec. 229.305(a) of this 
chapter), abbreviated financial statements meeting the requirements 
of Item 305 of Regulation S-K may be furnished as specified in Form 
S-3.

    B. Transaction Requirements
    1. * * * If the registrant satisfies the eligibility criteria in 
Item 305(a) of Regulation S-K, abbreviated financial statements 
meeting the requirements of Item 305 of Regulation S-K may be 
furnished pursuant to this Instruction.
* * * * *
    2. * * * If the registrant satisfies the eligibility criteria in 
Item 305(a) of Regulation S-K, abbreviated financial statements 
meeting the requirements of Item 305 of Regulation S-K may be 
furnished pursuant to this Instruction.
    3. * * * If the registrant satisfies the eligibility criteria in 
Item 305(a) of Regulation S-K, abbreviated financial statements 
meeting the requirements of Item 305 of Regulation S-K may be 
furnished pursuant to this Instruction.
    4. * * * If the registrant satisfies the eligibility criteria in 
Item 305(a) of Regulation S-K, abbreviated financial statements 
meeting the requirements of Item 305 of Regulation S-K may be 
furnished pursuant to this Instruction.
* * * * *

Item 11. Material Changes

    (b)(1) * * *
    (A) Abbreviated financial statements meeting the requirements of 
Item 305 of Regulation S-K may be furnished with respect to the 
businesses acquired or to be acquired, except that the information 
need only be provided for the periods specified by Rule 3-05 of 
Regulation S-X. This option is available only if the business 
acquired or to be acquired satisfies the eligibility criteria in 
Item 305(a)(1) of Regulation S-K.
    (B) If the registrant satisfies the eligibility criteria in Item 
305(a) of Regulation S-K, abbreviated financial statements meeting 
the requirements of Item 305 of Regulation S-K may be furnished 
pursuant to paragraphs (b)(ii), (iii) or (iv) above with respect to 
restated financial statements of the registrant required by these 
paragraphs.
    (2) * * * If the registrant satisfies the eligibility criteria 
in Item 305(a) of Regulation S-K, abbreviated interim financial 
statements meeting the requirements of Item 305 of Regulation S-K 
may be furnished pursuant to paragraph (i) above.
* * * * *

Item 18. Financial Statements and Schedules

    If abbreviated financial statements are furnished pursuant to 
paragraph (i) of Item 11(b) with respect to businesses acquired or 
to be acquired, furnish the full financial statements required by 
Regulation S-X and the independent accountant's report thereon. If 
abbreviated financial statements are furnished pursuant to paragraph 
(ii), (iii) or (iv) of Item 11(b) with respect to restated financial 
statements of the registrant, furnish the full financial statements 
required by Regulation S-X and the independent accountant's report 
thereon.
* * * * *
    21. By amending Form F-4 (referenced in Sec. 239.34) by adding Item 
10(c)(5), paragraph (iv) to Item 12(a)(2), a sentence at the end of 
Item 12(a)(3), a sentence at the end of Item 12(a)(5), redesignating 
paragraph (h) of Item 14 as paragraph (h)(1) of Item 14, adding 
paragraph (h)(2) to Item 14, redesignating current Item 15 as paragraph 
(a) to Item 15, adding paragraph (b) to Item 15, redesignating current 
Item 16 as paragraph (a) to Item 16, adding paragraph (b) to Item 16, 
adding paragraph (c) to Item 17, removing the words ``and Financial 
Statement Schedules'' from the caption to Item 21, removing paragraph 
(b) from Item 21, redesignating paragraph (c) of Item 21 as paragraph 
(b) of Item 21, and adding Item 23 to read as follows:

    Note--The text of Form F-4 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

Form F-4

Registration Statement Under the Securities Act of 1933

* * * * *

Item 10. Information With Respect to F-3 Companies * * *

    (c) * * *
    (5) If the registrant satisfies the eligibility criteria in Item 
305(a) of Regulation S-K:
    (i) Abbreviated financial statements meeting the requirements of 
Item 305 of Regulation S-K may be furnished pursuant to paragraph 
(c)(1) of this Item with respect to businesses acquired or to be 
acquired, except that the information need only be provided for the 
periods specified by Rule 3-05 of Regulation S-X. This option is 
available only if the business acquired or to be acquired satisfies 
the eligibility criteria in Item 305(a)(1) of Regulation S-K.
    (ii) Abbreviated financial statements meeting the requirements 
of Item 305 of Regulation S-K may be furnished pursuant to 
paragraphs (c)(2), (3) and (4) of this Item with respect to restated 
financial statements of the registrant.
* * * * *

Item 12. Information With Respect to F-2 or F-3 Registrants

* * * * *
    (a) * * *
    (2) * * *
    (iv) If the registrant satisfies the eligibility criteria in 
Item 305(a) of Regulation S-K, abbreviated interim financial 
statements of the registrant meeting the requirements of Item 
305(b)(5) of Regulation S-K may be furnished pursuant to paragraph 
(a)(2)(i) of this Item.
    (3) * * * Abbreviated financial statements meeting the 
requirements of Item 305 of Regulation S-K may be furnished with 
respect to the businesses acquired or to be acquired, except that 
the information need only be provided for the periods specified by 
Rule 3-05 of Regulation S-X. This option is available only if the 
business acquired or to be acquired satisfies the eligibility 
criteria in Item 305(a)(1) of Regulation S-K.
* * * * *
    (b) * * *
    (2) * * *
    (vi) If the registrant satisfies the eligibility criteria in 
Item 305(a) of Regulation S-K, abbreviated interim financial 
statements of the registrant meeting the requirements of Item 305 of 
Regulation S-K may be furnished pursuant to paragraph (i) above.
    (vii) If the registrant satisfies the eligibility criteria in 
Item 305(a) of Regulation S-K, abbreviated financial statements 
meeting the requirements of Item 305 of Regulation S-K may be 
furnished pursuant to paragraph (b)(2)(ii) of this Item with respect 
to businesses acquired or to be acquired, except that the 
information need only be provided for the periods specified by Rule 
3-05 of Regulation S-X. This option is available only if the 
business acquired or to be acquired satisfies the eligibility 
criteria in Item 305(a)(1) of Regulation S-K.
    (viii) If the registrant satisfies the eligibility criteria in 
Item 305(a) of Regulation S-K, abbreviated financial statements 
meeting the requirements of Item 305 of Regulation S-K may be 
furnished pursuant to paragraphs (b)(2)(iii), (iv) and (v) of this 
Item with respect to restated financial statements of the registrant 
required by this Item.
    (3) * * *
    (ix) If the registrant satisfies the eligibility criteria in 
Item 305(a) of Regulation S-K, abbreviated financial statements of 
the registrant meeting the requirements of Item 305 of Regulation S-
K may be furnished pursuant to paragraph (3)(vii) of this Item. If 

[[Page 35624]]
the registrant satisfies the eligibility criteria in Item 305(a) of 
Regulation S-K, abbreviated financial statements meeting the 
requirements of Item 305 of Regulation S-K may be furnished pursuant 
to paragraph (3)(vii) of this Item with respect to businesses 
acquired or to be acquired, except that the information need only be 
provided for the periods specified by Rule 3-05 of Regulation S-X. 
This option is available only if the business acquired or to be 
acquired satisfies the eligibility criteria in Item 305(a)(1) of 
Regulation S-K.
* * * * *

Item 14. Information With Respect to Foreign Registrants Other Than F-2 
or F-3 Registrants

    (h) Financial statements required by either paragraph (1) or (2) 
of this Item:
    (1) * * *
    (2) If the registrant satisfies the eligibility criteria in Item 
305(a) of Regulation S-K, abbreviated financial statements of the 
registrant meeting the requirements of Item 305 of Regulation S-K 
may be furnished with respect to paragraph (h)(1) of this Item. 
Abbreviated financial statements meeting the requirements of Item 
305 of Regulation S-K also may be furnished with respect to 
businesses acquired or to be acquired if such businesses satisfy the 
eligibility criteria in Item 305(a)(1) of Regulation S-K and the 
registrant satisfies the eligibility criteria in Item 305(a) of 
Regulation S-K, except that the information need only be provided 
for the periods specified by Rule 3-05 of Regulation S-X.
* * * * *

Item 15. Information With Respect to F-3 Companies

    (a) * * *
    (b) Abbreviated financial statements meeting the requirements of 
Item 305 of Regulation S-K of the company being acquired may be 
furnished pursuant to Items 10 and 11 of this Form if the company 
being acquired satisfies the eligibility criteria in Item 305(a)(1) 
of Regulation S-K and the registrant satisfies the eligibility 
criteria in Item 305(a) of Regulation S-K.
* * * * *

Item 16. Information With Respect to F-2 or F-3 Companies

    (a) * * *
    (b) Abbreviated financial statements meeting the requirements of 
Item 305 of Regulation S-K may be furnished for the company being 
acquired pursuant to Items 12 and 13 of this Form if the company 
being acquired satisfies the eligibility criteria in Item 305(a)(1) 
of Regulation S-K and the registrant satisfies the eligibility 
criteria in Item 305(a) of Regulation S-K.
* * * * *

Item 17. Information With Respect to Foreign Companies Other Than F-2 
or F-3 Companies

* * * * *
    (c) Abbreviated financial statements meeting the requirements of 
Item 305 of Regulation S-K may be furnished for the company being 
acquired pursuant to paragraph (a) of this Item if the company being 
acquired satisfies the eligibility criteria in Item 305(a)(1) of 
Regulation S-K and the registrant satisfies the eligibility criteria 
in Item 305(a) of Regulation S-K.
* * * * *

Item 23. Financial Statements and Schedules

    If abbreviated financial statements are furnished pursuant to 
paragraph (b)(3)(ix) of Item 12, paragraph (h)(2) of Item 14, 
paragraph (b) of Item 15, paragraph (b) of Item 16, or paragraph (c) 
of Item 17 of this Item, furnish full financial statements meeting 
the requirements of Item 17 or 18 of Form 20-F, whichever is 
applicable. If abbreviated financial statements are furnished 
pursuant to paragraph (c)(5)(i) of Item 10, paragraph (a)(3) of Item 
12, or paragraph (b)(2)(vii) of Item 12 of this Item, furnish full 
financial statements meeting the requirements of Regulation S-X with 
respect to businesses acquired or to be acquired. If abbreviated 
financial statements are furnished pursuant to paragraph (c)(5)(ii) 
of Item 10 or paragraph (b)(2)(viii) of Item 12 above, furnish 
restated full financial statements of the registrant meeting the 
requirements of Regulation S-X. If abbreviated financial statements 
are furnished pursuant to paragraph (a)(2)(iv) or paragraph 
(b)(2)(vi) of Item 12 above, furnish interim financial statements 
meeting the requirements of Regulation S-X.

    22. By amending Form F-7 (referenced in Sec. 239.37) by adding a 
paragraph to the end of Item 1 to read as follows:

    Note--The text of Form F-7 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

Form F-7

Registration Statement Under the Securities Act of 1933

* * * * *

Item 1. Home Jurisdiction Documents

* * * * *
    Notwithstanding the foregoing, the prospectus may contain, in 
lieu of any financial statements required in any Canadian 
jurisdiction, if the bidder satisfies the eligibility criteria in 
Item 305(a) of Regulation S-B (Sec. 228.305(a) of this chapter) or 
Item 305(a) of Regulation S-K (Sec. 229.305(a) of this chapter), 
abbreviated financial statements meeting the requirements of Item 
305 of such regulation.
* * * * *
    23. By amending Form F-8 (referenced in Sec. 239.38) by adding a 
paragraph to the end of Item 1 to read as follows:

    Note--The text of Form F-8 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

Form F-8

Registration Statement Under the Securities Act of 1933

* * * * *

Item 1. Home Jurisdiction Documents

* * * * *
    Notwithstanding the foregoing, the prospectus may contain, in 
lieu of any financial statements required in any Canadian 
jurisdiction, if the bidder satisfies the eligibility criteria in 
Item 305(a) of Regulation S-B (Sec. 228.305(a) of this chapter) or 
Item 305(a) of Regulation S-K (Sec. 229.305(a) of this chapter), 
abbreviated financial statements meeting the requirements of Item 
305 of such regulation.
* * * * *
    24. By amending Form F-9 (referenced in Sec. 239.39) by adding a 
paragraph to the end of Item 1 to read as follows:

    Note--The text of Form F-9 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

Form F-9

Registration Statement Under the Securities Act of 1933

* * * * *

Item 1. Home Jurisdiction Documents

* * * * *
    Notwithstanding the foregoing, the prospectus may contain, in 
lieu of any financial statements required in any Canadian 
jurisdiction, if the bidder satisfies the eligibility criteria in 
Item 305(a) of Regulation S-B (Sec. 228.305(a) of this chapter) or 
Item 305(a) of Regulation S-K (Sec. 229.305(a) of this chapter), 
abbreviated financial statements meeting the requirements of Item 
305 of such regulation.
* * * * *
    25. By amending Form F-10 (referenced in Sec. 239.40) by adding a 
paragraph to the end of Item 1 to read as follows:

    Note--The text of Form F-10 does not, and this amendment will 
not, appear in the Code of Federal Regulations.

Form F-10

Registration Statement Under the Securities Act of 1933

* * * * *

Item 1. Home Jurisdiction Documents

* * * * *
    Notwithstanding the foregoing, the prospectus may contain, in 
lieu of any financial statements required in any Canadian 
jurisdiction, if the bidder satisfies the eligibility criteria in 
Item 305(a) of Regulation S-B (Sec. 228.305(a) of this chapter) or 
Item 305(a) of Regulation S-K (Sec. 229.305(a) of this chapter), 
abbreviated financial statements meeting the requirements of Item 
305 of such regulation.
* * * * *
    26. By amending Form F-80 (referenced in Sec. 239.41) by adding a 
paragraph to the end of Item 1 to read as follows:

    Note--The text of Form F-80 does not, and this amendment will 
not, appear in the Code of Federal Regulations. 

[[Page 35625]]


Form F-80

Registration Statement Under the Securities Act of 1933

* * * * *

Item 1. Home Jurisdiction Documents

* * * * *
    Notwithstanding the foregoing, the prospectus may contain, in 
lieu of any financial statements required in any Canadian 
jurisdiction, if the bidder satisfies the eligibility criteria in 
Item 305(a) of Regulation S-B (Sec. 228.305(a) of this chapter) or 
Item 305(a) of Regulation S-K (Sec. 229.305(a) of this chapter), 
abbreviated financial statements meeting the requirements of Item 
305 of such regulation.
* * * * *
    27. By amending Form 1-A (referenced in Sec. 239.90) by revising 
Part F/S, by adding a sentence to the end of section (2), paragraph (f) 
to section (3) and paragraph (11) to Item 2 of Part III to read as 
follows:

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

Form 1-A

Regulation A Offering Statement Under the Securities Act of 1933

* * * * *

PART F/S

* * * * *
    (2) Statements of income, cash flows, and other stockholders 
equity--* * * If the issuer satisfies the eligibility criteria in 
Item 305(a) of Regulation S-B, the issuer may furnish abbreviated 
financial statements in accordance with Item 305 of Regulation S-B, 
except that the information shall be furnished for the periods 
specified in paragraphs (1) and (2) above, in lieu of full financial 
statements.
* * * * *
    (3) Financial Statements of Businesses Acquired or to be 
Acquired.
* * * * *
    (f) If the issuer satisfies the eligibility criteria in Item 
305(a) of Regulation S-B, the issuer may furnish abbreviated 
financial statements of the business acquired or to be acquired in 
accordance with Item 305 of Regulation S-B, except that the 
information shall be furnished for the periods specified under 
paragraph (c) above, in lieu of full financial statements. This 
option is available only if the business acquired or to be acquired 
satisfies the eligibility criteria in Item 305(a)(1) of Regulation 
S-B.
* * * * *

PART III--EXHIBITS

* * * * *

Item 2. Description of Exhibits

* * * * *
    (11) Financial statements--If abbreviated financial statements are 
furnished pursuant to Part F/S of this Form, furnish the full financial 
statements. If the full financial statements furnished pursuant to this 
paragraph are audited, furnish the independent accountant's report on 
the full financial statements.
* * * * *

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

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

    Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77eee, 77ggg, 
77nnn, 77sss, 77ttt, 78c, 78d, 78i, 78j, 78l, 78m, 78n, 78o, 78p, 
78q, 78s, 78w, 78x, 78ll(d), 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-
37, 80b-3, 80b-4, and 80b-11, unless otherwise noted.
* * * * *
    29. By amending Sec. 240.13e-3 by adding paragraph (e)(4) to read 
as follows:


Sec. 240.13e-3  Going private transactions by certain issuers or their 
affiliates.

* * * * *
    (e) Disclosure of certain information.
* * * * *
    (4) In lieu of the information required by paragraph (e)(1) of this 
section regarding information contained in Item 14 of Schedule 13E-3 
(Sec. 240.13e-3), or a fair and adequate summary thereof, the 
information set forth in this paragraph (e)(4) may be disclosed.
    (i) If the issuer or affiliate satisfies the eligibility criteria 
in Item 305(a) of Regulation S-B (Sec. 228.305(a) of this chapter) or 
Item 305(a) of Regulation S-K (Sec. 229.305(a) of this chapter), 
abbreviated financial statements meeting the requirements of Item 305 
of such regulation may be furnished.
    (ii) Abbreviated Financial Statements. For purposes of this 
section:
    (A) The term full financial statements shall mean financial 
statements filed with the Commission pursuant to Item 14 of Schedule 
13E-3.
    (B) The term abbreviated financial statements shall mean financial 
statements that meet the requirements of Item 305 of Regulation S-B or 
Item 305 of Regulation S-K.
    (iii) A disclosure document containing abbreviated financial 
statements shall not be deemed materially misleading or omitting 
material facts from the disclosure document within the meaning of the 
federal securities laws based on the omission from the disclosure 
document of those financial statement footnotes permitted by Item 305 
of Regulation S-B (Sec. 228.305 of this chapter) or Item 305 of 
Regulation S-K (Sec. 229.305 of this chapter) deemed a part of the 
disclosure document, provided the issuer or affiliate has complied with 
Item 305 of Regulation S-B or Item 305 of Regulation S-K.
    (iv) The full financial statements that are omitted from a 
disclosure document pursuant to this paragraph (e)(4) shall be deemed 
to be part of the disclosure document.
    30. By amending Sec. 240.13e-4 by adding paragraphs (d)(1)(v) and 
(i) to read as follows:


Sec. 240.13e-4  Tender offers by issuers.

* * * * *
    (d) Disclosure of certain information.
    (1) * * *
    (v) In lieu of the information required by paragraph (d)(1)(iv) of 
this section regarding information contained in Item 7 of Schedule 13E-
4 (Sec. 240.13e-4), or a fair and adequate summary thereof, if the 
issuer or affiliate satisfies the eligibility criteria in Item 305(a) 
of Regulation S-B (Sec. 228.305(a) of this chapter) or Item 305(a) of 
Regulation S-K (Sec. 229.305(a) of this chapter), abbreviated financial 
statements meeting the requirements of Item 305 of such regulation may 
be furnished.
* * * * *
    (i) Abbreviated Financial Statements. (1) For purposes of this 
section 13e-4:
    (i) The term full financial statements shall mean financial 
statements filed with the Commission pursuant to Item 7 of Schedule 
13E-4 or Item 1(a) of Schedule 13E-4F.
    (ii) The term abbreviated financial statements shall mean financial 
statements that meet the requirements of Item 305 of Regulation S-B or 
Item 305 of Regulation S-K.
    (2) A disclosure document containing abbreviated financial 
statements shall not be deemed materially misleading or omitting 
material facts from the disclosure document within the meaning of the 
federal securities laws based on the omission from the disclosure 
document of those financial statement footnotes permitted by Item 305 
of Regulation S-B (Sec. 228.305 of this chapter) or Item 305 of 
Regulation S-K (Sec. 229.305 of this chapter) deemed a part of the 
disclosure document, provided the issuer or affiliate has complied with 
Item 305 of Regulation S-B or Item 305 of Regulation S-K.
    (3) The full financial statements that are omitted from a 
disclosure document pursuant to paragraph (d)(1)(v) of this section or 
Item 1 of Schedule 13E-4F shall be deemed to be part of the disclosure 
document.
    31. By amending Sec. 240.13e-102 by redesignating paragraph (a) of 
Item 1 as paragraph (a)(1), adding a sentence at the beginning of 
paragraph (a)(1) and adding paragraph (a)(2) to read as follows: 

[[Page 35626]]



Sec. 240.13e-102  Schedule 13E-4F. Tender offer statement pursuant to 
section 13(e)(1) of the Securities Exchange Act of 1934 and 
Sec. 240.13e-4 thereunder.

* * * * *

Item 1. Home Jurisdiction Documents

    (a) (1) Furnish the information required by paragraph (a)(1) of 
this item to the Commission. Either the information required by 
paragraph (a)(1) or that required by paragraph (a)(2) of this Item 
shall be furnished to shareholders. If information is delivered to 
shareholders pursuant to paragraph (a)(2) of this Item, such 
information shall be furnished to the Commission. * * *
    (2) Furnish the information required by paragraph (a)(1) of this 
Item, provided that in lieu of financial statements included in such 
information, if the issuer satisfies the eligibility criteria in 
Item 305(a) of Regulation S-B (Sec. 228.305(a) of this chapter) or 
Item 305(a) of Regulation S-K (Sec. 229.305(a) of this chapter), 
abbreviated financial statements meeting the requirements of Item 
305 of such regulation may be furnished.
* * * * *
    32. By amending Sec. 240.14a-3 by revising the third sentence in 
the ``Note to Small Business Issuers''; by revising paragraph (b)(1); 
following the paragraph (b)(1), redesignating Notes 1 and 2 as Notes 2 
and 3, and adding Note 1 to read as follows:


Sec. 240.14a-3  Information to be furnished to security holders.

* * * * *
    (b) * * *
    Note to Small Business Issuers. * * * A small business issuer 
shall provide the information in Item 310(a) of Regulation S-B, or, 
provided that the small business issuer satisfies the eligibility 
criteria in Item 305(a) of Regulation S-B, the abbreviated financial 
statements required by Item 305 of Regulation S-B, in lieu of the 
financial information required by Sec. 240.14a-3(b)(1)). * * *
    (1) The report shall include, for the registrant and its 
subsidiaries consolidated, either:
    (i) Audited balance sheets as of the end of the two most recent 
fiscal years and audited statements of income and cash flows for each 
of the three most recent fiscal years prepared in accordance with 
Regulation S-X (Part 210 of this chapter), except that the provisions 
of Article 3 (other than Sec. 210.3-03(e), 210.3-04 and 210.3-20) and 
Article 11 shall not apply; or
    (ii) If the registrant satisfies the eligibility criteria in Item 
305(a) of Regulation S-K, abbreviated financial statements for the 
registrant and its subsidiaries consolidated prepared in accordance 
with Item 305 of Regulation S-K for the same periods specified in 
Sec. 240.14a-3(b)(1)(i). If abbreviated financial statements are 
included in the annual report to security holders, the registrant shall 
append the full financial statements required by Regulation S-X and the 
independent accountant's report thereon to the copies of the report 
mailed to the Commission pursuant to paragraph (c) of this section. If, 
however, the registrant has filed with the Commission an annual report 
on Form 10-K for the same fiscal year on or before the date that the 
annual report required by this section is delivered to security 
holders, the registrant does not have to append full financial 
statements to the copies of the report mailed to the Commission, and 
the registrant may furnish the Form 10-K financial statements to 
requesting persons in satisfaction of the delivery requirement set 
forth in Item 305(e) of Regulation S-K.

    Note 1. Any financial statement schedules or exhibits or 
separate financial statements that may otherwise be required in 
filings with the Commission may be omitted. If the financial 
statements of the registrant and its subsidiaries consolidated in 
the annual report filed or to be filed with the Commission are not 
required to be audited, the financial statements required by this 
paragraph (b) may be unaudited.
* * * * *
    33. By adding Sec. 240.14a-16 to read as follows:


Sec. 240.14a-16  Abbreviated financial statements.

    (a) For purposes of this section:
    (1) The term full financial statements shall mean financial 
statements filed with the Commission meeting the requirements of 
Regulation S-X (Part 210 of this chapter), or, for small business 
issuers, Item 310 of Regulation S-B (Sec. 228.310 of this chapter).
    (2) The term abbreviated financial statements shall mean financial 
statements that include the information specified in Item 305(b) of 
Regulation S-B (Sec. 228.305(b) of this chapter) or Item 305(b) of 
Regulation S-K (Sec. 229.305(b) of this chapter).
    (b) A report furnished pursuant to Sec. 240.14a-3(b) containing 
abbreviated financial statements shall not be deemed materially 
misleading or omitting material facts from the report within the 
meaning of the federal securities laws based on the omission from the 
report of those financial statement footnotes permitted by Item 305 of 
Regulation S-B (Sec. 228.305 of this chapter) or Item 305 of Regulation 
S-K (Sec. 229.305 of this chapter) deemed a part of the report, 
provided the issuer has complied with Item 305 of Regulation S-B or 
Item 305 of Regulation S-K.
    (c) A proxy statement containing abbreviated financial statements 
pursuant to Item 13 or 14 of Schedule 14A (Sec. 240.14a-101 of this 
chapter) shall not be deemed materially misleading or omitting material 
facts from the proxy statement within the meaning of the federal 
securities laws based on the omission from the proxy statement of those 
financial statement footnotes permitted by Item 305 of Regulation S-B 
(Sec. 228.305 of this chapter) or Item 305 of Regulation S-K 
(Sec. 229.305 of this chapter) deemed a part of the proxy statement, 
provided the issuer has complied with Item 305 of Regulation S-B or 
Item 305 of Regulation S-K.
    (d) The full financial statements that are omitted from a report or 
proxy statement shall be deemed to be part of the report or proxy 
statement.
    34. By amending Schedule 14A (Sec. 240.14a-101) by revising the 
last sentence in Note F, by revising paragraph (2) of Note G, by 
revising paragraph (3)(f) of Note G, by adding paragraph (a)(6) and 
Instruction 6 to Item 13 and by adding paragraphs (b)(1)(ii)(E), 
(b)(2)(i)(A)(5), (b)(2)(i)(B)(2)(vi), (b)(3)(i)(J) and (b)(3)(ii)(F) 
and Instruction 8 to Item 14 to read as follows:


Sec. 240.14a-101  Schedule 14A. Information required in proxy 
statement.

* * * * *
    Notes.
* * * * *
    F. Note to Small Business Issuers--* * * Small business issuers 
shall provide the financial information in Item 310 of Regulation S-
B or, if the small business issuer satisfies the eligibility 
criteria in Item 305(a) of Regulation S-B, the abbreviated financial 
statements required by Item 305 of Regulation S-B, in lieu of the 
financial statements required in Schedule 14A.
    G. Special Note for Small Business Issuers.
* * * * *
    (2) Registrants and acquirees which relied upon Alternative 1 in 
their most recent Form 10-KSB may provide the following information 
(Question numbers are in reference to Model A of Form 1-A): (a) 
Questions 37 and 38 instead of Item 6(d); (b) Question 43 instead of 
Item 7(a); (c) Questions 29-36 and 39 instead of Item 7(b); (d) 
Questions 40-42 instead of Item 8; (e) Questions 40-42 instead of 
Item 10; (f) the information required in Part F/S of Form 10-SB, or, 
if the small business issuer satisfies the eligibility criteria in 
Item 305(a) of Regulation S-B, the abbreviated financial statements 
required by Item 305 of Regulation S-B, instead of the financial 
statement requirements of Items 13 or 14 (abbreviated financial 
statements may be furnished for a business acquired or to be 
acquired if the small business issuer satisfies the eligibility 
criteria in Item 305(a) of Regulation S-B and the business acquired 
or to be acquired satisfies the eligibility criteria in Item 
305(a)(1) of Regulation S-B); (g) 

[[Page 35627]]
Questions 4, 11 and 47-50 instead of Item 13(a)(1)(3); (h) Question 3 
instead of Item 14(b)(3)(i)(A) and (B); and (i) Questions 4, 11 and 
47-50 instead of Item 14(b)(3)(i)(H).
* * * * *
    (3) * * *
    (f) the information required in Part F/S of Form 10-SB, or, if 
the small business issuer satisfies the eligibility criteria in Item 
305(a) of Regulation S-B, the abbreviated financial statements 
required by Item 305 of Regulation S-B, instead of the financial 
statement requirements of Items 13 or 14 of Schedule 14A 
(abbreviated financial statements may be furnished for a business 
acquired or to be acquired if the small business issuer satisfies 
the eligibility criteria in Item 305(a) of Regulation S-B and the 
business acquired or to be acquired satisfies the eligibility 
criteria in Item 305(a)(1) of Regulation S-B);
    Item 13. Financial and Other Information. * * *
    (a) Information required. * * *
* * * * *
    (6) If the registrant satisfies the eligibility criteria in Item 
305(a) of Regulation S-K, abbreviated financial statements of the 
registrant meeting the requirements of Item 305 of Regulation S-K 
may be furnished pursuant to paragraph (a)(1) of this Item. If the 
registrant satisfies the eligibility criteria in Item 305(a) of 
Regulation S-K, abbreviated financial statements meeting the 
requirements of Item 305 of Regulation S-K may be furnished pursuant 
to paragraph (a)(1) above with respect to businesses acquired or to 
be acquired, except that the information need only be provided for 
the periods specified by Rule 3-05 of Regulation S-X. This option is 
available only if the business acquired or to be acquired satisfies 
the eligibility criteria in Item 305(a)(1) of Regulation S-K.
* * * * *
    Instructions to Item 13. * * *
    6. If abbreviated financial statements are included pursuant to 
paragraph (a)(6) of this Item, the registrant shall append the full 
financial statements required by Regulation S-X and the independent 
accountant's report thereon to the copies of the proxy statement 
filed with the Commission pursuant to Rule 14a-6 (17 CFR 240.14a-6). 
If, however, the registrant previously has filed with the Commission 
full financial statements and the independent accountant's report 
thereon for the same period in an annual report on Form 10-K and any 
quarterly reports on Form 10-Q necessary to provide interim 
financial disclosure, the registrant does not have to append full 
financial statements to the copies of the proxy statement filed with 
the Commission, and the registrant may furnish the Form 10-K and 10-
Q financial statements and the independent accountant's report 
thereon to requesting persons in satisfaction of the delivery 
requirement set forth in Item 305(e) of Regulation S-K.
    Item 14. Mergers, consolidations, acquisitions and similar 
matters
* * * * *
    (b) * * *
    (1) * * *
    (ii) * * *
    (E) If the registrant satisfies the eligibility criteria in Item 
305(a) of Regulation S-K, abbreviated financial statements meeting 
the requirements of Item 305 of Regulation S-K may be furnished 
pursuant to paragraph (b)(1)(ii)(A) of this Item with respect to 
businesses acquired or to be acquired, except that the information 
need only be provided for the periods specified by Rule 3-05 of 
Regulation S-X. This option is available only if the business 
acquired or to be acquired satisfies the eligibility criteria in 
Item 305(a)(1) of Regulation S-K. If the registrant satisfies the 
eligibility criteria in Item 305(a) of Regulation S-K, abbreviated 
financial statements of the registrant meeting the requirements of 
Item 305 of Regulation S-K may be furnished pursuant to paragraphs 
(b)(1)(ii)(B), (C) or (D) of this Item.
* * * * *
    (2) Information with respect to S-2 or S-3 registrants.
* * * * *
    (i) * * *
    (A) * * *
    (5) If the registrant satisfies the eligibility criteria in Item 
305(a) of Regulation S-K, abbreviated financial statements meeting 
the requirements of Item 305 of Regulation S-K may be furnished 
pursuant to paragraph (b)(2)(i)(A)(3) of this Item with respect to 
businesses acquired or to be acquired, except that the information 
need only be provided for the periods specified by Rule 3-05 of 
Regulation S-X. This option is available only if the business 
acquired or to be acquired satisfies the eligibility criteria in 
Item 305(a)(1) of Regulation S-K.
    (B) * * *
    (2) * * *
    (vi) If the registrant satisfies the eligibility criteria in 
Item 305(a) of Regulation S-K, abbreviated financial statements 
meeting the requirements of Item 305 of Regulation S-K may be 
furnished pursuant to paragraph (b)(2)(i)(B)(2)(i) of this Item with 
respect to interim financial information of the registrant, 
paragraph (b)(2)(i)(B)(2)(ii) of this Item with respect to 
businesses acquired or to be acquired, except that the information 
need only be provided for the periods specified by Rule 3-05 of 
Regulation S-X, paragraphs (b)(2)(i)(B)(2) (iii) and (iv) of this 
Item with respect to restated financial statements of the 
registrant, and paragraph (b)(2)(i)(B)(2)(v) of this Item with 
respect to financial information required because of a material 
disposition of assets outside of the normal course of business. The 
option to furnish abbreviated financial statements with respect to 
businesses acquired or to be acquired is available only if the 
business acquired or to be acquired satisfies the eligibility 
criteria in Item 305(a)(1) of Regulation S-K.
* * * * *
    (3) Information with respect to registrants other than S-2 or S-
3 registrants. * * *
    (i) * * *
    (J) If the registrant satisfies the eligibility criteria in Item 
305(a) of Regulation S-K, abbreviated financial statements of the 
registrant meeting the requirements of Item 305 of Regulation S-K 
may be furnished pursuant to paragraph (b)(3)(i)(E) of this Item. If 
the registrant satisfies the eligibility criteria in Item 305(a) of 
Regulation S-K, abbreviated financial statements meeting the 
requirements of Item 305 of Regulation S-K may be furnished pursuant 
to paragraph (E) above with respect to businesses acquired or to be 
acquired, except that the information need only be provided for the 
periods specified by Rule 3-05 of Regulation S-X. This option is 
available only if the business acquired or to be acquired satisfies 
the eligibility criteria in Item 305(a)(1) of Regulation S-K.
    (ii) * * *
    (F) If the registrant satisfies the eligibility criteria in Item 
305(a) of Regulation S-K, abbreviated financial statements of the 
registrant meeting the requirements of Item 305 of Regulation S-K 
may be furnished pursuant to paragraphs (b)(3)(ii) (A) and (B) of 
this Item.
* * * * *
    Instructions to Item 14. * * *
    8. If abbreviated financial statements are included pursuant to 
paragraphs (b)(1)(ii)(E), (b)(2)(i)(A)(5), (b)(2)(i)(B)(2)(vi), 
(B)(3)(i)(J), or (b)(3)(ii)(F) of this Item, the registrant shall 
append the full financial statements required by Regulation S-X and 
the independent accountant's report thereon to the copies of the 
proxy statement filed with the Commission pursuant to Rule 14a-6 [17 
CFR 240.14a-6]. If, however, the registrant previously has filed 
with the Commission full financial statements and the independent 
accountant's report thereon for the same period in an annual report 
on Form 10-K and any quarterly reports on Form 10-Q necessary to 
provide interim financial disclosure, the registrant does not have 
to append full financial statements to the copies of the proxy 
statement filed with the Commission, and the registrant may furnish 
the Form 10-K and 10-Q financial statements and the independent 
accountant's report thereon to requesting persons in satisfaction of 
the delivery requirement set forth in Item 305(e) of Regulation S-K.
* * * * *
    35. By amending Sec. 240.14c-3 by adding two sentences at the end 
of paragraph (a)(1) and revising the third sentence in the ``Note to 
Small Business Issuers'' to read as follows:


Sec. 240.14c-3  Annual report to be furnished security holders.

    (a) * * *
    (1) * * * If abbreviated financial statements are included in the 
annual report to security holders, the registrant shall append the full 
financial statements required by Regulation S-X and the independent 
accountant's report thereon to the copies of the report mailed to the 
Commission pursuant to paragraph (c) of this rule. If, however, the 
registrant has filed with the Commission an annual report on Form 10-K 
on or before the date that the annual report required by this rule is 
delivered to security holders, the registrant does not have to append 
full 

[[Page 35628]]
financial statements to the copies of the report mailed to the 
Commission, and the registrant may furnish the Form 10-K financial 
statements to requesting persons in satisfaction of the delivery 
requirement set forth in Item 305(e) of Regulation S-K.
    (2) * * *

    Note to Small Business Issuers. * * * A small business issuer 
shall provide the information in Item 310(a) of Regulation S-B, or, 
if the small business issuer satisfies the eligibility criteria in 
Item 305(a) of Regulation S-B, the abbreviated financial statements 
required by Item 305 of Regulation S-B, in lieu of the financial 
information required by Rule 14a-3(b)(1) (Sec. 240.14a-3(b)(1)).
* * * * *
    36. By adding Sec. 240.14c-8 to read as follows:


Sec. 240.14c-8  Abbreviated financial statements.

    (a) For purposes of this rule:
    (1) The term ``full financial statements'' shall mean financial 
statements filed with the Commission meeting the requirements of 
Regulation S-X (Sec. 210 of this chapter), or, for small business 
issuers, Item 310 of Regulation S-B (Sec. 228.310 of this chapter).
    (2) The term ``abbreviated financial statements'' shall mean 
financial statements that include the information specified in Item 
305(b) of Regulation S-B (Sec. 228.305(b) of this chapter) or Item 
305(b) of Regulation S-K (Sec. 229.305(b) of this chapter).
    (b) A report furnished pursuant to Sec. 240.14c-3 containing 
abbreviated financial statements shall not be deemed materially 
misleading or omitting material facts from the report within the 
meaning of the federal securities laws based on the omission from the 
report of those financial statement footnotes permitted by Item 305 of 
Regulation S-B (Sec. 228.305 of this chapter) or Item 305 of Regulation 
S-K (Sec. 229.305 of this chapter) deemed a part of the report, 
provided the issuer has complied with Item 305 of Regulation S-B or 
Item 305 of Regulation S-K.
    (c) An information statement containing abbreviated financial 
statements pursuant to Item 1 of Schedule 14C (Sec. 240.14c-101 of this 
chapter) shall not be deemed materially misleading or omitting material 
facts from the information statement within the meaning of the federal 
securities laws based on the omission from the information statement of 
those financial statement footnotes permitted by Item 305 of Regulation 
S-B (Sec. 228.305 of this chapter) or Item 305 of Regulation S-K 
(Sec. 229.305 of this chapter) deemed a part of the information 
statement, provided the issuer has complied with Item 305 of Regulation 
S-B or Item 305 of Regulation S-K.
    (d) The full financial statements that are omitted from a report or 
information statement shall be deemed to be part of the report or 
information statement.
    37. By amending Schedule 14C (Sec. 240.14c-101) by revising the 
last sentence in the Note to read as follows:

* * * * *
    Note: * * * Small business issuers shall provide the financial 
information in Item 310 of Regulation S-B or, if the small business 
issuer satisfies the eligibility criteria in Item 305(a) of 
Regulation S-B, the abbreviated financial statements required by 
Item 305 of Regulation S-B, in lieu of any financial statements 
required by Item 1 of Sec. 240.14c-101.
* * * * *
    38. By amending Sec. 240.14d-1 by adding paragraph (b)(3) to read 
as follows:


Sec. 240.14d-1  Scope of and definitions applicable to Regulations 14D 
and 14E.

* * * * *
    (b) * * *
    (3) Abbreviated Financial Statements (i) For purposes of this rule:
    (A) The term ``full financial statements'' shall mean financial 
statements filed with the Commission pursuant to Item 9 of Schedule 
14D-1, Item 1(a) of Schedule 14D-1F or Item 1(a) of Schedule 14D-9F.
    (B) The term ``abbreviated financial statements'' shall mean 
financial statements that meet the requirements of Item 305 of 
Regulation S-B or Item 305 of Regulation S-K.
    (ii) A disclosure document containing abbreviated financial 
statements shall not be deemed materially misleading or omitting 
material facts from the disclosure document within the meaning of the 
federal securities laws based on the omission from the disclosure 
document of those financial statement footnotes permitted by Item 305 
of Regulation S-B (Sec. 228.305 of this chapter) or Item 305 of 
Regulation S-K (Sec. 229.305 of this chapter) deemed a part of the 
disclosure document, provided the bidder or other filer has complied 
with Item 305 of Regulation S-B or Item 305 of Regulation S-K.
    (iii) The full financial statements that are omitted from a 
disclosure document pursuant to paragraph (e)(1)(x) of Rule 14d-6, Item 
1(a) of Schedule 14D-1F or Item 1(a) of Schedule 14D-9F shall be deemed 
to be part of the disclosure document.
    39. By amending Sec. 240.14d-6 by adding paragraph (e)(1)(x) to 
read as follows:


Sec. 240.14d-6  Disclosure requirements with respect to tender offers.

* * * * *
    (e) Information to be included
    (1) * * *
    (x) In lieu of the information required by paragraph (e)(1)(viii) 
above regarding information contained in Item 9 of Schedule 14D-1, or a 
fair and adequate summary thereof, if the bidder satisfies the 
eligibility criteria in Item 305(a) of Regulation S-B (Sec. 228.305(a) 
of this chapter) or Item 305(a) of Regulation S-K (Sec. 229.305(a) of 
this chapter), abbreviated financial statements meeting the 
requirements of Item 305 of such regulation may be furnished.
    40. By amending Sec. 240.14d-102 by redesignating paragraph (a) of 
Item 1 as paragraph (a)(1), adding a new paragraph (a) introductory 
text and adding paragraph (a)(2) to read as follows:


Sec. 240.14d-102  Schedule 14D-1F. Tender offer statement pursuant to 
rule 14d-1(b) under the Securities Exchange Act of 1934.

* * * * *
Item 1. Home Jurisdiction Documents

    (a) Furnish the information required by paragraph (a)(1) of this 
item to the Commission. Either the information required by paragraph 
(a)(1) or that required by paragraph (a)(2) of this item shall be 
furnished to shareholders. If information is delivered to 
shareholders pursuant to paragraph (a)(2) of this item, such 
information shall be furnished to the Commission.
    (1) * * *
    (2) Furnish the information required by paragraph (a)(1) above, 
provided that in lieu of financial statements included in such 
information, if the bidder satisfies the eligibility criteria in 
Item 305(a) of Regulation S-B (Sec. 228.305(a) of this chapter) or 
Item 305(a) of Regulation S-K (Sec. 229.305(a) of this chapter), 
abbreviated financial statements meeting the requirements of Item 
305 of such regulation may be furnished.


    41. By amending Sec. 240.14d-103 by redesignating paragraph (a) of 
Item 1 as paragraph (a)(1), adding a new paragraph (a) introductory 
text and adding paragraph (a)(2) to read as follows:


Sec. 240.14d-103  Schedule 14D-9F. Solicitation/recommendation 
statement pursuant to section 14(d)(4) of the Securities Exchange Act 
of 1934 and rules 14d-1(b) and 14e-2(c) thereunder.

* * * * *
    Item 1. Home Jurisdiction Documents.
    (a) Furnish the information required by paragraph (a)(1) of this 
item to the Commission. Either the information required by paragraph 
(a)(1) or that required by paragraph (a)(2) of this item shall be 
furnished to shareholders. If information is delivered to 
shareholders pursuant to 

[[Page 35629]]
paragraph (a)(2) of this item, such information shall be furnished to 
the Commission.
    (1) * * *
    (2) Furnish the information required by paragraph (a)(1) above, 
provided that in lieu of financial statements included in such 
information, if the bidder satisfies the eligibility criteria in 
Item 305(a) of Regulation S-B (Sec. 228.305(a) of this chapter) or 
Item 305(a) of Regulation S-K (Sec. 229.305(a) of this chapter), 
abbreviated financial statements meeting the requirements of Item 
305 of such regulation may be furnished.
* * * * *

PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934

* * * * *
    42. The authority for Part 249 continues to read, in part, as 
follows:


    Authority: 15 U.S.C. 78a, et seq., unless otherwise noted.

    43. By amending Form 10-K (referenced in Sec. 249.310) by deleting 
the second sentence in Item 8, and adding a sentence at the end of Note 
1 to General Instruction G to read as follows:


    Note--The text of Form 10-K does not, and this amendment will 
not, appear in the Code of Federal Regulations.

Form 10-K

Annual Report Pursuant to Section 13 or 15(d) of the Securities 
Exchange Act of 1934

* * * * *

General Instructions

* * * * *
    G. Information to be Incorporated by Reference.
* * * * *
    Note 1. * * * In addition, if abbreviated financial statements 
are included in the registrant's annual report that is incorporated 
by reference, then full financial statements meeting the 
requirements of Regulation S-X shall be filed under Item 8.


    44. By amending Form 10-KSB (referenced in Sec. 249.310b) by adding 
paragraph 2(c) to the General Instructions to read as follows:


    Note--The text of Form 10-KSB does not, and this amendment will 
not, appear in the Code of Federal Regulations.

Form 10-KSB

* * * * *

General Instructions

* * * * *
    E. Information to be Incorporated by Reference.
* * * * *
    2. * * *
* * * * *
    (c) If abbreviated financial statements are included in the 
registrant's annual report that is incorporated by reference, then 
full financial statements meeting the requirements of Regulation S-B 
shall be filed under Item 7.

    By the Commission.

    Dated: June 27, 1995.
Margaret H. McFarland,
Deputy Secretary.

BILLING CODE 8010-01-P
    Note: The following appendices will not appear in the Code of 
Federal Regulations.

Appendix A--Summary of Common Footnote Disclosures That Would Be 
Omitted From Abbreviated Financial Statements

    The proposed rules for abbreviated financial statements would 
omit footnote disclosure included in the full financial statements, 
except with respect to a limited number of specified matters. Those 
specified matters are discussed in the proposing release. The 
following is a summary of the major types of disclosures that would 
typically be omitted from abbreviated financial statements of 
commercial and industrial companies. It may be useful in evaluating 
the general extent to which the volume of footnote disclosures would 
be reduced. The listing is not intended to include every specific 
disclosure that would be omitted, nor is it intended to define what 
disclosures would be omitted under the proposed rules. The listing 
does not specifically address additional footnote disclosures that 
may be required in full financial statements of registrants in 
specialized industries. However, such disclosures would be omitted 
from the notes to the abbreviated financial statements unless their 
inclusion is required in response to a matter specified for 
disclosure under the proposed rules. Certain information regarding 
the financial statement captions listed below is required to be 
shown on the face of the full financial statements, and that 
information also is required on the face of the abbreviated 
financial statements.

Omitted Disclosures by Major Financial Statement Caption

Cash
    Restrictions, compensating balances
Inventories
    Amounts by major classes, LIFO information, long term contract 
terms and conditions, billed and unbilled amounts
Investment securities
    Types, maturities, realized and unrealized gains or losses, 
sales and transfers

Loan impairment information

Depreciable assets
    Amounts by major classes, depreciation expense, depreciable 
lives
Intangible assets
    Amounts by major classes, amount and reasons for significant 
additions, deletions and writeoffs, amortization periods
Investments accounted for under the equity method
    Nature of investment, percentage ownership, market value, 
summarized financial information of investee
Amount of assets subject to lien
Lease information
    Operating leases
    Amounts expensed, commitments, future minimum lease payments, 
contingent rentals, terms and effects of sale-leaseback transactions
    Capital leases
    Assets subject to capital lease, interest portion of obligation, 
future minimum lease payments
Long-term obligations
    Terms, maturities, sinking fund requirements, security 
interests, covenants, nature and terms of extinguishments, terms and 
effects of troubled debt restructurings, capitalized interest 
amounts, rates used to discount certain liabilities
On-balance sheet and off-balance sheet financial instruments
    Financial instruments
    Terms and characteristics of both on-balance sheet and off-
balance sheet financial instruments, notional or contract amounts, 
concentrations of credit risk, amount of possible accounting loss on 
off balance sheet instruments
    Hedging activities
    Nature of activities and offsetting amounts, risks
    Derivatives
    Nature, terms and objectives, characteristics by category, 
notional or contract amounts
    Fair value disclosures
Pension, post-employment, and post-retirement benefit plan 
information
    Description of plan, details of the expense, plan assets, plan 
benefit obligations, net asset or liability recognized, assumptions 
regarding weighted-average assumed discount rate, rate of 
compensation increase used to measure the projected benefit, 
weighted-average expected long-term rate of return on plan assets, 
and health care cost trend rate, nature and gain or loss on 
curtailment of settlement of plan
Income taxes
    Components of tax expense, components of deferred tax assets/
liabilities and any valuation allowance, reconciliation of the 
effective income tax rate, carryforward information, nature and 
amounts of deferred taxes not recognized due to special exceptions 
to SFAS 109
Redeemable preferred stock
    Details of preferences, redemption terms and amounts
Stockholders equity
    Details of preferences, redemption terms, conversion features, 
voting rights, restrictions on net assets or payments of dividends, 
details of sales of stock by subsidiaries
Stock options and warrants
    Amounts granted, exercised, terminated and exercisable, changes 
in terms or exercise prices
Employee stock ownership plans (ESOPs)
    Details of plan, compensation expense during the period, number 
of share allocated and committed to be released, fair value of 
unearned ESOP shares and the existence of any obligation to 

[[Page 35630]]
repurchase shares including the fair value of such shares
Commitments
    Purchase, sale, delivery, guarantees etc.
Gain contingencies
Nonmonetary transactions
Transfers of receivable with recourse
Earnings per share
    Supplementary earnings per share reflecting recent conversions 
or issuances of debt or equity securities
Cash flows
    Interest and taxes paid, noncash transactions, sales, purchases, 
and maturities of investment securities

Research and development costs

Restructuring changes
    Nature and basis for the charge, description of major 
restructuring actions, amounts expensed by category, description and 
number of employees to be terminated, nature and extent to which 
actual restructuring action differed from original plan
Segment, geographic and currency translation information
    Business segment information
    Revenues, operating profit or loss, identifiable assets, 
depreciation and capital expenditures
    Revenue from major customers
    Foreign operations
    Reveues, operating profit or loss, identifiable assets
    Currency translation
    Balances, nature of foreign currency translated, exchange gains 
or losses included in net income
    Foreign exchange contracts
    Contract amounts and nature of foreign currency
    Certain Risks and Uncertainties as defined by AICPA SOP 94-6

Disclosures specified by recently issued or proposed FASB standards 
that would be omitted from abbreviated financial statements

Accounting for the impairment of long-lived assets and for long-
lived assets to be disposed of (SFAS 121)
    A description of impaired assets and facts and circumstances 
leading to impairment
    The amount of the impairment loss and how fair value was 
determined
    The caption in the income statement in which the impairment loss 
is recognized
    The business segment affected (if applicable)
Accounting for stock options
    Any additional disclosures that may be required by the proposed 
FASB statement with respect to disclosure of stock option 
compensation.
Appendix B--Disclosure Guidelines From the 1983 Study

    The following disclosure guidelines are reproduced from Summary 
Reporting of Financial Information, published in 1983 by the 
Financial Executives Research Foundation. The Guidelines were 
developed by the companies participating in the 1983 FERF study 
subsequent to the preparation of their prototype summary annual 
reports.
    These guidelines are based on the accounting and disclosure 
standards in effect in 1983. They have not been updated for changes 
since then.

General Guidelines

    SEC Rule. The guidelines presume that the summary report would 
not be materially misleading. This is implicit in SEC Rule 10(b)(5) 
and was among the instructions given to the nineteen companies that 
prepared mock summary reports.
    Format. No specific guidelines are recommended for the format of 
summary reports. Companies should have flexibility to make the most 
meaningful presentation of their individual circumstances.
    Narrative Financial Review. A summary report should include a 
narrative financial review. The authors believe that the summary 
reports that communicated most effectively were those that contained 
a narrative financial review in which management presented the 
company's financial results in layman's language. In addition, the 
financial review serves as a place to include all significant 
financial information, so as to avoid the duplication which occurs 
in many of today's annual reports. Also, the financial review 
provides a place where material now contained in the notes to the 
financial statements in technical terms can be explained in everyday 
language.
    The reporting on various aspects of the results of operations, 
of financial position, and of changes in financial position in a 
narrative financial review should be on an exception basis. For 
example, companies that are not incurring any liquidity problems or 
that do not lack resources would not be required to include 
``boilerplate'' language covering these matters.
    There should be total flexibility as to format and location of a 
narrative financial review. For example, a company could present 
such a discussion in an expanded letter to shareholders, if it 
wishes.
    Basic Financial Statements. A summary report should include a 
balance sheet and an income statement covering a minimum of two 
years. These could be condensed from those presented in the Form 10-
K.
    Funds flow information should be presented and should indicate 
the principal sources and uses of funds for a minimum of two years. 
This may be a condensed statement of changes in financial position, 
or any suitable alternative, such as a table or graph with a 
narrative explanation.

    Notes. The style and placement of footnote-type disclosures, 
when required by the summary reporting guidelines, are optional. The 
traditional footnote format is acceptable but not required.

Guidelines for Specific Disclosures

    Segment Data. A summary annual report should disclose industry 
and geographic segment data if necessary to give the reader an 
understanding of the company's business.
    Industry segment data should include a description of the 
segments, sales by segment and some meaningful measure of segment 
earnings (e.g., operating income or net earnings).
    Disclosure of identifiable assets, capital expenditures and 
depreciation expense by industry segment may be necessary if they 
would indicate a relationship among industry segments that is 
different from that which a reader might presume from observing 
sales and income.
    Encouraged disclosure. Companies are encouraged to provide 
additional information to aid readers in understanding the company's 
lines of business. Disclosures, such as rate of return on investment 
by segment, would be helpful in analyzing operations by segment.
    Companies are encouraged to disclose major operations outside 
the United States, especially when such operations are in countries 
that are politically or economically unstable.
    In addition, disclosing major customer information is 
encouraged.
    Accounting Policies and Accounting Changes. A company's 
accounting policies should be disclosed if:
     The policies are unique to the industry.
     There are acceptable alternative accounting principles 
that could be used and the choice would result in significantly 
different reported financial results.
    Factors to consider in determining whether or not to disclose an 
accounting policy include how much impact the policy may have on the 
financial statements and whether a reader would expect the policy to 
be disclosed.
    In addition, any material accounting changes should be 
disclosed, along with the effects of the changes on financial 
position or operating results.
    Contingencies and Uncertainties. Summary reports should disclose 
specific contingencies that could, on resolution, have a material 
effect on financial position or operation results.
    Acquisition and Dispositions. Summary reports should disclose 
significant acquisitions and dispositions of businesses, so the 
reader can more easily compare year-to-year reported financial 
results.
    Encourgaged disclosure. A company is encouraged to disclose the 
business reasons for an acquisition or disposition if that 
information might aid the reader in understanding the event and its 
importance.
    Long-term Debt. The total amount of long-term debt at the latest 
balance sheet date should be disclosed, including capitalized lease 
obligations. Scheduled maturities of this debt for each of the five 
years subsequent to the latest balance sheet date should be 
disclosed if it is anticipated that the maturities may cause or 
contribute to liquidity problems.
    Restrictive loan covenants (e.g., dividend restrictions, working 
capital requirements, interest coverage ratios) should be disclosed 
if the company is in or near violation of a covenant at the balance 
sheet date, or the restrictions significantly impede the flow of 
funds from subsidiaries to the parent company or from the company to 
the shareholders.
    Encouraged disclosure. Disclosure is also encouraged for larger 
than usual annual debt maturities, unusual financing and abnormal 
interest rates.
    Financial information on Unconsolidated Subsidiaries and Equity 
Investees. The 

[[Page 35631]]
entities should be identified and the percentages of ownership 
disclosed. In addition, aggregate totals of the following should be 
disclosed:
     Amount of the company's equity in earnings.
     Dividends received.
     Condensed balance sheet information.
    Short-term Debt. The total amount of short-term debt and the 
amount of unused lines of credit at the latest balance sheet date 
should be disclosed.
    Income Taxes. Companies should explain why the effective tax 
rate differs from the statutory tax rate, if there is a significant 
difference. Current guidance used by public companies would continue 
to apply in a summary report to determine materiality thresholds for 
disclosure. Such an explanation could be in the form of a 
reconciliation or be accomplished via narrative discussion.
    The amount of any significant operating loss or investment tax 
credit carryforwards that the company expects to use should be 
disclosed.
    Changing Prices Information. No minimum guidelines are proposed.
    Encouraged disclosure. Companies are encouraged to include 
whatever quantitative inflation-adjusted data they consider 
appropriate and to provide a narrative discussion of the effects of 
inflation on reported financial results.
    Quarterly Data. No minimum guidelines are proposed.
    Market Price Data. No minimum guidelines are proposed.
    Encouraged disclosure. Disclosure of the market price of the 
company's common stock is encouraged. This information could be on a 
monthly, quarterly or annual basis, indicating the highs, lows or 
averages for the period. The degree of detail would depend on the 
volatility of the stock's price.
    Selected Five-year Data. Both income statement and balance sheet 
data for a period of least five years should be presented. At a 
minimum, this disclosure should include the items required by the 
SEC's selected financial data rule--revenues, income from continuing 
operations, income per share from continuing operations, total 
assets, long-term obligations and cash dividends declared per common 
share.
    Encouraged disclosure. Companies are encouraged to disclose 
trend information, such as rate of return on investment, that would 
help the reader evaluate long-term performance and trends in 
financial position.
    Pension and Employee Benefit Plans. No minimum guidelines are 
proposed, pending the forthcoming guidance from the FASB's current 
pension accounting project.
    Detail of Inventory and Property. No minimum guidelines are 
proposed.
    Leases. Five-year maturities of capitalized lease obligations 
should be disclosed if the maturities may be the cause of or 
contribute to liquidity problems. Such disclosure would typically be 
included with long-term debt maturity information.
    Companies that have significant leases as a lessor should 
disclose information on their activities as a lessor, so the average 
reader can understand the business. Also, significant commitments 
for noncancelable operating leases should be disclosed.
    Encouraged disclosure. Disclosure of significant leasing 
transactions and other types of financing arrangements is 
encouraged.
    Shareholders' Equity. Minimum disclosure includes:
     The number of common shares outstanding at the latest 
balance sheet date.
     The components of shareholders' equity in the balance 
sheet at a minimum, a breakdown of retained earnings, total 
preferred stock and the total of common stock accounts.
     Total dividends declared.
     Restrictions on the payment of dividends due to loan or 
other covenants in cases where future dividend payments may be in 
jeopardy because the company is in or near violation of these 
covenants.
    Extraordinary Items. Extraordinary items merit ample explanation 
to help the average reader understand the significant items that 
affect the comparability of reported financial results. Both the 
nature of the items and effect on the financial statements should be 
disclosed.
    Other Income and Expense Data. Significant components of other 
income and expense should be disclosed if they would assist the 
average reader in understanding the comparability of reported 
financial results.
    Other Specific Expenses. No minimum guidelines are proposed for 
depreciation, research and development, interest and advertising 
expenses.
    Encouraged disclosure. Companies are encouraged to disclose 
these expenses when they are significant.
    Capitalized Interest. No minimum guidelines are proposed.
    Capital Expenditures and Firm Purchase Commitments. Companies 
should disclose current year capital expenditures. No minimum 
guidelines are proposed for firm purchase commitments that are in 
the ordinary course of business.
    Encouraged disclosure. Disclosure is encouraged of planned 
capital expenditures for the next year and beyond, if significant, 
as well as significant commitments and any plans for major new 
capital projects.
    Related Party Disclosures. Disclosure should include related 
party transactions or relationships where it is necessary for the 
reader to understand their present or potential future effects on 
results of operations or financial position.
    Prior Period Adjustments. Any adjustment of prior period 
financial statements should be disclosed, along with reasons, to 
inform the reader that comparative financial information is 
different from that previously issued.
    Ratios (Other Than Earnings Per Share). No minimum guidelines 
are proposed.
    Encouraged disclosure. Companies are encouraged to show ratios 
that would be meaningful indicators of the results of operations, 
funds flow and financial position.
    Earnings Per Share. Earnings per share amounts should be 
disclosed. In addition, fully diluted earnings per share should be 
disclosed if it is significantly different from primary earnings per 
share.
    Treasury Stock. Significant amounts of common stock held in the 
treasury should be disclosed. It is presumed that significant 
acquisitions of treasury shares would be disclosed in the funds flow 
data.
    Preferred stock. Significant types of preferred stock should be 
disclosed as separate line items in the balance sheet. Any scheduled 
maturities of preferred stock with mandatory redemption features 
should be disclosed if they may cause or contribute to liquidity 
problems.

Reports on Financial Statements

    Report of Management. Companies are encouraged to include a 
management report. It could explain the basis on which the financial 
information is prepared and management's objectives in simplifying 
the presentation of financial information to shareholders and state 
that the Form 10-K is available upon request.
    Report of Independent Accountants. A summary report should 
state, at a minimum, that the audited financial statements, 
including the independent accountants' report, are available in the 
Form 10-K. In addition, if the independent accountants' report is 
qualified for a matter other than consistency due to a change in 
accounting, such qualification should be mentioned in the summary 
report.
Illustration of Independent Auditors' Report

Report on condensed Financial Statements of a Public Entity Included in 
a Summary Annual Report

Independent Auditors' Report

Blank Company

    We have audited the consolidated balance sheets of Blank Company 
and subsidiaries as of December 31, 19x5 and 19x4 and the related 
consolidated statements of income, stockholders' equity, and cash 
flows for the years then ended. Such consolidated financial 
statements and our report thereon dated March 15, 19x6, expressing 
an unqualified opinion (which are not presented herein) are included 
in Appendix A to the proxy statement for the 19x6 annual meeting of 
stockholders. The accompanying condensed consolidated financial 
statements are the responsibility of the Company's management. Our 
responsibility is to express an opinion on such condensed 
consolidated financial statements in relation to the complete 
consolidated financial statements.
    In our opinion, the information set forth in the accompanying 
condensed consolidated balance sheets as of December 31, 19x5 and 
19x4 and the related condensed consolidated statements of income, 
stockholders' equity and cash flows for the years then ended is 
fairly stated in all material respects in relation to the basic 
consolidated financial statements from which it has been derived.

Appendix C--SEC Request for Investor Suggestions on How to Improve the 
Financial Information Provided in Annual Reports and Other Disclosure 
Documents Sent to Shareholders

    The U.S. Securities and Exchange Commission (``the SEC''), the 
federal government agency that oversees disclosure of information 
about companies to investors, wants to hear from investors about how 
they 

[[Page 35632]]
use the annual report to shareholders that the SEC requires most 
companies to send their shareholders every year. These annual 
reports are required to contain financial statements, including 
notes to the financial statements, as well as other information 
about the company.
    The SEC is proposing changes to its rules that would affect 
annual reports and other disclosure documents, such as prospectuses, 
containing financial statements that the SEC requires to be sent to 
investors. Some people have suggested that the information now 
required is too long and complex, and could discourage investors 
from examining the financial information they receive. Streamlining 
this information could highlight what is most important to 
investors. In addition, companies and their shareholders might be 
able to save substantial printing, mailing and other costs if the 
information were streamlined.
    The proposed changes to the SEC rules would allow companies to 
include ``abbreviated financial statements'' in their annual reports 
and other documents sent to investors. Abbreviated financial 
statements would be the same as the financial statements now 
required, except that most of the notes could be omitted. The 
complete financial statements, with all of the notes, would still be 
filed with the SEC, and companies would have to send this 
information to investors promptly if they requested it.
    The SEC also is asking questions about other approaches to 
streamlining the information given to investors. For example, should 
it allow companies to give their shareholders a ``summary annual 
report'' that includes financial information that is more condensed 
than abbreviated financial statements? Should it totally rescind the 
requirement that companies send their shareholders an annual report, 
and leave it up to the companies to decide when and what to 
communicate to shareholders?
    The SEC would like information about how investors use the 
financial information they receive, and whether the proposed rule 
changes would be helpful to them. Since many people now have 
computers, the SEC would like to hear whether investors prefer to 
receive information about companies in which they invest in 
electronic format or in paper.
    In addition, the SEC is proposing changes to its rules that 
would streamline disclosures about executive and director 
compensation in companies' annual proxy statements. Some of the 
information now required could be put into the company's Form 10-K 
report instead of the proxy statement. The Form 10-K is required to 
be filed with the SEC and provided to shareholders by the company 
upon request. The proposed rules also would require some of the 
director compensation information to be put in tabular form.
    Here is a series of questions. We urge you to respond, whether 
you answer one question or all, or just have general comments. Feel 
free to use this form or write a separate letter marked ``File No. 
S7-13-95.''
    Please mail your comments to the SEC so they arrive no later 
than October 10, 1995. Directions for sending your comments to the 
SEC are provided at the end of this document. The SEC will make your 
comments and other comments received by the SEC available to the 
public. In addition to receiving written comments, the SEC intends 
to hold focus groups composed of investors to assess investors' 
views as to the usefulness of sample abbreviated financial 
statements, as compared with full financial statements.
    1. Do you read notes to the financial statements?

Yes ____ No ____

    Do you find notes to the financial statements useful in making 
financial decisions?

Yes ____ No ____
    Please add any comments you like about why the notes are or are 
not useful.

----------------------------------------------------------------------

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    2. The SEC proposes to allow companies to send investors 
``abbreviated financial statements'' that are the same as full 
financial statements except for limiting the number of notes. Notes 
would be limited to those covering the following matters:

1. Basis of presentation of the abbreviated financial statements.
2. Accounting policies.
3. Changes in accounting principle.
4. Restatements and reclassifications.
5. Changes in accounting estimate.
6. Business combinations.
7. Discontinued operations.
8. Circumstances identified in explanatory language added to the 
independent accountant's standard report.
9. Loss contingencies.
10. Events of default under credit agreements.
11. Related party transactions.
12. Bankruptcies and quasi-reorganizations.
13. Subsequent events.

    All other financial statement notes would be available from the 
company on request and would be on file with the SEC. Are there some 
notes you would always want to see that are not set forth above?

Yes ____ No ____

    If yes, please identify which notes you would want to see.

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    Are there notes listed above that you feel could be omitted?

Yes ____ No ____

    If yes, please identify which notes could be omitted.
----------------------------------------------------------------------

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    3. What information is the most useful in the annual report to 
shareholders--financial statements or other information?

Financial statements most useful ____
Other information most useful ____

    If you think it is other information, please describe the type 
of other information that you find the most useful.

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    4. Would you like to receive shorter documents, with less 
financial information, if you could still get the more detailed 
information by asking the company for it?

Yes ____ No ____

    Please explain:
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    5. Should the SEC continue to require that companies send 
shareholders annual reports?

Yes____ No ____

    If the SEC does continue to require annual reports, should it 
continue to tell companies what information should go into those 
reports, instead of leaving it up to the company?

Yes____ No ____

    Please explain:

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    6. Financial statements are also in many prospectuses. Do you 
examine the financial statements in prospectuses?

Yes____ No ____

    Would you be more likely to read the financial statements in a 
prospectus if they were shorter, with fewer notes?

Yes____ No ____

    Please explain:

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    7. Do you have easy access to a computer with a modem?

Yes____ No ____

    If yes, do you use the computer to get information about 
companies in which you are a shareholder or are considering 
investing?

Yes____ No ____

    Would you like to continue to get financial and other 
information from companies in paper even if you can get it 
electronically?

Yes____ No ____

    Please explain or comment. If you do use the computer to get 
information about 

[[Page 35633]]
companies, describe what kind of information you get, and what database 
you get it from.

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    8. The SEC proposes to allow companies to provide some 
information about executive and director compensation in the Form 
10-K rather than the annual proxy statement. The proposed rule 
changes still would require the following information to remain in 
the proxy statement:

1. Summary Compensation Table
2. Option Grants
3. Director Compensation
4. Compensation Committee Interlocks
5. Compensation Committee Report on Executive Compensation
6. Graph of the Company's Shareholder Returns

    The SEC proposes to allow companies to move the following 
information to the Form 10-K:

7. Option Exercises and Value of Options Held
8. Long-Term Incentive Plan Awards
9. Pension Plans
10. Employment Contracts and Arrangements
11. Repricing of Options

    Please state which of these items you find most useful, and give 
any explanation you wish to add:

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    Of the items proposed to be moved, are there any that you would 
like to continue to have in the proxy statement?

Yes ____ No ____

    If yes, which ones? Add any comments you wish.

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    Of the items proposed to be retained in the proxy statement, are 
there any that you feel could be moved to the Form 10-K?

Yes ____ No ____

    If yes, which ones? Add any comments you wish.

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    9. Would you like to receive shorter annual proxy statements, 
with less information about the details of executive compensation, 
if you could still get the more detailed information by asking the 
company for it?

Yes ____ No ____

    Please explain:

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How to Mail Your Ideas and Suggestions to the SEC:

     This form can be mailed to the SEC by folding it in 
half, with the return address showing. Please staple or tape this 
form closed. No postage is necessary.
     If you do not wish to use this form, you can write a 
letter directly to the SEC. Mark your letter ``File No. S7-13-95,'' 
and send it to Jonathan G. Katz, Secretary, Securities and Exchange 
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
     Remember to send your ideas and suggestions in time to 
arrive by October 10, 1995.

Do You Want Further Information About What the SEC is Considering?

     If you would like a copy of the complete SEC releases 
that describe what the SEC is considering, write to Office of 
Consumer Affairs, Securities and Exchange Commission, Attn: Jonathan 
M. Gottsegen, Mail Stop 2-6, 450 Fifth Street, N.W., Washington, 
D.C. 20549. Please state whether you are asking for the release 
proposing ``abbreviated financial statesments'' or the release 
proposing changes to information about executive and director 
compensation, or both.

Thank You For Responding.

Your Name--------------------------------------------------------------

Street Address---------------------------------------------------------

City________ State ________ Zip ________

[FR Doc. 95-16389 Filed 7-7-95; 8:45 am]
BILLING CODE 8010-01-M