[Federal Register Volume 63, Number 25 (Friday, February 6, 1998)]
[Rules and Regulations]
[Pages 6370-6390]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-2889]



[[Page 6369]]

_______________________________________________________________________

Part IV





Securities and Exchange Commission





_______________________________________________________________________



17 CFR Parts 228, et al.



Plain English Disclosure; Final Rule

  Federal Register / Vol. 63, No. 25 / Friday, February 6, 1998 / Rules 
and Regulations  

[[Page 6370]]



SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 228, 229, 230, 239 and 274

[Release Nos. 33-7497; 34-39593; IC-23011; International Series No. 
1113; File No. S7-3-97]
RIN 3235-AG88


Plain English Disclosure

AGENCY: Securities and Exchange Commission.

ACTION: Final rules.

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SUMMARY: We are adopting the plain English rule with some changes based 
on the comments we received and the lessons we learned from the plain 
English pilot participants. The rule requires issuers to write the 
cover page, summary, and risk factors section of prospectuses in plain 
English. We are changing the existing requirements for these sections 
to the extent they conflict with the plain English rule. We are also 
giving issuers more specific guidance on how to make the entire 
prospectus clear, concise, and understandable. We believe that using 
plain English in prospectuses will lead to a better informed securities 
market--a market in which investors can more easily understand the 
disclosure required by the federal securities laws.

DATES: Effective Date. October 1, 1998.
    Compliance Date. October 1, 1998. When we act on the amendments to 
the mutual fund disclosure requirements that we proposed in February 
1997, we may change the date by which mutual funds must comply with 
these amendments.

FOR FURTHER INFORMATION CONTACT: Ann D. Wallace or Carolyn A. Miller at 
(202) 942-2980 or David Maltz at (202) 942-1921 in the Division of 
Corporation Finance. If your questions involve mutual funds, call 
Kathleen K. Clarke at (202) 942-0724 or Markian Melnyk at (202) 942-
0592 in the Division of Investment Management. Direct your questions on 
the staff's plain English handbook to Nancy M. Smith at (202) 942-7040.

SUPPLEMENTARY INFORMATION: We are adopting amendments to Rules 421,\1\ 
461 \2\ and 481 \3\ of Regulation C \4\ and Items 101,\5\ 501,\6\ 
502,\7\ 503,\8\ and 508 \9\ of Regulations S-K \10\ and S-B.\11\ We are 
also adopting minor amendments to Forms S-2,\12\ S-3,\13\ S-4,\14\ S-
20,\15\ F-2,\16\ F-3,\17\ F-4,\18\ and N-2.\19\
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    \1\ 17 C.F.R. 230.421.
    \2\ 17 C.F.R. 230.461.
    \3\ 17 C.F.R. 230.481.
    \4\ 17 C.F.R. 230.400 et seq.
    \5\ 17 C.F.R. 229.101.
    \6\ 17 C.F.R. 229.501.
    \7\ 17 C.F.R. 229.502.
    \8\ 17 CFR 229.503.
    \9\ 17 CFR 229.508.
    \10\ 17 CFR 229.10 et seq.
    \11\ 17 CFR 228.10 et seq.
    \12\ 17 CFR 239.12.
    \13\ 17 CFR 239.13.
    \14\ 17 CFR 239.25.
    \15\ 17 CFR 239.20.
    \16\ 17 CFR 239.32.
    \17\ 17 CFR 239.33.
    \18\ 17 CFR 239.34.
    \19\ 17 CFR 239.14.
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    Our Office of Investor Education and Assistance will issue, within 
the next six weeks, a final version of A Plain English Handbook: How to 
Create Clear SEC Disclosure Documents. The handbook will give 
techniques and tips on how to create plain English disclosure 
documents. We suggest you order a hard copy by calling 800-SEC-0330. 
Some of the handbook's graphic elements will not be available on the 
web version. A draft version is available now on our Internet site 
(http://www.sec.gov).

Table of Contents

I. Executive Summary
II. Lessons From the Plain English Pilot Program
III. Rules on How to Prepare Prospectuses
    A. Plain English Rule--Rule 421(d)
    B. Clear, Concise, and Understandable Prospectuses--Rule 421(b)
    C. Comments on Proposed Amendments to Rule 421(b) and Rule 
421(d)
IV. Revisions to Regulations S-K and S-B
    A. Item 501--Forepart of Registration Statement and Outside 
Front Cover Page of Prospectus
    B. Item 502--Inside Front and Outside Back Cover Pages of 
Prospectus
    C. Item 503--Summary Information, Risk Factors, and Ratio of 
Earnings to Fixed Charges
    1. Summary Information
    2. Risk Factors
    3. Ratio of Earnings to Fixed Charges
V. Plain English for Investment Companies
VI. Phase-In of the Plain English Rule and Other Requirements for 
Issuers Other Than Investment Companies
VII. Comments on the Plain English Proposals
    A. Liability Concerns
    B. Staff Plain English Review and Comment Process
    C. Requests for Acceleration
VIII. Cost-Benefit Analysis
IX. Final Regulatory Flexibility Analysis
X. Paperwork Reduction Act
XI. Statutory Authority
Text of the Amendments
Appendix A: Charts on Amendments to Small Business Issuer Rules
Appendix B: List of Plain English Pilot Participants

I. Executive Summary

    Full and fair disclosure is one of the cornerstones of investor 
protection under the federal securities laws. If a prospectus fails to 
communicate information clearly, investors do not receive that basic 
protection. Yet, prospectuses today often use complex, legalistic 
language that is foreign to all but financial or legal experts. The 
proliferation of complex transactions and securities magnifies this 
problem. A major challenge facing the securities industry and its 
regulators is assuring that financial and business information reaches 
investors in a form they can read and understand.
    In response to this challenge, we undertake today a sweeping 
revision of how issuers must disclose information to investors. This 
new package of rules will change the face of every prospectus used in 
registered public offerings of securities.\20\ Prospectuses will be 
simpler, clearer, more useful, and we hope, more widely read.
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    \20\ We proposed this package of rules in January 1997. See 
Release No. 33-7380 (January 14, 1997), 62 FR 3512 (January 21, 
1997).
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    First, the new rules require issuers to write and design the cover 
page, summary, and risk factors section of their prospectuses in plain 
English. Specifically, in these sections, issuers will have to use: 
short sentences; definite, concrete, everyday language; active voice; 
tabular presentation of complex information; no legal or business 
jargon; and no multiple negatives. Issuers will also have to design 
these sections to make them inviting to the reader. In response to 
comments, the new rules will not require issuers to limit the length of 
the summary, limit the number of risk factors, or prioritize risk 
factors.
    Second, we are giving guidance to issuers on how to comply with the 
current rule that requires the entire prospectus to be clear, concise, 
and understandable. Our goal is to purge the entire document of 
legalese and repetition that blur important information investors need 
to know.
    Also, our Office of Investor Education and Assistance is finalizing 
a handbook with practical tips on how to prepare plain English 
documents. This handbook explains how to apply plain English principles 
to disclosure documents.
    To ensure a smooth transition, the plain English rule and the other 
changes adopted today will apply beginning October 1, 1998. We 
encourage all

[[Page 6371]]

participants in securities offerings to start following these plain 
English principles now when writing their prospectuses. Our staff will 
continue its efforts to assist companies in drafting prospectuses in 
plain English.

II. Lessons From the Plain English Pilot Program

    To test plain English in disclosure documents, the Division of 
Corporation Finance started a pilot program in 1996 for public 
companies willing to file plain English documents under either the 
Securities Act of 1933 \21\ or the Securities Exchange Act of 1934.\22\ 
More than 75 companies have volunteered to participate in the pilot 
program. Many participants have prepared disclosure documents that will 
not be subject to the plain English rule, including proxy statements, 
footnotes to financial statements,\23\ and management's discussion and 
analysis of financial condition and results of operations.\24\
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    \21\ 15 U.S.C. 77a et seq.
    \22\ 15 U.S.C. 78a et seq.
    \23\ See the Forms 10-Q of Pfizer, Inc. (File No. 1-3619) for 
fiscal 1997.
    \24\ See the 1996 Form 10-K filed by Baltimore Gas and Electric 
Company (File No. 1-1910) and the Boddie-Noell Properties, Inc. 
registration statement filed December 2, 1997 (File No. 333-39803).
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    We have included in Appendix B a list of pilot participants that 
filed plain English documents. These pilot participants produced 
examples of disclosure that is clear, well-written, and designed to 
increase investors' understanding.
    Our experience with the pilot participants affirms our belief that 
preparing documents in plain English increases investors' understanding 
and helps them make informed investment decisions. The package of rules 
we are adopting, as well as the handbook, will enable issuers to 
improve dramatically the clarity of their disclosure documents.

III. Rules on How To Prepare Prospectuses

A. Plain English Rule--Rule 421(d)

    Rule 421(d), the plain English rule, requires you to prepare the 
front portion of the prospectus in plain English. You must use plain 
English principles in the organization, language, and design of the 
front and back cover pages, the summary, and the risk factors section. 
Also, when drafting the language in these front parts of the 
prospectus, you must comply substantially with six basic principles:
     Short sentences;
     Definite, concrete, everyday language;
     Active voice;
     Tabular presentation or bullet lists for complex material, 
whenever possible;
     No legal jargon or highly technical business terms; and
     No multiple negatives.
    A number of comment letters noted that our rule dictates how to 
write the front of the prospectus. They are correct. We have seen 
marked improvement in the clarity of disclosure when pilot participants 
have used these widely recognized, basic principles of clear writing. 
We believe the benefits to investors support mandating the use of these 
writing principles for the front of the prospectus.
    In addition, you must design the cover page, summary, and risk 
factors section to make them easy to read. You must format the text and 
design the document to highlight important information for investors. 
The rule permits you to use pictures, charts, graphics, and other 
design features to make the prospectus easier to understand.

B. Clear, Concise, and Understandable Prospectuses--Rule 421(b)

    Rule 421(b) currently requires that the entire prospectus be clear, 
concise, and understandable. This requirement is in addition to the 
plain English rule we are adopting, which applies only to the front of 
the prospectus.
    We are adopting, as proposed, amendments to Rule 421(b). These 
amendments provide guidance on how to prepare a prospectus that is 
clear, concise, and understandable. The amendments set out four general 
writing techniques that you must follow and list four conventions to 
avoid when drafting the prospectus. As several comment letters noted, 
these amendments codify our earlier interpretive advice.\25\
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    \25\ See Securities Act Release No. 6900 (June 17, 1991).
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    Amended Rule 421(b) requires you to use the following techniques 
when writing the entire prospectus:
     Present information in clear, concise sections, 
paragraphs, and sentences. Whenever possible, use short explanatory 
sentences and bullet lists;
     Use descriptive headings and subheadings;
     Avoid frequent reliance on glossaries or defined terms as 
the primary means of explaining information in the prospectus. Define 
terms in a glossary or other section of the document only if the 
meaning is unclear from the context. Use a glossary only if it 
facilitates understanding of the disclosure; and
     Avoid legal and highly technical business terminology.
    The new note to Rule 421(b) provides guidance on how to comply with 
the rule's general requirements. The note lists the following drafting 
conventions to avoid because they make your document harder to read:
     Legalistic or overly complex presentations that make the 
substance of the disclosure difficult to understand;
     Vague boilerplate explanations that are readily subject to 
differing interpretations;
     Complex information copied directly from legal documents 
without any clear and concise explanation of the provision(s); and
     Repetitive disclosure that increases the size of the 
document, but does not enhance the quality of the information.

C. Comments on Proposed Amendments to Rule 421(b) and Rule 421(d)

    Several comment letters stated that we should permit public 
companies to use legal and technical business terminology. The letters 
noted, for example, that high technology companies must use technical 
terms to distinguish their products or services from others in the 
industry. We recognize that certain business terms may be necessary to 
describe your operations properly. But, you should avoid using 
excessive technical jargon that only your competitors or an industry 
specialist can understand.
    You should write the disclosure in your prospectus for investors. 
When you use many highly technical terms, the investor must learn your 
dictionary of terms to understand your disclosure. If technical terms 
are unavoidable, you should make every effort to explain their meaning 
the first time you use them.
    Several comment letters noted that some investors, particularly 
institutional investors, want to read the specific terms of contracts 
or the securities offered. For example, an investor may want to read 
the specific language of a loan agreement's financial covenants or an 
indenture's default provisions.
    Our current rule permits you to summarize an exhibit's key 
provisions in your prospectus.\26\ Moreover, we require you to file 
material contracts and any instruments that define the rights of 
security holders. We believe this approach generally serves the needs 
of all investors in the market. If you cannot adequately summarize the 
language from an exhibit in the prospectus, then you should include 
that language. However, you must

[[Page 6372]]

present it clearly and explain what it means to investors.
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    \26\ Rule 421(c), 17 CFR 230.421(c).
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IV. Revisions to Regulations S-K and S-B

    We are adopting these revisions largely as we proposed them. 
However, based on the comment letters and our belief that communicating 
clearly should be the focus of disclosure to investors, we are not 
adopting any requirements that would require you to:
     Limit the length of the summary;
     Limit the number of risk factors; or
     Prioritize risk factors.

A. Item 501--Forepart of Registration Statement and Outside Front Cover 
Page of Prospectus \27\

    As proposed, we are eliminating the formal design requirements for 
the prospectus cover page. We are, however, requiring you to limit the 
front cover of the prospectus to one page. We believe these revisions 
will allow you to design and write a cover page that will focus 
investors on key information about the offering and encourage them to 
read the important information in the prospectus. Also, we intend for 
these amendments to give you the flexibility you need to design a cover 
page tailored to your company and the offering.
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    \27\ Item 501 of Regulation S-K, 17 CFR 229.501, and Item 501 of 
Regulation S-B, 17 CFR 228.501.
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    Under the revised disclosure item, you are free to use pictures, 
graphs, charts, and other designs that accurately depict your company, 
business products, and financial condition. The staff will object to 
design features and font types that make the disclosure hard to read or 
understand.
    We are amending the formalized requirements on how you present the 
mandatory legends on the cover page. We are not placing any 
restrictions on how you present these legends, except:
     You must make the legends prominent; and
     You must make the print type easy to read.
    Using all capitalized letters for the legends does not give them 
proper prominence. Rather, it makes them hard to read. A well-designed 
cover page that does not crowd the legends with other text can give 
them the prominence they need.
    We have amended Item 501 to give you two plain English examples of 
the legend that states the Commission has not approved the 
offering.\28\ The item also gives you a plain English example of the 
legend that states the prospectus is not yet complete, commonly called 
the ``red herring'' legend.
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    \28\ The North American Securities Administrators Association, 
Inc.'s Disclosure Reform Task Force recommended that the suggested 
legend include a reference to the state securities commissions. We 
have changed the legend to reflect this suggestion.
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    We are revising the requirements on information that you must 
always include on the prospectus cover page. Our goal is to have the 
cover page focus on key information about the offering. You should 
avoid moving information to the cover page unnecessarily.
    We had proposed to eliminate the requirement that the cover page 
include a cross-reference to the risk factors section in the 
prospectus. In response to comment letters emphasizing the importance 
of this information, we are keeping this requirement. The cover page 
must reference the risk factors section and state the page number on 
which the risk factors begin.
    The following table shows the current requirements for the 
prospectus cover page and the changes we are adopting.

                        Regulation S-K--Item 501                        
------------------------------------------------------------------------
                Current                               Final             
------------------------------------------------------------------------
 Cover page of registration       Same.                 
 statement.                                                             
 Company name..................   Same.                 
 Title, amount, and description   Same.                 
 of securities offered.                                                 
 Selling security holders         Same.                 
 offering.                                                              
 Cross-reference to risk          Same, except cross-   
 factors.                                 reference must include page   
                                          number. No print type         
                                          specified.                    
 Formatted distribution table     Delete distribution   
 showing price, underwriting              table. Use bullet list or     
 commission, and proceeds of offering.    other design that highlights  
                                          the information.              
 Show bona fide estimate of       Same.                 
 range of maximum offering price and                                    
 number of securities.                                                  
 If price not set, show how       Same.                 
 price will be determined.                                              
 Formatted best efforts           Delete distribution   
 disclosure and distribution table.       table. Use bullet list or     
                                          other design that highlights  
                                          the information.              
 Commission legend.............   Retain in plain       
                                          English. Include reference to 
                                          state securities commissions. 
                                          No print type specified.      
 State-required legends........   Same.                 
 Underwriters' over-allotment     Identify existence of 
 option, expenses of offering,            the option and the number of  
 commissions paid by others, and other    shares. Move all other        
 non-cash consideration and finders'      information to the plan of    
 fees.                                    distribution section.         
 No requirement to identify       Identify market for   
 market for securities, trading symbol,   securities, trading symbol,   
 underwriters, or type of underwriting    underwriters, and type of     
 arrangements.                            underwriting arrangements.    
 Date of prospectus............   Same.                 
 Prospectus ``Subject to          Retain in plain       
 Completion'' legend.                     English.                      
 No page limit.................   Must limit cover to   
                                          one page.                     
------------------------------------------------------------------------


[[Page 6373]]

    In our proposing release, we asked whether we should require 
specific information on the prospectus cover page for certain types of 
offerings, such as mergers, exchange offers, or limited partnership 
offerings. Several comment letters suggested that the plain English 
rule and the revised disclosure requirements should replace our earlier 
interpretive advice on cover page disclosure for limited partnership 
offerings.\29\
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    \29\ See Securities Act Release No. 6900 for our interpretive 
advice on limited partnership offerings.
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    We believe that the plain English rule and the revised disclosure 
requirements are consistent with our earlier advice on limited 
partnership offering prospectuses and similar offerings, with one 
significant exception. Under our advice, the cover page must list the 
offering's key risks, resulting in repetitious disclosure of those 
risks. However, we believe the unique nature of these offerings and the 
risks they present to investors warrant requiring the issuer to 
highlight these risks on the cover page. Of course, the cover page, 
summary, and risk factors section must otherwise comply with the plain 
English rule and the revised disclosure requirements we are adopting.
    We are not adopting special requirements for any other type of 
offering. We have had a number of merger prospectuses in the pilot 
program that provide excellent guidance on how to apply plain English 
to these offerings.

B. Item 502--Inside Front and Outside Back Cover Pages of Prospectus 
\30\

    We are amending the requirements for the inside front cover page 
and outside back cover page of the prospectus to limit significantly 
the information you are required to include on these pages. We believe 
this will give you further freedom to arrange the information in the 
prospectus from investors' viewpoints. The table at the end of this 
section shows the current requirements for these pages and the changes 
we are adopting.\31\
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    \30\ Item 502 of Regulation S-K, 17 CFR 229.502, and Item 502 of 
Regulation S-B, 17 CFR 228.502.
    \31\ We are also amending Forms S-2, S-3, S-4, F-2, F-3, and F-
4. Along with the list of reports incorporated by reference, you 
will include information on (1) how investors may obtain a copy of 
these reports, and (2) how they may obtain copies of the other 
reports you file with the SEC.
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    Although we prefer that the required table of contents immediately 
follow the cover page, we believe you should continue to have the 
flexibility to include it on either the inside front or outside back 
cover page of the prospectus. However, if you deliver a prospectus to 
investors electronically, you must include the table of contents 
immediately after the cover page. This placement will benefit investors 
because they will not have to scroll to the end of the prospectus to 
see how it is organized.
    Although some comment letters recommended that we eliminate the 
requirement to disclose the dealer's prospectus delivery obligations, 
we have decided to retain this disclosure on the outside back cover 
page. We believe this disclosure is helpful to dealers in meeting their 
legal obligation to deliver the prospectus.

                        Regulation S-K--Item 502                        
------------------------------------------------------------------------
                Current                               Final             
------------------------------------------------------------------------
 Availability of Exchange Act     Move to description of
 reports generally.                       business section or, for short-
                                          form registration statements, 
                                          to the incorporation by       
                                          reference disclosure.         
 Identify market for securities   Move to cover page.   
 Availability of annual reports   Move to description of
 to shareholders with financial           business section.             
 statements for foreign issuers and                                     
 others not subject to proxy rules.                                     
 Availability of Exchange Act     Move to incorporation 
 reports incorporated by reference in     by reference disclosure.      
 short-form registration statements.                                    
 Stabilization legend..........   Move to plan of       
                                          distribution section.         
 Passive market making            Delete. Disclosure    
 activities legend.                       retained in plan of           
                                          distribution section.         
 Dealer prospectus delivery....   Retain on outside back
                                          cover page.                   
 Enforceability of civil          Move to description of
 liability provisions of federal          business section.             
 securities laws against foreign                                        
 persons.                                                               
 Table of contents.............   Same. If prospectus   
                                          delivered electronically, must
                                          immediately follow cover page.
------------------------------------------------------------------------

C. Item 503--Summary Information, Risk Factors, and Ratio of Earnings 
to Fixed Charges \32\

1. Summary Information
    If you include a summary, it must be brief and in plain English. 
Further, if you include a summary description of the company's business 
operations or financial condition, you must write this information in 
plain English even if you do not caption it a ``summary.''
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    \32\ Item 503 of Regulation S-K, 17 CFR 229.503, and Item 503 of 
Regulation S-B, 17 CFR 228.503.
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    Although we have not limited the length of the summary, we believe 
this section should highlight the most important features of the 
offering. For example, the summary should not include a lengthy 
description of the company's business and business strategy. This 
detailed information is better suited to the disclosure in the body of 
the prospectus.
    Several comment letters suggested that we require a summary 
section. We decided against this because a summary may not be helpful 
in all prospectuses. For example, you may not need to summarize the 
prospectus in a short-form registration statement.
    Several comment letters suggested that we specify the information 
that must be in a summary. Because we believe you need flexibility to 
write a summary that is appropriate to your offering, we are not 
adopting specific disclosure items for the summary. However, because 
the financial statements are an important part of the disclosures made 
by public companies, we believe you should continue to highlight 
financial information in the summary. You should present this financial 
information in a manner that allows investors to understand it easily.
2. Risk Factors
    If you include a risk factors section in your prospectus, you must 
write the risk factors in plain English and avoid ``boilerplate'' risk 
factors. We believe a discussion of risk in purely generic terms does 
not tell investors how the risk may affect their investment in a 
specific company. You should place any risk factor in context so 
investors can understand the specific risk as it applies to your 
company and its operations.

[[Page 6374]]

3. Ratio of Earnings to Fixed Charges
    When you offer debt or preferred equity, you must disclose a ratio 
of earnings to fixed charges. Where you include a prospectus summary, 
amended Item 503 requires you to show the ratio of earnings to fixed 
charges as part of the summarized financial data.

V. Plain English for Investment Companies

    The plain English rule applies to prospectuses of investment 
companies and will complement our disclosure initiatives for these 
companies.\33\ Also, the amendments we are adopting to Rule 481 require 
these companies to write and design the front parts of their 
prospectuses in plain English.
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    \33\ See the amendments to Rule 481 under Regulation C, 17 CFR 
230.481.
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    As part of our commitment to improve mutual fund disclosure, in 
February 1997, we proposed significant changes to the disclosure 
requirements for mutual fund prospectuses and new summary disclosure 
documents called ``profiles.'' \34\ These proposals would require a 
standardized risk/return summary in mutual fund prospectuses and 
profiles. The risk/return summary would include a concise narrative 
discussion of fund risks and a bar chart showing a fund's annual 
returns for the past ten years. We expect to consider these and other 
changes to mutual fund prospectuses shortly. The plain English rule 
will apply to the cover page and the risk/return summary in 
prospectuses and the new fund profiles.\35\
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    \34\ The proposed amendments to Form N-1A are included in 
Investment Company Act Release No. 22528 (February 27, 1997) and the 
proposed profile rule is in Investment Company Act Release No. 22529 
(February 27, 1997).
    \35\ We are also adopting amendments to Rule 481 to require 
plain English legends in fund prospectuses.
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    Investment companies must comply with the plain English rule and 
the revised disclosure requirements for new registration statements 
filed on or after October 1, 1998. When we act on the changes to the 
mutual fund disclosure requirements, we may change the compliance date 
for mutual funds so they may comply with these new requirements with 
one filing.\36\
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    \36\ The Commission proposed to allow mutual funds a transition 
period of six months after the effective date of the proposed rules 
before they would need to comply with the new prospectus disclosure 
requirements. See Investment Company Act Release Nos. 22528 and 
22529 (February 27, 1997).
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VI. Phase-In of the Plain English Rule and Other Requirements for 
Issuers Other Than Investment Companies

    To ease the transition to plain English and to avoid delaying your 
access to the capital markets, we will phase in the plain English rule 
and the other changes as follows:
     If you first file a registration statement on or after 
October 1, 1998, you must comply with the new requirements.\37\ If you 
file a registration statement before October 1, 1998, but it is not yet 
effective on that date, you do not have to amend it to comply with the 
new requirements before it is effective.
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    \37\ If you file a registration statement under Rule 462(b), you 
must comply with new requirements only if they applied to the 
earlier offering.
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     On or after October 1, 1998, any supplement you file to a 
prospectus in an effective registration statement that relies on Rule 
415(a)(1)(x) must comply with the new requirements.
     If you file a post-effective amendment on or after October 
1, 1998, either to include the company's latest audited financial 
statements in the registration statement or to update the prospectus 
under Section 10(a)(3),\38\ you must comply with the new requirements.
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    \38\ 15 U.S.C. 77j(a)(3).
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    If you elect to comply immediately with any of the plain English 
requirements, we believe you should comply with all of them to make the 
document more readable. For example, you should not have a plain 
English cover page and a legalistic summary or risk factors section.
    During the phase-in period, we will hold workshops to help issuers, 
underwriters, and their counsel comply with the plain English rule. 
Until October 1, 1998, the staff will continue the plain English pilot 
program, but because of limited resources and because we expect high 
demand by issuers to participate in the pilot, the staff will no longer 
offer expedited review. We encourage issuers to participate in the 
pilot program with both Securities Act and Exchange Act documents.

VII. Comments on the Plain English Proposals

    We received 45 comment letters on the plain English proposals.\39\ 
Generally, the comment letters favored requiring plain English for the 
front of prospectuses--the cover page, summary, and risk factors 
section. The American Society of Corporate Secretaries and the American 
Corporate Counsel Association, as well as several public companies, 
supported the plain English requirements. They believe that requiring 
plain English will focus all parties involved in the offering process--
issuers, underwriters, trustees, and counsel--on clear and readable 
disclosure. Investor groups, such as the American Association of 
Retired Persons and the Consumer Federation of America, supported 
adopting the plain English rule to ensure that investors receive clear 
information.
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    \39\ You may read and copy the comment letters and the staff's 
summary of these letters in our Public Reference Room at 450 Fifth 
Street, NW., Washington, DC 20549. Ask for File No. S7-3-97.
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    Other comment letters raised the following general concerns about 
the plain English rule:
     Will the plain English rule increase a registrant's 
liability?
     How will the staff review and comment on plain English 
filings?
     Will the Commission deny acceleration of a filing if it 
does not comply with the plain English rule?
    We address these concerns in the following three sections.

A. Liability Concerns

    Several comment letters, including those of the American Bar 
Association and the Securities Industry Association, recommended a 
voluntary rather than a mandatory approach to improving the readability 
of prospectuses. These comment letters argued against mandating plain 
English primarily because of liability concerns.
    These comment letters expressed concern that issuers may omit 
material information in the course of simplifying the language. The 
comment letters urged us to adopt a safe harbor rule from legal 
liability to cover the sections of the prospectus that must be in plain 
English.
    Other letters from groups representing public companies and the 
mutual fund industry stated they believe plain English will not 
increase their liability. They stated that plain English disclosure 
should reduce potential liability because it decreases the likelihood 
that an investor will misunderstand the prospectus.\40\
---------------------------------------------------------------------------

    \40\ For example, see the Investment Company Institute's comment 
letter, dated March 24, 1997.
---------------------------------------------------------------------------

    Using plain English does not mean omitting important information. 
These rules only require you to disclose information in words investors 
can understand and in a format that invites them to read the document. 
For these reasons, we do not believe that a safe harbor rule is 
necessary or appropriate. We also believe it is inappropriate for you 
to include language that attempts to create a safe harbor for these 
sections.
    The letters raising liability concerns also questioned whether it 
is possible to summarize in plain English complex matters covered in 
the body of the document. We believe the courts will continue to view 
the summary section,

[[Page 6375]]

as its caption indicates, as a highlight of important information in 
the prospectus. A summary, by its very nature, cannot disclose 
everything. In determining whether a company has made full disclosure, 
courts should look at the disclosure in the entire document.
    Moreover, a company's failure to include everything in the summary 
should not trigger automatically the application of the ``buried 
facts'' doctrine. Under the buried facts doctrine, a court would 
consider disclosure to be false and misleading only if its overall 
significance is obscured because material information is ``buried,'' 
for example, in footnotes or appendices.\41\
---------------------------------------------------------------------------

    \41\ See Gould v. American Hawaiian Steamship Company, 331 F. 
Supp. 981 (D. Del. 1971); Kohn v. American Metal Climax, Inc., 322 
F. Supp. 1331 (E.D. Pa. 1970), modified, 458 F.2d 255 (3d Cir. 
1972).
---------------------------------------------------------------------------

    The package of rules we are adopting should lead to clearer 
documents that are easier for investors to understand. We believe that 
compliance with these requirements will not increase the risk of 
litigation.

B. Staff Plain English Review and Comment Process

    Several comment letters questioned whether the staff's time would 
be well spent giving comments on grammar. The letters also stated that 
the staff's past comments have caused many immaterial disclosures and 
much of the repetition in current prospectuses.
    Our staff will focus on whether you disclose material information 
and whether that disclosure is clear and readable. The staff will not 
correct grammatical mistakes.
    We recognize that a document can still be clear despite the 
occasional long sentence or use of passive voice. But we have learned 
from the plain English pilot program that a document becomes clearer 
and easier to read when its writer uses plain English.
    The staff will issue their comments in plain English and avoid 
requesting repetitive information in the document. If the staff selects 
your registration statement for a legal and accounting review, the same 
people who review your document will issue any plain English comments.
    Because the format and design of your document play a large part in 
its readability, we will request paper copies of the plain English 
sections that you plan to deliver to investors. We are working to 
upgrade our Electronic Data Gathering Analysis and Retrieval system, 
EDGAR, to permit the filing of an exact duplicate of the paper copy 
sent to investors but this may not occur for some time.

C. Requests for Acceleration

    Rule 461 currently requires the Commission staff, when presented 
with a request for acceleration, to consider the accuracy and adequacy 
of the prospectus that you circulated.\42\ The rule also requires the 
staff to consider whether you have made a bona fide effort to make the 
prospectus reasonably concise and understandable. We are amending Rule 
461 to require the staff to consider also whether you have made a bona 
fide effort to satisfy the plain English rule in drafting the front 
part of the prospectus. Because compliance with the plain English rule 
will facilitate investors' understanding of the prospectus information, 
we believe it is important that the preliminary prospectus that you 
circulate to investors complies with the plain English rule.
---------------------------------------------------------------------------

    \42\ See Rule 461 of Regulation C, 17 CFR 230.461.
---------------------------------------------------------------------------

    Comment letters expressed concern that the amendment to Rule 461 
could frequently delay the effective date of registration statements. 
We believe that these concerns are unfounded. The procedures for 
addressing deficiencies and for granting or denying acceleration 
requests have worked very well for many years. We believe the continued 
use of these procedures will work in implementing the plain English 
rule. If we select your registration statement for review, the staff 
will give you comments on how to comply with the plain English rule as 
well as other requirements. You will have the same opportunity you have 
now to work with the staff to resolve all comments on your document, 
consistent with your financing schedule.

VIII. Cost-Benefit Analysis

    The plain English rule and amendments should improve communications 
between public companies and investors and promote investor protection. 
Specifically, we anticipate, and many public comment letters concur, 
that adopting the plain English rule will:
     Allow investors to make better-informed assessments of the 
risk and rewards of investment opportunities;
     Reduce the likelihood that investors make investment 
mistakes because of incomprehensible disclosure documents;
     Reduce investors' costs of investing by lowering the time 
required to read and understand information;
     Increase consumers' interest in investing by giving them 
greater confidence in their understanding of investments;
     Reduce the number of costly legal disputes because 
investors are more likely to better understand disclosure documents; 
and
     Lower offering costs because investors will ask issuers 
fewer questions about the offering.
    Several comment letters suggested that writing documents in plain 
English would impose substantial costs on public companies.\43\ While 
there may be some additional costs initially, we expect them to be 
modest and to diminish over time as firms learn to prepare documents 
using plain English principles. After a short phase-in period, public 
companies should incur little, if any, additional cost from this rule 
or these amendments. In some instances, we anticipate that companies 
will save on printing and mailing costs because plain English tends to 
reduce document length. Some firms may also save time answering 
investors' questions. We believe the substantial benefits to investors 
and the public markets more than justify the phase-in costs.
---------------------------------------------------------------------------

    \43\ PSA The Bond Market Trade Association, in their comment 
letter dated March 24, 1997, for example, estimated that costs 
``could increase by up to 50 percent.''
---------------------------------------------------------------------------

    We base these conclusions, in part, on companies' experiences in 
the plain English pilot program. To help assess the benefits and costs, 
we asked nine randomly selected plain English pilot participants, one 
of which prepared an initial public offering prospectus, about their 
experiences preparing plain English documents. Six of the nine 
participants responded, including the initial public offering issuer. 
All of the participants agreed that investors benefit from clearer, 
more readable, less redundant disclosure. Specifically, several 
predicted that investor misunderstandings and mistakes would decline. 
They did not generally believe, however, that writing their disclosures 
in plain English would reduce their liability for disclosures. The 
consensus was that investors file lawsuits on the basis of disclosure 
materiality, not brevity or wording. Several participants found, 
however, that they spent less time answering investors' questions when 
they wrote their documents in plain English.\44\
---------------------------------------------------------------------------

    \44\ For example, one participant indicated that they spent 12 
percent less time answering investors' questions, while another 
spent 20 percent less time.
---------------------------------------------------------------------------

    In terms of the costs of writing documents in plain English, all of 
the responding participants spent more time writing their documents in 
plain English than they otherwise would have

[[Page 6376]]

if they used conventional language.\45\ Pilot participants found that 
legal and technical writing costs rose for plain English filings by 
approximately 15 percent.\46\ Because legal and technical writing 
comprises approximately 48 percent of the total burden hours necessary 
to complete a registration statement (with accounting comprising the 
other 52 percent),\47\ we estimate that total burden hours will rise by 
approximately seven percent in the first year.
---------------------------------------------------------------------------

    \45\ Four of the six participants spent 10 percent longer; the 
initial public offering issuer spent 15 percent longer; and one 
participant took ``significantly longer.'' For the participant that 
took significantly longer, we received two estimates--one from the 
company of 75 percent longer and one from the firm's legal counsel 
of 200 percent longer.
    \46\ This estimate is based on responses to a survey of nine 
plain English pilot program participants and on a summary of the 
results of an informal survey of pilot participants conducted by the 
American Society of Corporate Secretaries. See Public Comment letter 
dated March 24, 1997.
    \47\ The Division of Corporation Finance collected Item 511 of 
Regulation S-K expense information from approximately 1500 
registration statements filed between January 1 and December 31, 
1995. Assuming legal costs averaged $150/hour and accounting costs 
averaged $75/hour, the survey indicates that approximately 48 
percent of burden hours are for legal and technical writing, while 
52 percent are accounting-related. Because the rule and amendments 
apply predominately to legal and technical writing, we apply the 
increased burden to those hours.
---------------------------------------------------------------------------

    The table below shows the current and estimated burden hours per 
filing, the estimated change in burden hours per filing, and the number 
of forms filed in 1997 by form type.\48\ The information in the table 
indicates that we estimate public companies will require on average 60 
additional hours per filing to comply with the plain English 
requirements in the first year. At $120 per hour,\49\ this translates 
to an added cost in the first year of approximately $7,200 per 
filing.\50\ Based on pilot program participants' experiences,\51\ we 
expect the number of hours and cost to fall in the following year to 
the current level as firms gain experience with the plain English 
principles. We anticipate the cost to repeat filers to fall even 
sooner.
---------------------------------------------------------------------------

    \48\ We do not anticipate that the plain English requirements 
will change the burden hours or cost for preparing Form N-2. 
Consequently, we do not include Form N-2 in the table.
    \49\ We anticipate that some firms will comply, in part, with 
the plain English requirements using in-house counsel, which will 
lower hourly costs.
    \50\ In 1997, registrants filed 7,531 filings. At $7,200 per 
filing, the total increase in cost would be approximately $54 
million.
    \51\ Four of the six participants believed that once they 
developed plain English formats, it would take them less time to 
write a document in plain English than in the conventional language. 
One participant predicted that writing documents in plain English 
would require no additional time after the initial effort. The other 
participant did not comment directly.

----------------------------------------------------------------------------------------------------------------
                                                                                                     Change in  
                                     Estimated       Estimated       Change in                       estimated  
                                   burden hours/   burden hours/     estimated     Filings/year    burden hours 
              Form                 filing before   filing after    burden hours/       \52\       by filing type
                                   plain English   plain English      filing                        after plain 
                                       rule            rule                                        English rule 
----------------------------------------------------------------------------------------------------------------
S-1.............................           1,267           1,358              91           1,067          97,097
S-2.............................             470             504              34             145           4,930
S-3.............................             398             427              29           3,137          90,973
S-4.............................           1,233           1,322              89           2,044         181,916
F-1/S-20........................           1,868           2,002             134             162          21,708
F-2.............................             559             599              40               3             120
F-3.............................             166             178              12             220           2,640
F-4.............................           1,308           1,402              94             243          22,842
S-11............................             147             158              11              68             748
SB-1............................             710             761              51               8             408
SB-2............................             876             939              63             434          27,342
                                                                                 -------------------------------
      Total.....................  ..............  ..............  ..............           7,531        450,724 
----------------------------------------------------------------------------------------------------------------
\52\ These estimates are based on the number of such filings made in calendar year 1997.                        

    We believe the estimate of seven-percent higher cost in the first 
year is somewhat overstated because it is based on the experiences of 
pilot participants who did not have models to follow. The time required 
for future registrants to comply with the requirements should be lower. 
To help reduce compliance time, the staff is including a list of 
filings by pilot participants and the information issuers need to 
locate those filings. The staff is also issuing a handbook on how to 
prepare plain English documents and will hold workshops to help public 
companies, their counsel, and underwriters comply with the rules. We 
also anticipate that public companies' legal counsel, who will gain 
experience from all their clients' transactions, will help to speed the 
transition to plain English. Finally, some firms filed multiple 
registration statements in 1997 and we applied the same burden hour 
increase to all filings. We believe that required compliance time for 
firms' later filings should be lower than earlier filings as companies 
gain experience writing in plain English.
    These results are consistent with those found by the American 
Society of Corporate Secretaries, which surveyed the 57 member 
companies represented on its Securities Law Committee. The twelve 
members who had prepared at least one plain English document predicted 
no ``material change in annual burden reporting or hours.'' \53\ 
Similarly, Baltimore Gas and Electric Company incurred no additional 
cost once the company learned the process.\54\
---------------------------------------------------------------------------

    \53\ See American Society of Corporate Secretaries Public 
Comment letter dated March 24, 1997.
    \54\ See Baltimore Gas and Electric Company Public Comment 
letter dated March 26, 1997.

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[[Page 6377]]

    One benefit generally found by pilot program participants was that 
document length was shortened on average by 11 percent.\55\ Given that 
the average length of an S-1 prospectus is approximately 116 pages, 
this decline would result in a 13-page reduction. For an S-3 
prospectus, whose average length is 52 pages, the decline would save 6 
pages. And the length of an S-4 prospectus, which averages 219 pages, 
would fall by 24 pages.\56\ Where plain English shortened documents, 
several responding participants estimated lower printing and 
distribution costs. Even if costs dropped by only five percent, firms 
would save approximately $3,160 per filing. In aggregate, firms would 
save approximately $24 million per year--savings that could continue 
for as long as firms comply with the plain English requirements.\57\
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    \55\ One of the six participants indicated that writing in plain 
English shortened their document by 5 percent; one by 10 to 15 
percent; one by 15 percent; and one by 35 percent. Interestingly, 
the pilot participant who spent 75 percent more time on its plain 
English prospectus shortened its prospectus the largest amount--35 
percent. One found no appreciable difference, and one estimated that 
plain English increased document length by one percent.
    \56\ The staff randomly selected prospectuses filed in 1997 to 
estimate document length.
    \57\ The Division of Corporation Finance collected Item 511 of 
Regulation S-K expense information from approximately 1500 
registration statements filed between January 1 and December 31, 
1995. Printing expenses averaged $63,200 per filing. Assuming five-
percent cost savings, public companies would save $3,160 per filing 
or a total of about $24 million in printing and mailing costs on 
7,531 filings per year.
---------------------------------------------------------------------------

    In summary, while all of the participants that answered our 
questions incurred some additional document preparation costs, the 
majority estimated them to be low and predicted that they would fall 
over time. The participants anticipated little added, and perhaps even 
lower, overall cost. Some even predicted they might save money on 
printing and distribution costs and time answering investors' 
questions. Based on the experiences of pilot program participants, we 
believe that the substantial benefits to investors of plain English and 
the on-going cost savings to issuers justify the short-term cost to 
public companies of learning to prepare documents in plain English.

IX. Final Regulatory Flexibility Analysis

    The staff has prepared this Final Regulatory Flexibility Analysis 
in accordance with Section 603 of the Regulatory Flexibility Act (5 
U.S.C. 603). This analysis relates to revisions of Rules 421, 461, and 
481 of Regulation C and Items 101, 501, 502, 503, and 508 of 
Regulations S-K and S-B to implement the Commission's plain English 
initiative. The Commission is also adopting minor amendments to Forms 
S-2, S-3, S-4, S-20, F-2, F-3, and F-4 under the Securities Act and 
Form N-2 under the Investment Company Act.

Need for and Objectives of Plain English Rules

    In August 1995, Chairman Arthur Levitt organized the Task Force on 
Disclosure Simplification to find ways to simplify the disclosure 
process and increase the effectiveness and efficiency of capital 
formation where consistent with investor protection. In its final 
report to the Commission, the Task Force suggested that the Commission 
require public companies to write certain parts of prospectuses in 
plain English.\58\ The Commission responded in January 1997 by 
proposing a rule and several amendments that required public companies 
to write the front of prospectuses using plain English principles.\59\ 
The amendments revised current rules and forms to eliminate certain 
language requirements in the front of prospectuses and relocate highly 
technical language within the prospectus. The Commission proposed these 
rules to enhance the clarity and conciseness of prospectuses.
---------------------------------------------------------------------------

    \58\ See Report of the Task Force on Disclosure Simplification 
(March 1996).
    \59\ Securities Act Release No. 33-7380.
---------------------------------------------------------------------------

    The Commission received 45 comment letters from 43 entities in 
response to the proposing release.\60\ The commentators generally 
expressed strong support for the plain English proposals, although 
several expressed concerns with specific provisions and some suggested 
alternative approaches for addressing particular issues. The Commission 
is adopting the plain English proposals with minor modifications that 
clarify provisions and reflect the suggestions of some comment letters 
and the plain English pilot program participants. These rules will make 
prospectuses simpler, clearer, more useful, and, we hope, more widely 
read.
---------------------------------------------------------------------------

    \60\ A summary of comments is available, along with the comment 
letters, in Public File No. S7-3-97. The file is available for 
inspection and copying in the Commission's Public Reference Room, 
450 Fifth Street N.W., Washington, D.C. 20549.
---------------------------------------------------------------------------

    The amendments will be adopted pursuant to Sections 6, 7, 8, 10, 
and 19(a) of the Securities Act, Sections 12, 13, 15(d), 16(a), and 
23(a) of the Exchange Act, and Sections 8, 24, 30, 31, and 38 of the 
Investment Company Act of 1940.

Small Entities Subject to the Rules

    For the purposes of the Regulatory Flexibility Act, the term 
``small business,'' as used in reference to a public company other than 
an investment company, is defined by Rule 157 under the Securities Act 
as an issuer whose total assets on the last day of its most recent 
fiscal year were $5 million or less and is engaged or proposing to 
engage in small business financing.\61\ An issuer is considered to be 
engaged in small business financing if it is conducting or proposes to 
conduct an offering of securities that does not exceed $5 million. The 
Securities Exchange Act defines a ``small business'' issuer, other than 
an investment company, to be an issuer that, on the last day of its 
most recent fiscal year, had total assets of $5 million or less. When 
used with respect to an issuer that is an investment company, the term 
is defined as an investment company with net assets of $50 million or 
less as of the end of its most recent fiscal year.\62\
---------------------------------------------------------------------------

    \61\ 17 CFR 230.157.
    \62\ 17 CFR 240.0-10.
---------------------------------------------------------------------------

    The Commission estimates that approximately 1,100 of approximately 
12,700 Exchange Act reporting companies and 800 investment companies of 
approximately 3,700 active registered investment companies currently 
satisfy the definition of ``small business,'' all of which will be 
subject to the plain English requirements. We have no reliable way, 
however, to determine how many businesses may become subject to 
Commission reporting obligations in the future, or may otherwise be 
impacted by the plain English requirements.

Significant Issues Raised by Public Comment

    The Commission received no requests for the Initial Regulatory 
Flexibility Analysis and received no comments specifically in response 
to its request for information about the impact of the rule and 
amendments on small businesses. Nine comment letters, however, 
discussed the costs and benefits to public companies in general. Six 
believed that costs would generally be low and temporary as firms learn 
to write in plain English. Three believed that the costs would be more 
significant. These costs are discussed in greater detail in the next 
subsection. The Commission's efforts to minimize the compliance costs 
to all reporting companies, both large and small, are discussed in the 
final subsection of this Final Regulatory Flexibility Analysis.

[[Page 6378]]

Projected Reporting, Recordkeeping, and Other Compliance Requirements

    The plain English rules and amendments do not affect the substance 
of the disclosures that public companies must make. They do not impose 
any new recordkeeping requirements or require reporting of additional 
information. We anticipate, however, that there will be a temporary 
increase in cost that will diminish over time as firms learn to prepare 
documents using plain English principles. Thus, after a short phase-in 
period, public companies should incur little, if any, additional cost 
from this rule or these amendments. In some instances, we anticipate 
that companies will save on printing and mailing costs because plain 
English tends to reduce document length. Some firms may also save time 
answering investors' questions.
    We base these conclusions, in part, on companies' experiences in 
the plain English pilot program. We solicited information about firms' 
experiences by questioning a group of pilot participants. Based on 
their responses, discussed in detail in Section VIII, we anticipate a 
temporary increase in cost that will diminish over time as firms learn 
to prepare documents using plain English principles. While none of the 
pilot participants specifically qualified as a ``small business,'' the 
company that wrote its initial public offering prospectus in plain 
English had a favorable experience.
    In addition, we requested information about the impact of the plain 
English requirements on small businesses in the proposing release. 
While no one commented specifically on the burden to small firms, 
several letters indicated that the additional cost of writing in plain 
English would be low and would diminish after the initial effort of 
learning to write in plain English. Some commentators even predicted 
savings. This evidence contrasts, however, with three letters 
expressing concern that writing in plain English would increase 
document preparation costs and lengthen documents. While we considered 
these concerns, experience from the pilot program suggests that phase-
in costs will be low and that documents will be shorter and easier to 
read and understand.

Agency Action To Minimize Effect on Small Businesses

    The Regulatory Flexibility Act directs the Commission to consider 
significant alternatives that would accomplish the stated objectives, 
while minimizing any significant adverse impact on small issuers. In 
connection with the plain English rules and amendments, we considered 
several alternatives, including (a) establishing different compliance 
and reporting requirements for small businesses; and (b) using 
performance rather than design standards, and (c) exempting small 
businesses from all or part of the requirements. We do not believe, 
however, that these alternatives are appropriate. First, these 
alternatives would be inconsistent with our statutory mandate to 
require prospectuses to disclose fully and fairly all material 
information to investors. Second, these alternatives would 
significantly dilute or negate the important benefits of plain English 
disclosure to investors. For these reasons, we also believe there would 
be no benefit in providing separate requirements for small issuers 
based on the use of performance rather than design standards.
    We have tried before, through interpretive advice and other means, 
to address the problems with current prospectus disclosure, which too 
often includes arcane, needlessly complex, and incomprehensible 
language. These earlier measures have not resulted in widespread 
improvement in prospectus readability. Therefore, we believe the plain 
English requirements are necessary to improve communication between 
public companies and investors, particularly given the relatively low 
compliance burden. In addition, we believe the rules and amendments 
should apply equally to all entities required to disclose information 
under the Securities Act to enhance protection of all investors.
    The plain English principles are generally broad statements that 
provide registrants flexibility in how to disclose information. Thus, 
there are a variety of ways in which registrants, including small 
businesses, can use the principles and guidance in making their 
disclosures. Modifications of the plain English proposals by the 
Commission will reduce the short-term cost to small issuers. Based on 
suggestions in several comment letters, the Commission is not adopting 
limitations on the length of summaries, limitations on the number of 
risk factors or the requirement that companies prioritize risk factors. 
To provide compliance assistance to both small and large issuers, the 
release includes a list of filings by pilot participants and the 
information issuers need to locate those filings. The staff is also 
issuing a handbook on how to prepare plain English documents and will 
hold workshops to help small and large issuers, their counsels, 
underwriters, and others comply with the rules. Finally, the Commission 
is minimizing the impact by delaying the effective date of the rules 
until October 1, 1998.

X. Paperwork Reduction Act

    The plain English rule and amendments affect several regulations 
and forms that contain ``collection of information requirements'' 
within the meaning of the Paperwork Reduction Act of 1995.\63\ In the 
proposing release, the Commission stated its belief that the plain 
English rule and amendments would not result in a substantive or 
material change to the affected collections of information. 
Nevertheless, the Commission solicited comment on whether the rule and 
amendments would materially affect the burden on public companies and 
mutual funds that prepare prospectuses. Because several comment letters 
indicated that the burden would increase, at least in the short term, 
the Commission has determined to submit the rule and amendments to the 
Office of Management and Budget for review in accordance with 44 U.S.C. 
3507(d). The Commission is amending Rules 421, 461, and 481 of 
Regulation C and Items 101, 501, 502, 503, and 508 of Regulations S-K 
and S-B. The Commission is also adopting minor amendments to Forms S-2, 
S-3, S-4, S-20, F-2, F-3, and F-4 under the Securities Act and Form N-2 
under the Investment Company Act as a part of the plain English 
initiative.\64\
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    \63\ 44 U.S.C. 3501 et seq.
    \64\ Regulations S-K, S-B, and C do not impose reporting burdens 
directly on public companies. For administrative convenience, each 
of these regulations is currently assigned one burden hour. The 
burden hours imposed by the disclosure regulations are currently 
included in the estimates for the forms that refer to the 
regulations.
---------------------------------------------------------------------------

    The rule and amendments require public companies to write 
information included in the front of prospectuses the cover page, 
summary, and risk factors section--in everyday language that investors 
can understand. The changes also codify existing Commission 
interpretive advice and eliminate requirements no longer deemed useful. 
The requirements do not affect the substance of the disclosures that 
registrants must make. They do not impose any new recordkeeping 
requirements or require reporting of additional information.
    As discussed in detail in Section VII, we anticipate that there 
will be a temporary increase in burden that will diminish over time as 
firms learn to prepare documents using plain English principles. As 
indicated in the Cost/Benefit Analysis table, we estimate that

[[Page 6379]]

public companies will require on average 60 additional burden hours per 
filing or 450,724 hours in total to comply with the plain English 
requirements in the first year. We then expect burden hours to fall to 
their current level. Thus, after a short phase-in period, public 
companies should incur little, if any, additional cost from this rule 
or these amendments. In some instances, we anticipate that companies 
will save on printing and mailing costs because plain English tends to 
reduce document length. Some firms may also save time answering 
investors' questions. The added burden will be reflected in the 
estimated burden hours for Regulation C.\65\
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    \65\ Regulations S-K and S-B will continue to show an estimated 
burden hour of one.
---------------------------------------------------------------------------

    The information collection requirements imposed by the forms and 
regulations are mandatory to the extent that a company elects to do a 
registered offering. The information is made publicly available. An 
agency may not conduct or sponsor, and a person is not required to 
respond to, a collection of information unless it displays a currently 
valid OMB control number.
    In accordance with 44 U.S.C. 3506(c)(2)(B), the Commission solicits 
comment on the following:
     Whether the changes in the collection of information are 
necessary for the proper performance of the function of the agency;
     The accuracy of the Commission's estimate of the burden of 
the changes to the collection of information;
     The quality, utility, and clarity of the information to be 
collected; and
     Whether there are ways to minimize the burden of the 
collection of information on those who are to respond, including 
through the use of automated collection techniques or other forms of 
information technology.
    Anyone desiring to submit comments on the collection of information 
requirements should direct them to the Office of Management and Budget, 
Attention: Desk Officer for the Securities and Exchange Commission, 
Office of Information and Regulatory Affairs, Washington, D.C. 20503, 
and should also send a copy of their comments to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, N.W., 
Washington, D.C. 20549, with reference to File No. S7-3-97. The Office 
of Management and Budget is required to make a decision concerning the 
collection of information between 30 and 60 days after publication, so 
a comment to OMB is best assured of having its full effect if OMB 
receives it within 30 days of publication.

XI. Statutory Authority

    The rule amendments are proposed under Sections 6, 7, 8, 10 and 
19(a) of the Securities Act, Sections 12, 13, 15(d), 16(a) and 23(a) of 
the Exchange Act, and Sections 8, 24, 30, 31 and 38 of the Investment 
Company Act of 1940.

List of Subjects in 17 CFR Parts 228, 229, 230, 239, and 274

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

Text of the Amendments

    For the reasons discussed in the preamble, the Securities and 
Exchange Commission amends Title 17, Chapter 11 of the Code of Federal 
Regulations 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, 77z-2, 
77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77jjj, 77nnn, 77sss, 
78l, 78m, 78n, 78o, 78u-5, 78w, 78ll, 80a-8, 80a-29, 80a-30, 80a-37, 
80b-11, unless otherwise noted.

    2. By amending Sec. 228.101 to add paragraphs (c) and (d) to read 
as follows:


Sec. 228.101 (Item 101)  Description of Business.

* * * * *
    (c) Reports to security holders. Disclose the following in any 
registration statement you file under the Securities Act of 1933:
    (1) If you are not required to deliver an annual report to security 
holders, whether you will voluntarily send an annual report and whether 
the report will include audited financial statements;
    (2) Whether you file reports with the Securities and Exchange 
Commission. If you are a reporting company, identify the reports and 
other information you file with the SEC; and
    (3) That the public may read and copy any materials you file with 
the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W., 
Washington, D.C. 20549. State that the public may obtain information on 
the operation of the Public Reference Room by calling the SEC at 1-800-
SEC-0330. If you are an electronic filer, state that the SEC maintains 
an Internet site that contains reports, proxy and information 
statements, and other information regarding issuers that file 
electronically with the SEC and state the address of that site (http://
www.sec.gov). You are encouraged to give your Internet address, if 
available;
    (d) Canadian Issuers. Provide the information required by Items 
101(f)(2) and 101(g) of Regulation S-K (Sec. 229.101(f)(2) and (g)).
    3. Section 228.501 is revised to read as follows:


Sec. 228.501 (Item 501)  Front of registration statement and front 
cover of prospectus.

    The small business issuer must furnish the following information in 
plain English. See Sec. 230.421(d) of Regulation C of this chapter.
    (a) Limit the outside front cover page of the prospectus to one 
page and include the following information:
    (1) The registrant's name. A foreign registrant also must give the 
English translation of its name;
    (2) The title, amount, and description of securities offered. If 
the underwriter has any arrangement with the issuer, such as an over-
allotment option, under which the underwriter may purchase additional 
shares in connection with the offering, indicate that this arrangement 
exists and state the amount of additional shares that the underwriter 
may purchase under the arrangement;
    (3) If there are selling security holders, a statement to that 
effect;
    (4) Whether any national securities exchange or the Nasdaq Stock 
Market lists the securities offered, naming the particular market(s), 
and identifying the trading symbol(s) for those securities;
    (5) A cross-reference to the risk factors section, including the 
page number where it appears in the prospectus. Highlight this cross-
reference by prominent type or in another manner;
    (6) Any legend or statement required by the law of any state in 
which the securities are offered;
    (7) A legend that indicates that neither the Securities and 
Exchange Commission nor any state securities commission has approved or 
disapproved of the securities or passed on the adequacy or accuracy of 
the disclosures in the prospectus. Also make clear that any 
representation to the contrary is a criminal offense. You may use one 
of the following or other clear, plain language:

    Example A: Neither the Securities and Exchange Commission nor 
any state securities commission has approved or disapproved of these 
securities or passed upon the adequacy or accuracy of the 
prospectus. Any representation to the contrary is a criminal 
offense.
    Example B: Neither the Securities and Exchange Commission nor 
any state securities commission has approved or disapproved of these 
securities or determined if this prospectus is truthful or complete.

[[Page 6380]]

Any representation to the contrary is a criminal offense.

    (8) If you are not a reporting company and the preliminary 
prospectus will be circulated, as applicable:
    (i) A bona fide estimate of the range of the maximum offering price 
and maximum number of shares or units offered; or
    (ii) A bona fide estimate of the principal amount of debt 
securities offered;
    (9)(i) Name(s) of the lead or managing underwriter(s) and an 
identification of the nature of the underwriting arrangements;
    (ii) If the offering is not made on a firm commitment basis, a 
brief description of the underwriting arrangements;
    (iii) If you offer the securities on a best efforts or best efforts 
minimum/maximum basis, the date the offering will end, any minimum 
purchase requirements, and whether or not there are any arrangements to 
place the funds in an escrow, trust, or similar account; and
    (iv) If you offer the securities for cash, the price to the public 
for the securities, the underwriting discounts and commissions, and 
proceeds to the registrant or other persons. Show the information on 
both a per share or unit basis and for the total amount of the 
offering. If you make the offering on a minimum/maximum basis, show 
this information based on the total minimum and total maximum amount of 
the offering. You may present the information in a table, term sheet 
format, or other clear presentation. You may present the information in 
any format that fits the design of the cover page so long as the 
information can be easily read and is not misleading;
    (10) If the prospectus will be used before the effective date of 
the registration statement, a prominent statement that:
    (i) The information in the prospectus will be amended or completed;
    (ii) A registration statement relating to these securities has been 
filed with the Securities and Exchange Commission;
    (iii) The securities may not be sold until the registration 
statement becomes effective; and
    (iv) The prospectus is not an offer to sell the securities and it 
is not soliciting an offer to buy the securities in any state where 
offers or sales are not permitted. You may use the following or other 
clear, plain language:

    The information in this prospectus is not complete and may be 
changed. We may not sell these securities until the registration 
statement filed with the Securities and Exchange Commission is 
effective. This prospectus is not an offer to sell these securities 
and it is not soliciting an offer to buy these securities in any 
state where the offer or sale is not permitted.

    (11) If you use Sec. 230.430A of this chapter to omit pricing 
information and the prospectus is used before you determine the public 
offering price, the information in paragraph (a)(10) of this section; 
and
    (12) The date of the prospectus.
    (b) [Reserved]
    4. Section 228.502 is revised to read as follows:


Sec. 228.502 (Item 502)  Inside Front and Outside Back Cover Pages of 
Prospectus.

    The small business issuer must furnish the following information in 
plain English. See Sec. 230.421(d) of Regulation C of this chapter.
    (a) Table of contents. On either the inside front or outside back 
cover page of the prospectus, provide a reasonably detailed table of 
contents. It must show the page number of the various sections or 
subdivisions of the prospectus. Include a specific listing of the risk 
factors section required by Item 503 of this Regulation S-B (17 CFR 
228.503). You must include the table of contents immediately following 
the cover page in any prospectus you deliver electronically;
    (b) Dealer prospectus delivery obligation. If applicable to your 
offering, on the outside back cover page of the prospectus, advise 
dealers of their prospectus delivery obligation, including the 
expiration date specified by Section 4(3) of the Securities Act (15 
U.S.C. 77d(3)) and Sec. 230.174 of this chapter. You may use the 
following or other clear, plain language:

Dealer Prospectus Delivery Obligation

    Until (insert date), all dealers that effect transactions in 
these securities, whether or not participating in this offering, may 
be required to deliver a prospectus. This is in addition to the 
dealers' obligation to deliver a prospectus when acting as 
underwriters and with respect to their unsold allotments or 
subscriptions.

    5. By revising Sec. 228.503 to read as follows:


Sec. 228.503 (Item 503)  Summary Information and Risk Factors.

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

Instruction to paragraph 503(a)

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

    (b) Address and phone number. Include, either on the cover page or 
in the summary section of the prospectus, the complete mailing address 
and telephone number of your principal executive offices.
    (c) Risk factors. (1) Discuss in a section captioned ``Risk 
Factors'' any factors that make the offering speculative or risky. The 
factors may include, among other things, the following:
    (i) Your lack of an operating history;
    (ii) Your lack of recent profits from operations;
    (iii) Your poor financial position;
    (iv) Your business or proposed business; or
    (v) The lack of a market for your common equity securities.
    (2) The risk factor discussion must immediately follow the summary 
section. If you do not include a summary section, the risk factor 
discussion must immediately follow the cover page or the pricing 
information that immediately follows the cover page. Pricing 
information means price and price-related information that you may omit 
from the prospectus in an effective registration statement based on 
Sec. 230.430A(a) of this chapter.
    6. Section 228.508 is amended to revise the heading of paragraph 
(a), add two sentences to the end of paragraph (a) and revise paragraph 
(j) to read as follows:


Sec. 228.508 (Item 508)  Plan of Distribution.

    (a) Underwriters and underwriting obligations.* * * The small 
business issuer must disclose the offering expenses specified in Item 
511 of this Regulation S-B (17 CFR 228.511). If there is an arrangement 
under which the underwriter may purchase additional shares in 
connection with the offering, such as an over-allotment option, 
describe that arrangement and disclose information on the total 
offering price, underwriting discounts and commissions, and total 
proceeds assuming the underwriter purchases all

[[Page 6381]]

of the shares subject to that arrangement.
* * * * *
    (j) Stabilization and other transactions. (1) Briefly describe any 
transaction that the underwriter intends to conduct during the offering 
that stabilizes, maintains, or otherwise affects the market price of 
the offered securities. Include information on stabilizing 
transactions, syndicate short covering transactions, penalty bids, or 
any other transaction that affects the offered security's price. 
Describe the nature of the transactions clearly and explain how the 
transactions affect the offered security's price. Identify the exchange 
or other market on which these transactions may occur. If true, 
disclose that the underwriter may discontinue these transactions at any 
time;
    (2) If the stabilizing began before the effective date of the 
registration statement, disclose the amount of securities bought, the 
prices at which they were bought, and the period within which they were 
bought. If you use Sec. 230.430A of this chapter, the final prospectus 
must contain information on the stabilizing transactions that took 
place before the public offering price was set; and
    (3) If you are making a warrant or rights offering of securities to 
existing security holders and the securities not purchased by existing 
security holders are to be reoffered to the public, disclose the 
following information in the reoffer prospectus:
    (i) The amount of securities bought in stabilization activities 
during the offering period and the price or range of prices at which 
the securities were bought;
    (ii) The amount of the offered securities subscribed for during the 
offering period;
    (iii) The amount of the offered securities purchased by the 
underwriter during the offering period;
    (iv) The amount of the offered securities sold by the underwriter 
during the offering period and the price or range of prices at which 
the securities were sold; and
    (v) The amount of the offered securities that will be reoffered to 
the public and the offering price.

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

    7. The general authority citation for part 229 continues to read as 
follows:

    Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 77z-2, 
77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77iii, 77jjj, 77nnn, 
77sss, 78c, 78i, 78j, 78l, 78m, 78n, 78o, 78u-5, 78w, 78ll(d), 79e, 
79n, 79t, 80a-8, 80a-29, 80a-30, 80a-37, 80b-11, unless otherwise 
noted.

* * * * *
    8. By amending Sec. 229.101 to add paragraphs (e), (f), and (g) 
before ``Instructions to Item 101'' to read as follows:


Sec. 229.101 (Item 101)  Description of business.

* * * * *
    (e) Available information. Disclose the following in any 
registration statement you file under the Securities Act of 1933:
    (1) Whether you file reports with the Securities and Exchange 
Commission. If you are reporting company, identify the reports and 
other information you file with the SEC.
    (2) That the public may read and copy any materials you file with 
the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W., 
Washington, D.C. 20549. State that the public may obtain information on 
the operation of the Public Reference Room by calling the SEC at 1-800-
SEC-0330. If you are an electronic filer, state that the SEC maintains 
an Internet site that contains reports, proxy and information 
statements, and other information regarding issuers that file 
electronically with the SEC and state the address of that site (http://
www.sec.gov). You are encouraged to give your Internet address, if 
available;
    (f) Reports to security holders. Disclose the following information 
in any registration statement you file under the Securities Act:
    (1) If the SEC's proxy rules or regulations, or stock exchange 
requirements, do not require you to send an annual report to security 
holders or to holders of American depository receipts, describe briefly 
the nature and frequency of reports that you will give to security 
holders. Specify whether the reports that you give will contain 
financial information that has been examined and reported on, with an 
opinion expressed ``by'' an independent public or certified public 
accountant.
    (2) For a foreign private issuer, if the report will not contain 
financial information prepared in accordance with U.S. generally 
accepted accounting principles, you must state whether the report will 
include a reconciliation of this information with U.S. generally 
accepted accounting principles.
    (g) Enforceability of civil liabilities against foreign persons. 
Disclose the following if you are a foreign private issuer filing a 
registration statement under the Securities Act:
    (1) Whether or not investors may bring actions under the civil 
liability provisions of the U.S. federal securities laws against the 
foreign private issuer, any of its officers and directors who are 
residents of a foreign country, any underwriters or experts named in 
the registration statement that are residents of a foreign country, and 
whether investors may enforce these civil liability provisions when the 
assets of the issuer or these other persons are located outside of the 
United States. The disclosure must address the following matters:
    (i) The investor's ability to effect service of process within the 
United States on the foreign private issuer or any person;
    (ii) The investor's ability to enforce judgments obtained in U.S. 
courts against foreign persons based upon the civil liability 
provisions of the U.S. federal securities laws;
    (iii) The investor's ability to enforce, in an appropriate foreign 
court, judgments of U.S. courts based upon the civil liability 
provisions of the U.S. federal securities laws; and
    (iv) The investor's ability to bring an original action in an 
appropriate foreign court to enforce liabilities against the foreign 
private issuer or any person based upon the U.S. federal securities 
laws.
    (2) If you provide this disclosure based on an opinion of counsel, 
name counsel in the prospectus and file as an exhibit to the 
registration statement a signed consent of counsel to the use of its 
name and opinion.
* * * * *
    9. By revising Sec. 229.501 to read as follows:


Sec. 229.501 (Item 501)  Forepart of Registration Statement and Outside 
Front Cover Page of Prospectus.

    The registrant must furnish the following information in plain 
English. See Sec. 230.421(d) of Regulation C of this chapter.
    (a) Front cover page of the registration statement. Where 
appropriate, include the delaying amendment legend from

[[Page 6382]]

Sec. 230.473 of Regulation C of this chapter.
    (b) Outside front cover page of the prospectus. Limit the outside 
cover page to one page. If the following information applies to your 
offering, disclose it on the outside cover page of the prospectus.
    (1) Name. The registrant's name. A foreign registrant must give the 
English translation of its name.

Instruction to paragraph 501(b)(1).

    If your name is the same as that of a company that is well 
known, include information to eliminate any possible confusion with 
the other company. If your name indicates a line of business in 
which you are not engaged or you are engaged only to a limited 
extent, include information to eliminate any misleading inference as 
to your business. In some circumstances, disclosure may not be 
sufficient and you may be required to change your name. You will not 
be required to change your name if you are an established company, 
the character of your business has changed, and the investing public 
is generally aware of the change and the character of your current 
business.

    (2) Title and amount of securities. The title and amount of 
securities offered. Separately state the amount of securities offered 
by selling security holders, if any. If the underwriter has any 
arrangement with the issuer, such as an over-allotment option, under 
which the underwriter may purchase additional shares in connection with 
the offering, indicate that this arrangement exists and state the 
amount of additional shares that the underwriter may purchase under the 
arrangement. Give a brief description of the securities except where 
the information is clear from the title of the security. For example, 
you are not required to describe common stock that has full voting, 
dividend and liquidation rights usually associated with common stock.
    (3) Offering price of the securities. Where you offer securities 
for cash, the price to the public of the securities, the underwriter's 
discounts and commissions, the net proceeds you receive, and any 
selling shareholder's net proceeds. Show this information on both a per 
share or unit basis and for the total amount of the offering. If you 
make the offering on a minimum/maximum basis, show this information 
based on the total minimum and total maximum amount of the offering. 
You may present the information in a table, term sheet format, or other 
clear presentation. You may present the information in any format that 
fits the design of the cover page so long as the information can be 
easily read and is not misleading:

Instructions to paragraph 501(b)(3)

    1. If a preliminary prospectus is circulated and you are not 
subject to the reporting requirements of Section 13(a) or 15(d) of 
the Exchange Act, provide, as applicable:
    (A) A bona fide estimate of the range of the maximum offering 
price and the maximum number of securities offered; or
    (B) A bona fide estimate of the principal amount of the debt 
securities offered.
    2. If it is impracticable to state the price to the public, 
explain the method by which the price is to be determined. If the 
securities are to be offered at the market price, or if the offering 
price is to be determined by a formula related to the market price, 
indicate the market and market price of the securities as of the 
latest practicable date.
    3. If you file a registration statement on Form S-8, you are not 
required to comply with this paragraph (b)(3).

    (4) Market for the securities. Whether any national securities 
exchange or the Nasdaq Stock Market lists the securities offered, 
naming the particular market(s), and identifying the trading symbol(s) 
for those securities;
    (5) Risk factors. A cross-reference to the risk factors section, 
including the page number where it appears in the prospectus. Highlight 
this cross-reference by prominent type or in another manner;
    (6) State legend. Any legend or statement required by the law of 
any state in which the securities are to be offered. You may combine 
this with any legend required by the SEC, if appropriate;
    (7) Commission legend. A legend that indicates that neither the 
Securities and Exchange Commission nor any state securities commission 
has approved or disapproved of the securities or passed upon the 
accuracy or adequacy of the disclosures in the prospectus and that any 
contrary representation is a criminal offense. You may use one of the 
following or other clear, plain language:

    Example A: Neither the Securities and Exchange Commission nor 
any state securities commission has approved or disapproved of these 
securities or passed upon the adequacy or accuracy of this 
prospectus. Any representation to the contrary is a criminal 
offense.
    Example B: Neither the Securities and Exchange Commission nor 
any state securities commission has approved or disapproved of these 
securities or determined if this prospectus is truthful or complete. 
Any representation to the contrary is a criminal offense.

    (8) Underwriting. (i) Name(s) of the lead or managing 
underwriter(s) and an identification of the nature of the underwriting 
arrangements;
    (ii) If the offering is not made on a firm commitment basis, a 
brief description of the underwriting arrangements. You may use any 
clear, concise, and accurate description of the underwriting 
arrangements. You may use the following descriptions of underwriting 
arrangements where appropriate:

    Example A: Best efforts offering. The underwriters are not 
required to sell any specific number or dollar amount of securities 
but will use their best efforts to sell the securities offered.
    Example B: Best efforts, minimum-maximum offering. The 
underwriters must sell the minimum number of securities offered 
(insert number) if any are sold. The underwriters are required to 
use only their best efforts to sell the maximum number of securities 
offered (insert number).

    (iii) If you offer the securities on a best efforts or best efforts 
minimum/maximum basis, the date the offering will end, any minimum 
purchase requirements, and any arrangements to place the funds in an 
escrow, trust, or similar account. If you have not made any of these 
arrangements, state this fact and describe the effect on investors;
    (9) Date of prospectus. The date of the prospectus;
    (10) Prospectus ``Subject to Completion'' legend. If you use the 
prospectus before the effective date of the registration statement, a 
prominent statement that:
    (i) The information in the prospectus will be amended or completed;
    (ii) A registration statement relating to these securities has been 
filed with the Securities and Exchange Commission;
    (iii) The securities may not be sold until the registration 
statement becomes effective; and
    (iv) The prospectus is not an offer to sell the securities and it 
is not soliciting an offer to buy the securities in any state where 
offers or sales are not permitted. The legend may be in the following 
or other clear, plain language:

    The information in this prospectus is not complete and may be 
changed. We may not sell these securities until the registration 
statement filed with the Securities and Exchange Commission is 
effective. This prospectus is not an offer to sell these securities 
and it is not soliciting an offer to buy these securities in any 
state where the offer or sale is not permitted.

    (11) If you use Sec. 230.430A of this chapter to omit pricing 
information and the prospectus is used before you determine the public 
offering price, the information and legend in paragraph (b)(10) of this 
section.
    10. By revising Sec. 229.502 to read as follows:

[[Page 6383]]

Sec. 229.502 (Item 502)  Inside Front and Outside Back Cover Pages of 
Prospectus.

    The registrant must furnish this information in plain English. See 
Sec. 230.421(d) of Regulation C of this chapter.
    (a) Table of contents. On either the inside front or outside back 
cover page of the prospectus, provide a reasonably detailed table of 
contents. It must show the page number of the various sections or 
subdivisions of the prospectus. Include a specific listing of the risk 
factors section required by Item 503 of this Regulation S-K (17 CFR 
229.503). You must include the table of contents immediately following 
the cover page in any prospectus you deliver electronically.
    (b) Dealer prospectus delivery obligation. On the outside back 
cover page of the prospectus, advise dealers of their prospectus 
delivery obligation, including the expiration date specified by Section 
4(3) of the Securities Act (15 U.S.C. 77d(3)) and Sec. 230.174 of this 
chapter. If you do not know the expiration date on the effective date 
of the registration statement, include the expiration date in the copy 
of the prospectus you file under Sec. 230.424(b) of this chapter. You 
do not have to include this information if dealers are not required to 
deliver a prospectus under Sec. 230.174 of this chapter or Section 
24(d) of the Investment Company Act (15 U.S.C. 80a-24). You may use the 
following or other clear, plain language:

Dealer Prospectus Delivery Obligation

    Until (insert date), all dealers that effect transactions in 
these securities, whether or not participating in this offering, may 
be required to deliver a prospectus. This is in addition to the 
dealers' obligation to deliver a prospectus when acting as 
underwriters and with respect to their unsold allotments or 
subscriptions.

    11. By revising Sec. 229.503 to read as follows:


Sec. 229.503 (Item 503)  Prospectus Summary, Risk Factors, and Ratio of 
Earnings to Fixed Charges.

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

Instruction to paragraph 503(a).

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

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

Instructions to paragraph 503(d)

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

[[Page 6384]]

calculate the ratios. See paragraph (b)(12) of Item 601 of 
Regulation S-K (17 CFR 229.601(b)(12)).

    12. By amending Sec. 229.508 by revising paragraphs (e) and (l) to 
read as follows:


Sec. 229.508 (Item 508)  Plan of distribution.

* * * * *
    (e) Underwriter's compensation. Provide a table that sets out the 
nature of the compensation and the amount of discounts and commissions 
to be paid to the underwriter for each security and in total. The table 
must show the separate amounts to be paid by the company and the 
selling shareholders. In addition, include in the table all other items 
considered by the National Association of Securities Dealers to be 
underwriting compensation for purposes of that Association's Rules of 
Fair Practice.

Instructions to paragraph 508(e)

    1. The term ``commissions'' is defined in paragraph (17) of 
Schedule A of the Securities Act. Show separately in the table the 
cash commissions paid by the registrant and selling security 
holders. Also show in the table commissions paid by other persons. 
Disclose any finder's fee or similar payments in the table.
    2. Disclose the offering expenses specified in Item 511 of 
Regulation S-K (17 CFR 229.511).
    3. If the underwriter has any arrangement with the issuer, such 
as an over-allotment option, under which the underwriter may 
purchase additional shares in connection with the offering, indicate 
that this arrangement exists and state the amount of additional 
shares that the underwriter may purchase under the arrangement. 
Where the underwriter has such an arrangement, present maximum-
minimum information in a separate column to the table, based on the 
purchase of all or none of the shares subject to the arrangement. 
Describe the key terms of the arrangement in the narrative.

* * * * *
    (l) Stabilization and other transactions. (1) Briefly describe any 
transaction that the underwriter intends to conduct during the offering 
that stabilizes, maintains, or otherwise affects the market price of 
the offered securities. Include information on stabilizing 
transactions, syndicate short covering transactions, penalty bids, or 
any other transaction that affects the offered security's price. 
Describe the nature of the transactions clearly and explain how the 
transactions affect the offered security's price. Identify the exchange 
or other market on which these transactions may occur. If true, 
disclose that the underwriter may discontinue these transactions at any 
time;
    (2) If the stabilizing began before the effective date of the 
registration statement, disclose the amount of securities bought, the 
prices at which they were bought and the period within which they were 
bought. If you use Sec. 230.430A of this chapter, the prospectus you 
file under Sec. 230.424(b) of this chapter or include in a post-
effective amendment must contain information on the stabilizing 
transactions that took place before the determination of the public 
offering price; and
    (3) If you are making a warrants or rights offering of securities 
to existing security holders and any securities not purchased by 
existing security holders are to be reoffered to the public, disclose 
in a supplement to the prospectus or in the prospectus used in 
connection with the reoffering:
    (i) The amount of securities bought in stabilization activities 
during the offering period and the price or range of prices at which 
the securities were bought;
    (ii) The amount of the offered securities subscribed for during the 
offering period;
    (iii) The amount of the offered securities subscribed for by the 
underwriter during the offering period;
    (iv) The amount of the offered securities sold during the offering 
period by the underwriter and the price or price ranges at which the 
securities were sold; and
    (v) The amount of the offered securities that will be reoffered to 
the public and the public offering price.

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

    13. The general authority citation for part 230 is revised to read 
as follows:

    Authority: 15 U.S.C. 77b, 77f, 77g, 77h, 77j, 77s, 77sss, 78c, 
78d, 78l, 78m, 78n, 78o, 78w, 78ll(d), 79t, 80a-8, 80a-24, 80a-29, 
80a-30, and 80a-37, unless otherwise noted.
* * * * *
    14. By amending Sec. 230.421 by revising paragraph (b) and adding 
paragraph (d) to read as follows:


Sec. 230.421  Presentation of information in prospectuses.

* * * * *
    (b) You must present the information in a prospectus in a clear, 
concise and understandable manner. You must prepare the prospectus 
using the following standards:
    (1) Present information in clear, concise sections, paragraphs, and 
sentences. Whenever possible, use short, explanatory sentences and 
bullet lists;
    (2) Use descriptive headings and subheadings;
    (3) Avoid frequent reliance on glossaries or defined terms as the 
primary means of explaining information in the prospectus. Define terms 
in a glossary or other section of the document only if the meaning is 
unclear from the context. Use a glossary only if it facilitates 
understanding of the disclosure; and
    (4) Avoid legal and highly technical business terminology.

Note to Sec. 230.421(b):

    In drafting the disclosure to comply with this section, you 
should avoid the following:
    1. Legalistic or overly complex presentations that make the 
substance of the disclosure difficult to understand;
    2. Vague ``boilerplate'' explanations that are imprecise and 
readily subject to different interpretations;
    3. Complex information copied directly from legal documents 
without any clear and concise explanation of the provision(s); and
    4. Disclosure repeated in different sections of the document 
that increases the size of the document but does not enhance the 
quality of the information.
* * * * *
    (d)(1) To enhance the readability of the prospectus, you must use 
plain English principles in the organization, language, and design of 
the front and back cover pages, the summary, and the risk factors 
section.
    (2) You must draft the language in these sections so that at a 
minimum it substantially complies with each of the following plain 
English writing principles:
    (i) Short sentences;
    (ii) Definite, concrete, everyday words;
    (iii) Active voice;
    (iv) Tabular presentation or bullet lists for complex material, 
whenever possible;
    (v) No legal jargon or highly technical business terms; and
    (vi) No multiple negatives.
    (3) In designing these sections or other sections of the 
prospectus, you may include pictures, logos, charts, graphs, or other 
design elements so long as the design is not misleading and the 
required information is clear. You are encouraged to use tables, 
schedules, charts and graphic illustrations of the results of 
operations, balance sheet, or other financial data that present the 
data in an understandable manner. Any presentation must be consistent 
with the financial statements and non-financial information in the 
prospectus. You must draw the graphs and charts to scale. Any 
information you provide must not be misleading.

Instruction to Sec. 230.421

    You should read Securities Act Release No. 33-7497 (January 28, 
1998) for information on plain English principles.


[[Page 6385]]


    15. By revising paragraph (b)(1) of Sec. 230.461 to read as 
follows.


Sec. 230.461  Acceleration of effective date.

* * * * *
    (b) * * *
    (1) Where there has not been a bona fide effort to make the 
prospectus reasonably concise, readable, and in compliance with the 
plain English requirements of Rule 421(d) of Regulation C (17 CFR 
230.421(d)) in order to facilitate an understanding of the information 
in the prospectus.
* * * * *
    16. Revise Sec. 230.481 to read as follows:


Sec. 230.481  Information required in prospectuses.

    Disclose the following in registration statements prepared on a 
form available solely to investment companies registered under the 
Investment Company Act of 1940 or in registration statements filed 
under the Act for a company that has elected to be regulated as a 
business development company under Sections 55 through 65 of the 
Investment Company Act (15 U.S.C. 80a-54--80a-64):
    (a) Facing page. Indicate the approximate date of the proposed sale 
of the securities to the public.
    (b) Outside front cover page. If applicable, include the following 
in plain English as required by Sec. 230.421(d):
    (1) Commission legend. Provide a legend that indicates that the 
Securities and Exchange Commission has not approved or disapproved of 
the securities or passed upon the accuracy or adequacy of the 
disclosure in the prospectus and that any contrary representation is a 
criminal offense. The legend may be in one of the following or other 
clear and concise language:

    Example A: The Securities and Exchange Commission has not 
approved or disapproved these securities or passed upon the adequacy 
of this prospectus. Any representation to the contrary is a criminal 
offense.
    Example B: The Securities and Exchange Commission has not 
approved or disapproved these securities or determined if this 
prospectus is truthful or complete. Any representation to the 
contrary is a criminal offense.

    (2) ``Subject to Completion'' legend.
    (i) If a prospectus or Statement of Additional Information will be 
used before the effective date of the registration statement, include 
on the outside front cover page of the prospectus or Statement of 
Additional Information, a prominent statement that:
    (A) The information in the prospectus or Statement of Additional 
Information will be amended or completed;
    (B) A registration statement relating to these securities has been 
filed with the Securities and Exchange Commission;
    (C) The securities may not be sold until the registration statement 
becomes effective; and
    (D) In a prospectus, that the prospectus is not an offer to sell 
the securities and it is not soliciting an offer to buy the securities 
in any state where offers or sales are not permitted, or in a Statement 
of Additional Information, that the Statement of Additional Information 
is not a prospectus.
    (ii) The legend may be in the following language or other clear and 
understandable language:

    The information in this prospectus (or Statement of Additional 
Information) is not complete and may be changed. We may not sell 
these securities until the registration statement filed with the 
Securities and Exchange Commission is effective. This prospectus (or 
Statement of Additional Information) is not an offer to sell these 
securities and is not soliciting an offer to buy these securities in 
any state where the offer or sale is not permitted.

    (iii) In the case of a prospectus that omits pricing information 
under Sec. 230.430A, provide the information and legend in paragraph 
(b)(2) of this section if the prospectus or Statement of Additional 
Information is used before the initial public offering price is 
determined.
    (c) Table of contents. Include on either the outside front, inside 
front, or outside back cover page of the prospectus, a reasonably 
detailed table of contents. It must show the page number of the various 
sections or subdivisions of the prospectus. Include this table of 
contents immediately following the cover page in any prospectus 
delivered electronically.
    (d) Stabilization and Other Transactions. (1) Indicate on the front 
cover page of the prospectus if the underwriter has any arrangement 
with the issuer, such as an over-allotment option, under which the 
underwriter may purchase additional shares in connection with the 
offering, and state the amount of additional shares the underwriter may 
purchase under the arrangement. Provide disclosure in the prospectus 
that briefly describes any transaction that the underwriter intends to 
conduct during the offering that stabilizes, maintains, or otherwise 
affects the market price of the offered securities. Include information 
on stabilizing transactions, syndicate short covering transactions, 
penalty bids, or any other transactions that affect the offered 
security's price. Describe the nature of the transactions clearly and 
explain how the transactions affect the offered security's price. 
Identify the exchange or other market on which these transactions may 
occur. If true, disclose that the underwriter may discontinue these 
transactions at any time;
    (2) If the stabilizing began before the effective date of the 
registration statement, disclose in the prospectus the amount of 
securities bought, the prices at which they were bought and the period 
within which they were bought. In the event that Sec. 230.430A of this 
chapter is used, the prospectus filed under Sec. 230.497(h) or included 
in a post-effective amendment must contain information on the 
stabilizing transactions that took place before the determination of 
the public offering price shown in the prospectus; and
    (3) If you are making a warrant or rights offering of securities to 
existing security holders and the securities not purchased by existing 
security holders are to be reoffered to the public, disclose in the 
prospectus used in connection with the reoffering:
    (i) The amount of securities bought in stabilization activities 
during the offering period and the price or range of prices at which 
the securities were bought;
    (ii) The amount of the offered securities subscribed for during the 
offering period;
    (iii) The amount of the offered securities subscribed for by the 
underwriters during the offering period;
    (iv) The amount of the offered securities sold during the offering 
period by the underwriters and the price or range of prices at which 
the securities were sold; and
    (v) The amount of the offered securities to be reoffered to the 
public and the public offering price.
    (e) Dealer prospectus delivery obligations. On the outside back 
cover page of the prospectus, advise dealers of their prospectus 
delivery obligation, including the expiration date specified by Section 
4(3) of the Act (15 U.S.C. 77d(3)) and Sec. 230.174. If the expiration 
date is not known on the effective date of the registration statement, 
include the expiration date in the copy of the prospectus filed under 
Sec. 230.497. This information need not be included if dealers are not 
required to deliver a prospectus under Sec. 230.174 or Section 24(d) of 
the Investment Company Act of 1940 (15 U.S.C. 80a-24). Use the 
following or other clear, plain language:

[[Page 6386]]

Dealer Prospectus Delivery Obligation

    Until (insert date), all dealers that effect transactions in 
these securities, whether or not participating in this offering, may 
be required to deliver a prospectus. This is in addition to the 
dealers' obligation to deliver a prospectus when acting as 
underwriters and with respect to their unsold allotments or 
subscriptions.

    (f) Electronic distribution. Where a prospectus is distributed 
through an electronic medium, issuers may satisfy legibility 
requirements applicable to printed documents, such as paper size, type 
size and font, bold-face type, italics and red ink, by presenting all 
required information in a format readily communicated to investors, and 
where indicated, in a manner reasonably calculated to draw investor 
attention to specific information.

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

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

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77z-2, 77sss, 78c, 
78l, 78m, 78n, 78o(d), 78u-5, 78w(a), 78ll(d), 79e, 79f, 79g, 79j, 
79l, 79m, 79n, 79q, 79t, 80a-8, 80a-29, 80a-30 and 80a-37, unless 
otherwise noted.

* * * * *
    18. By amending Form S-2 (referenced in Sec. 239.12), Item 12 to 
add paragraph (d) 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

* * * * *
Item 12. Incorporation of Certain Information by Reference.
* * * * *
    (d)(1) You must state (i) that you will provide to each person, 
including any beneficial owner, to whom a prospectus is delivered, a 
copy of any or all of the information that has been incorporated by 
reference in the prospectus but not delivered with the prospectus;
    (ii) that you will provide this information upon written or oral 
request;
    (iii) that you will provide this information at no cost to the 
requester; and
    (iv) the name, address, and telephone number to which the request 
for this information must be made.

Note to Item 12(d)(1)

    If you send any of the information that is incorporated by 
reference in the prospectus to security holders, you also must send 
any exhibits that are specifically incorporated by reference in that 
information.

    (2) You must (i) identify the reports and other information that 
you file with the SEC; and
    (ii) state that the public may read and copy any materials you file 
with the SEC at the SEC's Public Reference Room at 450 Fifth Street, 
N.W., Washington, D.C. 20549. State that the public may obtain 
information on the operation of the Public Reference Room by calling 
the SEC at 1-800-SEC-0330. If you are an electronic filer, state that 
the SEC maintains an Internet site that contains reports, proxy and 
information statements, and other information regarding issuers that 
file electronically with the SEC and state the address of that site 
(http://www.sec.gov). You are encouraged to give your Internet address, 
if available.
* * * * *
    19. By amending Form S-3 (referenced in Sec. 239.13) Item 12 to add 
paragraph (c) before the instruction 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

* * * * *
Item 12. Incorporation of Certain Information by Reference.
* * * * *
    (c)(1) You must state (i) that you will provide to each person, 
including any beneficial owner, to whom a prospectus is delivered, a 
copy of any or all of the information that has been incorporated by 
reference in the prospectus but not delivered with the prospectus;
    (ii) that you will provide this information upon written or oral 
request;
    (iii) that you will provide this information at no cost to the 
requester; and
    (iv) the name, address, and telephone number to which the request 
for this information must be made.

Note to Item 12(c)(1)

    If you send any of the information that is incorporated by 
reference in the prospectus to security holders, you also must send 
any exhibits that are specifically incorporated by reference in that 
information.

    (2) You must (i) identify the reports and other information that 
you file with the SEC; and
    (ii) state that the public may read and copy any materials you file 
with the SEC at the SEC's Public Reference Room at 450 Fifth Street, 
N.W., Washington, D.C. 20549. State that the public may obtain 
information on the operation of the Public Reference Room by calling 
the SEC at 1-800-SEC-0330. If you are an electronic filer, state that 
the SEC maintains an Internet site that contains reports, proxy and 
information statements, and other information regarding issuers that 
file electronically with the SEC and state the address of that site 
(http://www.sec.gov). You are encouraged to give your Internet address, 
if available.
* * * * *
    20. By amending Form S-20 (referenced in Sec. 239.20) to revise the 
reference in Item 1 ``Item 502(f) of Regulation S-K [Sec. 229.502(f) of 
this chapter]'' to read ``Item 101(g) of Regulation S-K 
[Sec. 229.101(g) of this chapter].''

(Note: The text of Form S-20 does not, and this amendment will not, 
appear in the Code of Federal Regulations)

    21. By amending Form S-4 (referenced in Sec. 239.25) to revise Item 
2 and adding paragraph (c) to Item 11 and paragraph (d) to Item 13 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

* * * * *
Item 2. Inside Front and Outside Back Cover Pages of Prospectus.
    Provide the information required by Item 502 of Regulation S-K. In 
addition, on the inside front cover page, you must state (1) that the 
prospectus incorporates important business and financial information 
about the company that is not included in or delivered with the 
document; and
    (2) that this information is available without charge to security 
holders upon written or oral request. Give the name, address, and 
telephone number to which security holders must make this request. In 
addition, you must state that to obtain timely delivery, security 
holders must request the information no later than five business days 
before the date they must make their investment decision. Specify the 
date by which security holders must request this information. You must 
highlight this statement by print type or otherwise.

Note to Item 2.

    If you send any of the information that is incorporated by 
reference in the prospectus to security holders, you also must send 
any

[[Page 6387]]

exhibits that are specifically incorporated by reference in that 
information.
* * * * *
Item 11. Incorporation of Certain Information by Reference.
* * * * *
    (c) You must (1) identify the reports and other information that 
you file with the SEC; and
    (2) state that the public may read and copy any materials you file 
with the SEC at the SEC's Public Reference Room at 450 Fifth Street, 
N.W., Washington, D.C. 20549. State that the public may obtain 
information on the operation of the Public Reference Room by calling 
the SEC at 1-800-SEC-0330. If you are an electronic filer, state that 
the SEC maintains an Internet site that contains reports, proxy and 
information statements, and other information regarding issuers that 
file electronically with the SEC and state the address of that site 
(http://www.sec.gov). You are encouraged to give your Internet address, 
if available.
* * * * *
Item 13. Incorporation of Certain Information by Reference
* * * * *
    (d) You must (1) identify the reports and other information that 
you file with the SEC; and
    (2) state that the public may read and copy any materials you file 
with the SEC at the SEC's Public Reference Room at 450 Fifth Street, 
N.W., Washington, D.C. 20549. State that the public may obtain 
information on the operation of the Public Reference Room by calling 
the SEC at 1-800-SEC-0330. If you are an electronic filer, state that 
the SEC maintains an Internet site that contains reports, proxy and 
information statements, and other information regarding issuers that 
file electronically with the SEC and state the address of that site 
(http://www.sec.gov). You are encouraged to give your Internet address, 
if available.
* * * * *
    22. By amending Form F-2 (referenced in Sec. 239.32) to revise Item 
12 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

* * * * *
Item 12. Information with respect to the Registrant.
    (a) You must state (1) that you will provide to each person, 
including any beneficial owner, to whom a prospectus is delivered, a 
copy of any or all of the information that has been incorporated by 
reference in the prospectus but not delivered with the prospectus;
    (2) that you will provide this information upon written or oral 
request;
    (3) that you will provide this information at no cost to the 
requester; and
    (4) the name, address, and telephone number to which the request 
for this information must be made.

Note to Item 12(a)

    If you send any of the information that is incorporated by 
reference in the prospectus to security holders, you also must send 
any exhibits that are specifically incorporated by reference in that 
information.

    (b) You must (1) identify the reports and other information that 
you file with the SEC; and
    (2) state that the public may read and copy any materials you file 
with the SEC at the SEC's Public Reference Room at 450 Fifth Street, 
N.W., Washington, D.C. 20549. State that the public may obtain 
information on the operation of the Public Reference Room by calling 
the SEC at 1-800-SEC-0330. If you are an electronic filer, state that 
the SEC maintains an Internet site that contains reports, proxy and 
information statements, and other information regarding issuers that 
file electronically with the SEC and state the address of that site 
(http://www.sec.gov). You are encouraged to give your Internet address, 
if available.
* * * * *
    23. By amending Form F-3 (referenced in Sec. 239.33) by adding 
paragraphs (d) and (e) to Item 12 before the instruction 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

* * * * *
Item 12. Incorporation of Certain Information by Reference.
* * * * *
    (d) You must state (1) that you will provide to each person, 
including any beneficial owner, to whom a prospectus is delivered, a 
copy of any or all of the information that has been incorporated by 
reference in the prospectus but not delivered with the prospectus;
    (2) that you will provide this information upon written or oral 
request;
    (3) that you will provide this information at no cost to the 
requester; and
    (4) the name, address, and telephone number to which the request 
for this information must be made.

Note to Item 12(d)

    If you send any of the information that is incorporated by 
reference in the prospectus to security holders, you also must send 
any exhibits that are specifically incorporated by reference in that 
information.

    (e) You must (1) identify the reports and other information that 
you file with the SEC; and
    (2) state that the public may read and copy any materials you file 
with the SEC at the SEC's Public Reference Room at 450 Fifth Street, 
N.W., Washington, D.C. 20549. State that the public may obtain 
information on the operation of the Public Reference Room by calling 
the SEC at 1-800-SEC-0330. If you are an electronic filer, state that 
the SEC maintains an Internet site that contains reports, proxy and 
information statements, and other information regarding issuers that 
file electronically with the SEC and state the address of that site 
(http://www.sec.gov). You are encouraged to give your Internet address, 
if available.
* * * * *
    24. By amending Form F-4 (referenced in Sec. 239.34) to revise Item 
2 and add paragraph (b) to Item 11 and paragraph (c) to Item 13 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 2. Inside Front and Outside Back Cover Pages of Prospectus
    Provide the information required by Item 502 of Regulation S-K. In 
addition, on the inside front cover page, you must state (1) that the 
prospectus incorporates important business and financial information 
about the company that is not included in or delivered with the 
document; and
    (2) that this information is available without charge to security 
holders upon written or oral request. Give the name, address, and 
telephone number to which security holders must make this

[[Page 6388]]

request. In addition, you must state that to obtain timely delivery, 
security holders must request the information no later than five 
business days before the date they must make their investment decision. 
Specify the date by which security holders must request this 
information. You must highlight this statement by print type or 
otherwise.

Note to Item 2.

    If you send any of the information that is incorporated by 
reference in the prospectus to security holders, you also must send 
any exhibits that are specifically incorporated by reference in that 
information.

* * * * *
Item 11. Incorporation of Certain Information by Reference
* * * * *
    (b) You must (1) identify the reports and other information that 
you file with the SEC; and
    (2) state that the public may read and copy any materials you file 
with the SEC at the SEC's Public Reference Room at 450 Fifth Street, 
N.W., Washington, D.C. 20549. State that the public may obtain 
information on the operation of the Public Reference Room by calling 
the SEC at 1-800-SEC-0330. If you are an electronic filer, state that 
the SEC maintains an Internet site that contains reports, proxy and 
information statements, and other information regarding issuers that 
file electronically with the SEC and state the address of that site 
(http://www.sec.gov). You are encouraged to give your Internet address, 
if available.
* * * * *
Item 13. Incorporation of Certain Information by Reference
* * * * *
    (c) You must (1) identify the reports and other information that 
you file with the SEC; and
    (2) state that the public may read and copy any materials you file 
with the SEC at the SEC's Public Reference Room at 450 Fifth Street, 
N.W., Washington, D.C. 20549. State that the public may obtain 
information on the operation of the Public Reference Room by calling 
the SEC at 1-800-SEC-0330. If you are an electronic filer, state that 
the SEC maintains an Internet site that contains reports, proxy and 
information statements, and other information regarding issuers that 
file electronically with the SEC and state the address of that site 
(http://www.sec.gov). You are encouraged to give your Internet address, 
if available.
* * * * *

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

    25. The authority citation for part 274 continues to read as 
follows:

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 78c(b), 78l, 78m, 
78n, 78o(d), 80a-8, 80a-24, and 80a-29, unless otherwise noted.

    26. Amend Form N-2 (referenced in Sec. 274.11a-1) to revise Item 2, 
Item 3, and Item 14 to read as follows:

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

Form N-2

* * * * *
Item 2. Cover Pages; Other Offering Information
    1. Disclose whether any national securities exchange or the Nasdaq 
Stock Market lists the securities offered, naming the particular 
market(s), and identify the trading symbol(s) for those securities, on 
the inside front or outside back cover page of the prospectus unless 
the information appears on the front cover page.
    2. Provide the information required by paragraph (d) of Rule 481 
under the Securities Act [17 CFR 230.481(d)] in an appropriate place in 
the prospectus.
    3. Provide the information required by paragraph (e) of Rule 481 
under the Securities Act [17 CFR 230, 481(d)] on the outside back cover 
page of the prospectus.
Item 3. Fee Table and Synopsis
* * * * *
    3. In the case of a business development company, include the 
information required by Item 101(e) of Regulation S-K [17 CFR 
229.101(e)] (concerning reports and other information filed with the 
SEC).
* * * * *
Item 14. Cover Page
    1. The outside cover page must contain the following information:
* * * * *
    (e) The statement required by paragraph (b)(2) of Rule 481 under 
the Securities Act [17 CFR 230.481(b)(2)].
* * * * *
    By the Commission.

    Dated: January 28, 1998.
Margaret H. McFarland,
Deputy Secretary.
    Note: Appendices A and B to the Preamble will not appear in the 
Code of Federal Regulations.

Appendix A--Charts on Amendments to Small Business Issuer Rules

                    Chart 1: Regulation S-B Item 501                    
------------------------------------------------------------------------
                Current                               Final             
------------------------------------------------------------------------
 Small business issuer name....   Same.                 
 Title, amount, and description   Same.                 
 of securities offered.                                                 
 Selling security holders         Same.                 
 offering.                                                              
 Cross-reference to risk          Same, except cross-   
 factors.                                 reference must include page   
                                          number. No print type         
                                          specified.                    
 Formatted distribution table     Delete distribution   
 showing price, underwriting              table. Use bullet list or     
 commission, and proceeds of offering.    other design that highlights  
                                          the information.              
 Show bona fide estimate of       Same.                 
 range of maximum offering price and                                    
 number of shares.                                                      
 Formatted best efforts           Delete distribution   
 disclosure and distribution table.       table. Use bullet list or     
                                          other design that highlights  
                                          the information.              
 Prospectus ``Subject to          Retain in plain       
 Completion'' legend.                     English.                      
 Commission legend.............   Retain in plain       
                                          English. Include reference to 
                                          state securities commissions. 
                                          No print type specified.      
 State-required legends........   Same.                 
 Underwriters' over-allotment     Identify existence of 
 option, expenses of offering,            the option and the number of  
 commissions paid by others, and other    shares. Move all other        
 non-cash consideration and finders       information to the plan of    
 fees.                                    distribution section.         
 Date of prospectus............   Same.                 
 Expenses of offering..........   Move to plan of       
                                          distribution section.         

[[Page 6389]]

                                                                        
 No requirement to identify       Identify market for   
 market for securities.                   securities, trading symbol,   
                                          underwriters, and type of     
                                          underwriting.                 
 No page limit.................   Must limit cover to   
                                          one page.                     
------------------------------------------------------------------------


                    Chart 2: Regulation S-B Item 502                    
------------------------------------------------------------------------
                Current                               Final             
------------------------------------------------------------------------
 Availability of Exchange Act     Move to description of
 Reports.                                 business section or, for short-
                                          form registration statements, 
                                          include with incorporation by 
                                          reference disclosure.         
 Identify market for securities   Move to cover page.   
 Availability of reports with     Move to description of
 audited financial statements.            business section.             
 Availability of reports          Move to incorporation 
 incorporated by reference..              by reference disclosure.      
 Stabilization legend..........   Move to plan of       
                                          distribution section.         
 Passive market making            Delete. Disclosure    
 activities legend.                       retained in plan of           
                                          distribution section.         
 Dealer prospectus delivery       Retain on outside back
 obligation.                              page of prospectus.           
 Canadian issuers' disclosure     Move to description of
 on enforceability of civil liability     business section.             
 against foreign person.                                                
 Table of contents.............   Same. If prospectus   
                                          delivered electronically, must
                                          immediately follow cover page.
 Summary.......................   Retain in plain       
                                          English.                      
 Address and telephone number..   Retain. Permit on     
                                          cover page or in summary.     
 Risk factors..................   Retain in plain       
                                          English.                      
                                                                        
------------------------------------------------------------------------

Appendix B--List of Plain English Pilot Participants

----------------------------------------------------------------------------------------------------------------
         Company name              File No.          Type of file                      Date filed               
----------------------------------------------------------------------------------------------------------------
AMBAC Inc.....................   1-10777        Annual Proxy/Schedule  4/1/97.                                  
                                                 14A.                                                           
American Family Holdings, Inc.  333-37161       Consent Solicitation/  11/5/97.                                 
                                                 Form S-4.                                                      
AmerUs Life Holdings, Inc.....  333-40065       Merger Proxy/Form S-4  11/12/97.                                
ANTEC Corporation.............  333-19129       Merger Proxy/Form S-4  12/31/96.                                
Associated Banc-Corp..........  333-18181       Merger Proxy/Form S-4  1/22/97.                                 
Baltimore Gas and Electric      333-22697       Selling Shareholder    3/4/97.                                  
 Company.                                        Prospectus/Form S-3.                                           
Baltimore Gas and Electric      333-19263       Medium Term Note       1/3/97.                                  
 Company.                                        Prospectus/Form S-3.                                           
Baltimore Gas and Electric        1-1910        Management's           3/28/97.                                 
 Company.                                        Discussion and                                                 
                                                 Analysis in the Form                                           
                                                 10-K for the year                                              
                                                 ended 12/31/96.                                                
Bell Atlantic Corporation.....  333-11573       Merger Proxy/Form S-4  9/9/96.                                  
BellSouth Corporation.........  333-25703       Merger Proxy/Form S-4  4/23/97.                                 
The B.F. Goodrich Company.....  333-40291       Merger Proxy/Form S-4  11/14/97.                                
Boddie-Noell Properties, Inc..  333-39803       Common Stock Offering/ 12/2/97.                                 
                                                 Form S-2.                                                      
British Telecommunications PLC  333-6422        Merger Proxy/Form F-4  Foreign issuer not filed electronically. 
 (MCI Communications                                                    Provided in hard copy.                  
 Corporation).                                                                                                  
The Brooklyn Union Gas Company  333-30353       Merger Proxy/Form S-4  6/30/97.                                 
Buckeye Partners, L.P.........   1-09356        Consent Solicitation/  6/26/97.                                 
                                                 Schedule 14A.                                                  
Caterpillar Inc...............     1-768        Annual Proxy/Schedule  2/25/97.                                 
                                                 14A.                                                           
The Chase Manhattan               1-5805        Annual Proxy/Schedule  3/28/97.                                 
 Corporation.                                    14A.                                                           
ChoicePoint Inc...............   1-13069        Form 10..............  6/9/97.                                  
Citizens Bancorp..............  333-29031       Savings & Loan         7/31/97.                                 
                                                 Conversion/Form S-1.                                           
Compaq Computer Corporation...  333-32401       Merger Proxy/Form S-4  7/30/97.                                 
CVS Corporation...............  333-24163       Merger Proxy/Form S-4  4/17/97.                                 
Dean Witter, Discover & Co.     333-25003       Merger Proxy/Form S-4  4/11/97.                                 
 (Morgan Stanley Group Inc.).                                                                                   
Delaware First Financial        333-36757       Savings & Loan         11/7/97.                                 
 Corporation.                                    Conversion/Form SB-2.                                          
Detroit Diesel Corporation....   1-12394        Annual Proxy/Schedule  3/27/97.                                 
                                                 14A.                                                           
Dollar Thrifty Automotive       333-39661       Common Stock Offering  12/16/97.                                
 Group, Inc.                                     IPO/Form S-1.                                                  
Dominion Resources, Inc.......  333-35501       Universal Shelf/Form   9/15/97.                                 
                                                 S-3.                                                           
Eastman Kodak Company.........  333-31759       Direct Purchase Plan/  7/22/97.                                 
                                                 Form S-3.                                                      
Emerson Electric Co...........  333-40871       Merger Proxy/Form S-4  11/24/97.                                
Farmland Industries, Inc......  333-40759       Subordinated           12/9/97.                                 
                                                 Debenture Bonds/Form                                           
                                                 S-1.                                                           
FDX Corporation...............  333-39483       Merger Proxy/Form S-4  12/4/97.                                 
FFP Marketing Company, Inc....  333-41709       Merger Proxy/Form S-4  12/10/97.                                
The FINOVA Group Inc..........   1-11011        Annual Proxy/Schedule  4/2/97.                                  
                                                 14A.                                                           
Ford Motor Company............    1-3950        Annual Proxy/Schedule  4/7/97.                                  
                                                 14A.                                                           
General Electric Company......  333-30845       Merger Proxy/Form S-4  7/8/97.                                  
General Mills, Inc............  333-20429       Merger Proxy/Form S-4  1/24/97.                                 
General Motors Corporation....  333-37215       Spin-off Proxy/Form S- 11/10/97.                                
                                                 4.                                                             
Great Pee Dee Bancorp, Inc....  333-36489       Savings & Loan         10/23/97.                                
                                                 Conversion/Form SB-2.                                          
Hercules Incorporated.........     1-496        Annual Proxy/Schedule  3/14/97                                  
                                                 14A.                                                           
Honeywell Inc.................   0-20629        Annual Proxy/Schedule  3/4/97.                                  
                                                 14A.                                                           

[[Page 6390]]

                                                                                                                
International Business          333-27669       Selling Shareholder    5/29/97.                                 
 Machines Corporation.                           Prospectus/Form S-3.                                           
ITT Corporation...............  333-7221        Universal Shelf/Form   6/28/96.                                 
                                                 S-3.                                                           
Keebler Foods Company.........  333-42075       Common Stock Offering  1/7/98.                                  
                                                 IPO/Form S-1.                                                  
MBNA Master Credit Card Trust        (1)        Asset-Backed           Provided in hard copy.                   
 II.                                             Securities Offering.                                           
Medical Science Systems, Inc..  333-37441       Common Stock Offering/ 11/21/97.                                
                                                 Form SB-2.                                                     
Mellon Bank Corporation.......  333-38213       Direct Stock Purchase  10/17/97.                                
                                                 Plan/Form S-3.                                                 
Monsanto Company..............    1-2516        Spin-off Proxy         7/14/97.                                 
                                                 Solicitation/                                                  
                                                 Schedule 14A.                                                  
North Arkansas Bancshares, Inc  333-35985       Savings & Loan         10/30/97.                                
                                                 Conversion/Form SB-2.                                          
Ohio Edison Company...........  333-1489        Merger Proxy/Form S-4  4/12/96.                                 
Parent Holding Corp.            333-40233       Merger Proxy/Form S-4  11/14/97.                                
 (Doubletree Corporation).                                                                                      
Perkins Family Restaurants,      1-09214        Merger Proxy           11/28/97.                                
 L.P.                                            Solicitation/                                                  
                                                 Schedule 14A.                                                  
Pfizer Inc....................    1-3619        Notes to Financial     5/13/97, 8/13/97 and 11/12/97.           
                                                 Statements/Form 10-Q                                           
                                                 for the periods 3/30/                                          
                                                 97, 6/29/97 and 9/28/                                          
                                                 97.                                                            
Pfizer Inc....................  33-56435        Dividend Reinvestment  11/17/97.                                
                                                 Plan/Form 424B3.                                               
Premium Cigars International,   333-29985       Common Stock Offering  8/18/97.                                 
 Ltd.                                            IPO/Form SB-2.                                                 
Price Communications            333-34017       Merger Proxy/Form S-4  9/4/97.                                  
 Corporation.                                                                                                   
Providian Bancorp, Inc........   1-12897        Form 10..............  4/17/97.                                 
RSL Communications, Ltd.......  333-34281       Exxon Capital          9/29/97.                                 
                                                 Exchange Debt                                                  
                                                 Offering/Form S-1.                                             
Rymer Foods Inc...............  333-27895       Prepackaged            5/28/97.                                 
                                                 Bankruptcy Proxy/                                              
                                                 Form S-4.                                                      
Santa Anita Realty              333-34831       Merger 1 Proxy/Form S- 9/26/97.                                 
 Enterprises, Inc.                               4.                                                             
Sara Lee Corporation..........    1-3344        Annual Proxy/Schedule  9/22/97.                                 
                                                 14A.                                                           
SCANA Corporation.............  333-18149       Direct Purchase Plan/  1/10/97.                                 
                                                 Form S-3.                                                      
SFB Bancorp, Inc..............  333-23505       Saving & Loan          4/9/97.                                  
                                                 Conversion/Form SB-2.                                          
SFBS Holding Company..........  333-40955       Savings & Loan         12/23/97.                                
                                                 Conversion/Form SB-2.                                          
SIS Bancorp, Inc..............  333-38889       Merger Proxy/Form S-4  10/28/97.                                
Sullivan & Cromwell...........       (2)        Description of         Provided in hard copy.                   
                                                 American Depository                                            
                                                 Receipts.                                                      
Tejas Gas Corporation.........   1-11580        Cash Merger Proxy      11/21/97.                                
                                                 Solicitation/                                                  
                                                 Schedule 14A.                                                  
Traveler Group Inc............  333-38647       Merger Proxy/Form S-4  10/24/97.                                
Tyco International Ltd........  333-31631       Merger Proxy/Form S-4  7/29/97.                                 
Union Community Bancorp.......  333-35799       Savings & Loan         11/10/97.                                
                                                 Conversion/Form S-1.                                           
Unisource Worldwide, Inc......   1-14482        Form 10..............  11/26/97.                                
United Tennessee Bankshares,    333-36465       Savings & Loan         11/12/97.                                
 Inc.                                            Conversion/Form SB-2.                                          
UP Sedona, Inc................  333-22643       Condo Offering         8/11/97.                                 
                                                 Prospectus/Form S-11.                                          
Valero Refining and Marketing   333-27013       Spin-off and Merger    5/13/97.                                 
 Company.                                        Proxy/Form S-1.                                                
Wal-Mart Stores, Inc..........    1-6991        Annual Proxy/Schedule  4/18/97.                                 
                                                 14-A.                                                          
The Warnaco Group, Inc........  333-40207       Merger Proxy/Form S-4  11/14/97.                                
WICOR, Inc....................  333-27415       Direct Stock Purchase  5/19/97.                                 
                                                 Plan/Form S-3.                                                 
WSB Holding Company...........  333-29389       Savings & Loan         7/15/97.                                 
                                                 Conversion/Form SB-2.                                          
----------------------------------------------------------------------------------------------------------------
\1\ Not filed yet.                                                                                              
\2\ Not on file.                                                                                                

[FR Doc. 98-2889 Filed 2-5-98; 8:45 am]
BILLING CODE 8010-01-P