[Federal Register Volume 68, Number 193 (Monday, October 6, 2003)]
[Rules and Regulations]
[Pages 57760-57782]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-25114]



[[Page 57759]]

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Part III





Securities and Exchange Commission





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17 CFR Parts 230, 239, et al.



Amendments to Investment Company Advertising Rules; Final Rule

  Federal Register / Vol. 68, No. 193 / Monday, October 6, 2003 / Rules 
and Regulations  

[[Page 57760]]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 230, 239, 270, and 274

[Release Nos. 33-8294; 34-48558; IC-26195; File No. S7-17-02]
RIN 3235-AH19


Amendments to Investment Company Advertising Rules

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

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SUMMARY: The Securities and Exchange Commission is adopting rule and 
form amendments under the Securities Act of 1933, the Securities 
Exchange Act of 1934, and the Investment Company Act of 1940 that 
require enhanced disclosure in investment company advertisements and 
that are designed to encourage advertisements that convey balanced 
information to prospective investors, particularly with respect to past 
performance. The amendments also implement section 24(g) of the 
Investment Company Act by permitting the use of a prospectus under 
section 10(b) of the Securities Act with respect to securities issued 
by an investment company that includes information the substance of 
which is not included in the investment company's statutory prospectus.

DATES: Effective Date: November 15, 2003.
    Compliance Dates: See section II.F. of this release for information 
on compliance dates.

FOR FURTHER INFORMATION CONTACT: Christopher P. Kaiser, Special 
Counsel, David S. Schwartz, Senior Counsel, or Keith E. Carpenter, 
Senior Special Counsel, at (202) 942-0721, Office of Disclosure 
Regulation, Division of Investment Management, Securities and Exchange 
Commission, 450 5th Street, NW., Washington, DC 20549-0506.

SUPPLEMENTARY INFORMATION: The Securities and Exchange Commission 
(``Commission'') is adopting amendments to rule 134 [17 CFR 230.134], 
rule 156 [17 CFR 230.156], and rule 482 [17 CFR 230.482] under the 
Securities Act of 1933 [15 U.S.C. 77a et seq.] (``Securities Act'') and 
rule 34b-1 [17 CFR 270.34b-1] under the Investment Company Act of 1940 
[15 U.S.C. 80a-1 et seq.] (``Investment Company Act''). The Commission 
also is adopting technical amendments to Form N-1A [17 CFR 239.15A and 
274.11A], Form N-3 [17 CFR 239.17a and 274.11b], Form N-4 [17 CFR 
239.17b and 274.11c], and Form N-6 [17 CFR 239.17c and 274.11d], 
registration forms used by investment companies to register under the 
Investment Company Act and to offer their securities under the 
Securities Act.

Table of Contents

I. Introduction and Background
II. Discussion
    A. Eliminating the ``Substance of Which'' Requirement from Rule 
482 and Rescinding Rule 134 for Funds
    B. Applicability of Antifraud Provisions To Fund Advertising
    C. Enhanced Disclosure Under Rule 482
    D. Reorganization of Rule 482 and Technical Form Amendments
    E. Rule 482(a)(5)(i) Relating to Variable Insurance Products
    F. Compliance Dates
III. Cost/Benefit Analysis
IV. Consideration of Effects on Efficiency, Competition, and Capital 
Formation
V. Paperwork Reduction Act
VI. Final Regulatory Flexibility Analysis
VII. Statutory Authority
Text of Rule and Form Amendments

I. Introduction and Background

    Like most issuers of securities, when an investment company 
(``fund'') offers its shares to the public, its promotional efforts 
become subject to the advertising restrictions of the Securities Act. 
Congress imposed these restrictions so that investors would base their 
investment decisions on the full disclosures contained in the 
``statutory prospectus,'' which Congress intended to be the primary 
selling document.\1\ The advertising restrictions of the Securities Act 
cause special problems for many investment companies, particularly for 
open-end management investment companies (``mutual funds'') and other 
investment companies that continuously offer and sell their shares.\2\ 
For these funds, the advertising restrictions apply continuously 
because the offering process, in effect, is continuous.
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    \1\ ``Statutory prospectus'' refers to the full prospectus 
required by section 10(a) of the Securities Act. 15 U.S.C. 77j(a).
    \2\ An open-end management investment company is an investment 
company, other than a unit investment trust or face-amount 
certificate company, that offers for sale or has outstanding any 
redeemable security of which it is the issuer. Sections 4 and 
5(a)(1) of the Investment Company Act [15 U.S.C. 80a-4 and 80a-
5(a)(1)]. Mutual funds typically offer and sell their shares 
continuously to provide an ongoing flow of capital into their 
portfolios and to enable them to meet redemption requests from their 
shareholders.
    A unit investment trust (``UIT'') is ``an investment company 
which (A) is organized under a trust indenture, contract of 
custodianship or agency, or similar instrument, (B) does not have a 
board of directors, and (C) issues only redeemable securities, each 
of which represents an undivided interest in a unit of specified 
securities, but does not include a voting trust.'' Section 4(2) of 
the Investment Company Act [15 U.S.C. 80a-4(2)]. UITs typically have 
active secondary markets in which the trusts' sponsors are 
continuously purchasing and selling the trusts' units.
    A face-amount certificate is a security that obligates the 
issuer to pay a stated (or determinable) amount on a fixed (or 
determinable) date or series of dates more than twenty-four months 
after the date of issuance. Section 2(a)(15) of the Investment 
Company Act [15 U.S.C. 80a-2(a)(15)]. A face-amount certificate 
company is an investment company that engages or proposes to engage 
in the business of issuing certain face-amount certificates. Section 
4(1) of the Investment Company Act [15 U.S.C. 80a-4(1)].
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    In recognition of these problems, the Commission has adopted 
special advertising rules for investment companies. The most important 
of these is rule 482 under the Securities Act, which permits investment 
companies to advertise investment performance data, as well as other 
information.\3\ Rule 482 advertisements are ``prospectuses'' under 
section 10(b) of the Securities Act (so-called ``omitting 
prospectuses''),\4\ which means that, historically, they could only 
contain information the ``substance of which'' is included in the 
statutory prospectus.\5\
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    \3\ 17 CFR 230.482.
    \4\ 15 U.S.C. 77j(b).
    \5\ Current 17 CFR 230.482(a)(2).
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    In the National Securities Markets Improvement Act of 1996 
(``NSMIA''), Congress amended the Investment Company Act to permit, 
subject to rules adopted by the Commission, the use of prospectuses 
under section 10(b) of the Securities Act that include information the 
substance of which is not included in the statutory prospectus.\6\ In 
May 2002, we issued a release proposing to amend rule 482 and make 
other related rule and form changes to implement this provision of the 
legislation (the ``Proposing Release'').\7\
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    \6\ National Securities Markets Improvement Act of 1996, Pub. L. 
No. 104-290, 110 Stat. 3416, 3428, Section 204.
    \7\ Investment Company Act Release No. 25575 (May 17, 2002) [67 
FR 36712 (May 24, 2002)] (``Proposing Release'').
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    At the same time, we proposed other amendments to the fund 
advertising rules to reinforce antifraud protections and encourage the 
provision of information to investors that is more balanced and 
informative, particularly in the area of investment performance. These 
proposed amendments addressed our concern that some funds, when 
advertising their performance, may resort to techniques that create 
unrealistic investor expectations or may mislead potential investors. 
These concerns arose during 1999 and 2000 when many funds experienced 
extraordinary performance and engaged in advertising campaigns focusing 
on past performance.\8\ In recent months,

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following improved market performance, commentators have already noted 
an increase in advertisements highlighting favorable short-term 
performance and have expressed concern about this practice.\9\ The 
Commission received 29 comment letters on the proposal. Commenters 
generally supported the proposal, but also suggested revisions in 
certain areas.\10\ Today, the Commission is adopting these proposed 
amendments, with certain modifications as described below to address 
the suggestions of the commenters.
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    \8\ See Proposing Release, supra note 7, 67 FR at 36713 nn. 8 
and 9 and accompanying text (discussion regarding funds' advertising 
during 1999 and 2000 focused on extraordinary performance).
    \9\ See Kimberly Weisul, Mutual Fund Ads: Reader Beware, 
Business Week, September 15, 2003, at 44; Suzanne McCoy, Performance 
Ads Return in Q2 as Spending Drops (August 12, 2003) http://www.ignites.com; Gregg Wolper, Buy this Fund--It's Had a Great 
Week!, Morningstar Online, July 15, 2003, available at http://news.morningstar.com/doc/document/print/1,3651,93809,00.html.
    \10\ The comment letters and a summary of the comments are 
available for public inspection and copying in the Commission's 
Public Reference Room, 450 5th Street, NW., Washington, DC 20549-
0102. Public comments submitted electronically and the comment 
summary are also available on the Commission's Internet Web site 
(http://www.sec.gov).
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II. Discussion

A. Eliminating the ``Substance of Which'' Requirement From Rule 482 and 
Rescinding Rule 134 for Funds

    We are adopting, as proposed, the amendment removing the 
requirement that a rule 482 advertisement contain only information the 
``substance of which'' is included in the statutory prospectus.\11\ 
This amendment implements section 24(g) of the Investment Company Act, 
added by NSMIA, which directs the Commission to adopt rules or 
regulations that permit registered investment companies to use 
prospectuses that (i) include information the substance of which is not 
included in the statutory prospectus, and (ii) are deemed to be 
permitted by section 10(b) of the Securities Act.\12\ Eliminating this 
requirement will permit investment companies to include up-to-date 
information in rule 482 advertisements, such as information about 
current economic conditions that normally would not be included in a 
fund's prospectus. The amendment also will permit funds to eliminate 
certain information from the statutory prospectus, such as boilerplate 
disclosure about the methods used to calculate performance in fund 
advertising, that clutters the statutory prospectus and obscures other 
important information. As a result, investors should receive better, 
more understandable, and more timely information in both the statutory 
prospectus and fund advertisements. In addition, the costs of 
regulatory compliance should be reduced for funds and, ultimately, for 
investors.
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    \11\ The ``substance of which'' requirement is presently 
contained in current rule 482(a)(2) [17 CFR 230.482(a)(2)]. We are 
also revising the language in the note to current paragraph (a)(3) 
of rule 482, which states that ``[t]he fact that the statements 
included in the advertisement are included in the section 10(a) 
prospectus does not relieve the issuer, underwriter, or dealer of 
the obligation to ensure that the advertisement is not false or 
misleading.'' [17 CFR 230.482(a)(3)]. The removal of the ``substance 
of which'' requirement makes the reference to the section 10(a) 
prospectus unnecessary. The revised language of this note is 
incorporated into the note to newly adopted paragraph (a) of rule 
482 [17 CFR 230.482(a)]. See Section II.B., ``Applicability of 
Antifraud Provisions to Fund Advertising,'' infra.
    \12\ 15 U.S.C. 80a-24(g). See also S. Rep. No. 293, 104th Cong., 
2d Sess. 8 (1996) (stating that the ``bill improves fund advertising 
by giving the Commission express authority to create a new 
investment company `advertising prospectus' '').
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    Elimination of the ``substance of which'' requirement from rule 482 
should not diminish investor protection. The ``substance of which'' 
requirement is a technical requirement that does not, in itself, 
prevent misleading statements because it does not require an 
advertisement to use the same words as the statutory prospectus or 
prohibit the use of advertising techniques that are not included in the 
statutory prospectus.\13\ Importantly, rule 482 advertisements, as 
``prospectuses,'' will remain subject to liability under section 
12(a)(2) of the Securities Act and the antifraud provisions of the 
federal securities laws. Also, rule 482 advertisements, as section 
10(b) prospectuses under the Securities Act, are subject to the summary 
suspension provisions of section 10(b), which permit the Commission to 
suspend the use of a materially false or misleading prospectus.\14\ In 
addition, fund advertising materials must continue to be filed with 
NASD Regulation, Inc. (``NASDR'') or the Commission, and NASDR rules 
relating to fund advertising will continue to apply.\15\ Finally, we 
are adopting additional amendments to rule 482 to reinforce antifraud 
protections, particularly in the area of fund performance.\16\
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    \13\ See Investment Company Act Release No. 9811 (June 8, 1977) 
[42 FR 30379, 30380 (June 14, 1977)] (``1977 Advertising Proposing 
Release'') (proposing rule 434d, subsequently renumbered as rule 
482).
    \14\ 15 U.S.C. 77j(b).
    \15\ Section 24(b) of the Investment Company Act [15 U.S.C. 80a-
24(b)] requires the filing with the Commission of ``any 
advertisement, pamphlet, circular, form letter, or other sales 
literature'' for any registered investment company other than a 
closed-end fund. Rule 24b-3 under the Investment Company Act [17 CFR 
270.24b-3] relieves funds of the obligation to file advertisements 
and other sales materials with the Commission if those materials are 
filed with NASDR.
    Members of the National Association of Securities Dealers, Inc. 
(``NASD'') also must comply with rule 2210 of the NASD Conduct Rules 
when sponsoring fund advertisements. Rule 2210 outlines general 
standards for what may constitute misleading fund advertising and 
specific requirements for advertising communications. Rules 
2210(d)(1) and (2) of the NASD Conduct Rules.
    \16\ See discussion in Section II.B., ``Applicability of 
Antifraud Provisions to Fund Advertising,'' and Section II.C., 
``Enhanced Disclosure Under Rule 482,'' infra.
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    We are using our exemptive authority under the Securities Act to 
eliminate the ``substance of which'' requirement from rule 482 for the 
securities of business development companies (``BDCs'') as well as 
registered investment companies.\17\ Currently, BDCs and registered 
investment companies are treated similarly under rule 482. We believe 
that it is appropriate to extend the benefits that would result from 
elimination of the ``substance of which'' requirement to BDCs, given 
that elimination of this requirement should not diminish investor 
protection. We note, however, that BDCs, unlike mutual funds, do not 
continuously offer and sell their shares and do not make extensive use 
of advertisements.
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    \17\ Section 28 of the Securities Act [15 U.S.C. 77z-3]. 
Business development companies are a category of closed-end 
investment companies that are not required to register under the 
Investment Company Act. See section 2(a)(48) of the Investment 
Company Act [15 U.S.C. 80a-2(a)(48)] (defining ``business 
development company'').
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    We are also adopting amendments removing the provisions of rule 134 
that apply specifically to funds and are excluding both registered 
investment companies and business development companies from relying on 
rule 134.\18\ We believe that, with the elimination of the ``substance 
of which'' requirement from rule 482, funds will no longer need to rely 
on rule 134. Rule 134 will remain available to other issuers. We have 
made technical modifications to our proposed amendments to rule 134 in 
order to retain the existing introductory text of rule 134 for these 
issuers.\19\ Rule 482, as amended, will provide funds with sufficient 
flexibility to discuss topics, such as current economic conditions, 
that are currently discussed in rule 134 advertisements but generally 
not in the statutory prospectus. We believe that investor protection 
will be increased if fund advertisements including this

[[Page 57762]]

information are subject to rule 482 and, as a result, to liability 
under section 12(a)(2) of the Securities Act.\20\
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    \18\ 17 CFR 230.134. Rule 134, in contrast to rule 482, is a 
content-based rule that specifies certain categories of information 
that a fund may advertise. Currently, funds may advertise a broad 
range of information under rule 134, other than performance 
information. See Proposing Release, supra note 7, 67 FR at 36714.
    \19\ See 17 CFR 230.134(e) (registered investment companies and 
business development companies excluded from rule 134).
    \20\ Because a rule 482 advertisement is a prospectus under 
section 10(b) of the Securities Act, a rule 482 advertisement is 
subject to section 12(a)(2) of the Securities Act [15 U.S.C. 
77l(a)(2)], which imposes liability for materially false or 
misleading statements in a prospectus or oral communication, subject 
to a reasonable care defense. An action under section 12(a)(2) does 
not require proof of scienter (i.e., an intent to defraud 
investors), e.g., Wigand v. Flo-Tek, Inc., 609 F.2d 1028, 1034 (2d 
Cir. 1979), or investor reliance on a misleading statement or 
omission, e.g., MidAmerica Fed. S. & L. Assoc. v. Shearson/American 
Express, Inc., 886 F.2d 1249, 1256 (10th Cir. 1989); Sanders v. John 
Nuveen & Co., 619 F.2d 1222, 1225 (7th Cir. 1980), cert. denied, 450 
U.S. 1005 (1981). In contrast, antifraud claims by investors under 
section 10(b) of the Securities Exchange Act of 1934 (``Exchange 
Act'') [15 U.S.C. 78j(b)] require proof of scienter and investor 
reliance. Under either type of claim, however, the plaintiff must 
establish that the misrepresentation or omission is material. Rule 
134 advertisements are subject to the antifraud provisions under the 
Federal securities laws but do not create liability under section 
12(a)(2) of the Securities Act because rule 134 advertisements are 
not considered ``prospectuses.'' Rule 134 was adopted under section 
2(a)(10)(b) of the Securities Act [15 U.S.C. 77b(a)(10)(b)], which 
excepts certain communications from the definition of 
``prospectus.''
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    A number of commenters opposed the elimination of funds' ability to 
rely on rule 134, objecting to the application of the more stringent 
liability standard under section 12(a)(2) of the Securities Act to fund 
advertisements that have in the past fallen within the scope of rule 
134. Commenters argued that the limitations on the type of information 
that may be included in rule 134 advertisements provide sufficient 
protection against fraud or misleading statements so that the more 
rigorous liability standard under section 12(a)(2) is not necessary. In 
addition, they argued that, in the absence of evidence of significant 
abuse, there is no reason to eliminate funds' ability to rely on rule 
134 and impose the burden of increased liability.
    We are not persuaded by these comments because we believe that the 
standard of liability that attaches to a fund advertisement should not 
depend on the content of the advertisement. Nor do we believe that 
exactly the same content should be subject to different liability 
standards depending on whether that content is included in a rule 134 
advertisement or a rule 482 advertisement. Assuming that commenters are 
correct that the limitations on the type of information that may be 
included in rule 134 advertisements provide protection against fraud, 
then it should not be problematic to apply a more rigorous liability 
standard to this information. Further, our elimination of funds' 
ability to rely on rule 134 is not intended to address significant past 
abuses, but to help to prevent false and misleading advertisements in 
the future. Finally, excluding investment companies from rule 134 is 
consistent with the goal of regulatory simplification. With the 
elimination of the ``substance of which'' requirement from rule 482, 
any advertisement that could be presented under rule 134 may also be 
presented under rule 482. The elimination of funds' ability to rely on 
rule 134 will eliminate unnecessary complexity in the regulation of 
fund advertising.

B. Applicability of Antifraud Provisions to Fund Advertising

    We are adopting, with modifications suggested by the commenters, 
amendments to the fund advertising rules that are intended to 
reemphasize that fund advertisements are subject to the antifraud 
provisions of the federal securities laws. When we initially proposed 
rule 482 in 1977, we indicated that rule 482 advertisements would be 
subject to section 12(a)(2) of the Securities Act and the antifraud 
provisions of the federal securities laws.\21\ Since then, we have 
reiterated that compliance with the ``four corners'' of rule 482 does 
not alter the fact that funds, underwriters, and dealers are subject to 
the antifraud provisions of the federal securities laws with respect to 
fund advertisements.\22\
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    \21\ 1977 Advertising Proposing Release, supra note, 42 FR at 
30380.
    \22\ Investment Company Act Release No. 16245 (Feb. 2, 1988) [53 
FR 3868, 3878 n. 51 (Feb. 10, 1988)]. See also Investment Company 
Act Release No. 24832 (Jan. 18, 2001) [66 FR 9002, 9008 (Feb. 5, 
2001)] (compliance with rule 482 is not a safe harbor from antifraud 
liability); Investment Company Act Release No. 15315 (Sept. 17, 
1986) [51 FR 34384, 34391 (Sept. 26, 1986)] (in proposing amendments 
to rule 482 to require the inclusion of a legend on advertisements, 
Commission stated that it was ``not suggesting that the legend 
information contains all the material information necessary to 
prevent an ad from being misleading . . . [and] that whoever 
sponsors the ad, be it the fund, the underwriter, or the dealer, 
bears the primary responsibility for assuring that the ad is not 
false or misleading''); 1977 Advertising Proposing Release, supra 
note, 42 FR at 30380 (advertisements made pursuant to rule 434d 
(subsequently renumbered as rule 482) would be subject to the 
antifraud provisions of the securities laws); In the Matter of The 
Dreyfus Corporation and Michael L. Schonberg, Investment Advisers 
Act Release No. 1870 (May 10, 2000) (advertisements that comply with 
rule 482 are subject to the general antifraud provisions of the 
securities laws).
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    To emphasize this principle, we are adding a note to newly adopted 
paragraph (a) of rule 482 that states that an advertisement that 
complies with rule 482 does not relieve the fund, underwriter, or 
dealer of any obligations with respect to the advertisement under the 
antifraud provisions of the federal securities laws. We also are adding 
a similar note to the introductory paragraph of rule 34b-1 under the 
Investment Company Act with respect to supplemental sales literature. 
These notes include cross-references to rule 156 under the Securities 
Act, which provides guidance about the factors to be weighed in 
determining whether statements, representations, illustrations, and 
descriptions contained in fund advertisements and sales literature are 
misleading.\23\
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    \23\ 17 CFR 230.156.
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    As proposed, the language of the notes to rules 482 and 34b-1 would 
have stated that compliance with the rules does not relieve the fund, 
underwriter, or dealer of the obligation to ``ensure'' that the 
advertisement is not false or misleading. One commenter objected to the 
use of the term ``ensure,'' stating that it could potentially expand 
the responsibility of funds, underwriters, and dealers because it might 
imply that they are guarantors of the accuracy of statements contained 
in advertisements. Our proposal incorporated language, including the 
term ``ensure,'' similar to that used in an existing note to paragraph 
(a)(3) of rule 482, and we did not intend to alter existing standards 
of liability.\24\ In order to address the commenter's concern, however, 
we have revised the language of the note to remove the term ``ensure'' 
and clarify that compliance with rules 482 and 34b-1 does not relieve 
the fund, underwriter, or dealer of any obligations with respect to the 
advertisement under the antifraud provisions of the federal securities 
laws. This change is intended to clarify that the scope of a fund's, 
underwriter's, or dealer's obligations under the antifraud provisions 
is drawn from the federal securities laws and relevant precedents and 
not from the language of rule 482 or 34b-1 itself.
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    \24\ Note to current rule 482(a)(3) [17 CFR 230.482(a)(3)] 
(``The fact that the statements included in the advertisement are 
included in the section 10(a) prospectus does not relieve the 
issuer, underwriter, or dealer of the obligation to ensure that the 
advertisement is not false or misleading.'')
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    Two commenters urged the Commission to confirm in the adopting 
release that, notwithstanding the note to rule 482(a), performance 
information in a rule 482 advertisement (as opposed to other 
disclosures included in the advertisement) will not be deemed to be 
false or misleading if it (i) is computed in accordance with the 
methodology required by the rule; and (ii) complies with the 
currentness requirements of the rule. We disagree with this position. 
An advertisement that complies with rule

[[Page 57763]]

482 will be deemed to be an ``omitting prospectus'' under section 10(b) 
of the Securities Act for the purposes of section 5(b)(1) of the 
Securities Act.\25\ Rule 482, however, is not a safe harbor from 
antifraud liability for any information included in a rule 482 
advertisement, including performance information complying with the 
requirements of the rule.
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    \25\ Section 5(b)(1) of the Securities Act [15 U.S.C. 77e(b)(1)] 
makes it unlawful to use interstate commerce to transmit any 
prospectus relating to a security with respect to which a 
registration statement has been filed unless the prospectus meets 
the requirements of section 10 of the Securities Act. Section 10(b) 
of the Securities Act [15 U.S.C. 77j(b)] permits the Commission to 
adopt rules that provide for a prospectus that ``omits in part'' or 
``summarizes'' information contained in the statutory prospectus. 
Rule 482 was adopted under the authority of section 10(b) of the 
Securities Act.
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    In addition, we are amending rule 156 to provide further guidance 
regarding the factors to be weighed in considering whether a statement 
involving a material fact in investment company sales materials is or 
might be misleading. As discussed in the Proposing Release, we are 
concerned that the advertisement of past performance without an 
adequate explanation of other facts may create unrealistic investor 
expectations or even mislead potential investors.\26\ For that reason, 
we are modifying the language of rule 156 to state more explicitly that 
portrayals of past income, gain, or growth of assets may be misleading 
where the portrayals omit explanations, qualifications, limitations, or 
other statements necessary or appropriate to make these portrayals of 
past performance not misleading.\27\ This language is intended to 
address our concerns with fund performance advertisements that do not 
provide adequate disclosure: (i) Of unusual circumstances that have 
contributed to fund performance; (ii) that more current performance may 
be lower than advertised performance; or (iii) that would permit an 
investor to evaluate the significance of performance that is based on 
selective dates.\28\ We remind funds and their underwriters and 
dealers, however, that this language would address other circumstances 
that we have not specifically enumerated and that each fund, and its 
underwriters and dealers, is responsible for analyzing the facts and 
circumstances concerning its advertisements and determining whether its 
advertisements may be misleading.
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    \26\ See Proposing Release, supra note 7, at Section I.B., 
``Performance Advertising Practices,'' 67 FR at 36715-16.
    \27\ 17 CFR 230.156(b)(2)(i); Cf. 17 CFR 230.156(b)(1)(ii) (``A 
statement could be misleading because of * * * [t]he absence of 
explanations, qualifications, limitations or other statements 
necessary or appropriate to make such statement not misleading * * * 
'').
    \28\ See Proposing Release, supra note 7, 67 FR at 36715-16 
(discussing concerns about lack of disclosure relating to unusual 
circumstances contributing to fund performance, currentness of 
performance information, and selective use of performance figures).
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C. Enhanced Disclosure Under Rule 482

    We are adopting, with modifications to address commenters' 
concerns, additional amendments to rule 482 that will require enhanced 
disclosure of certain information designed to encourage advertisements 
that convey balanced information to prospective investors. Our 
amendments require that funds that advertise performance information 
make available to investors total returns that are current to the most 
recent month-end. They also require that fund advertisements include 
improved narrative information and present explanatory information more 
prominently.
Availability of Month-End Performance Information
    Currently, rule 482(g) requires all performance data contained in 
any mutual fund advertisement to be as of the most recent practicable 
date, provided that any advertisement containing total return 
quotations is considered to have complied with the requirement if the 
total return quotations are current to the most recent calendar quarter 
ended prior to submission of the advertisement for publication.\29\ We 
are adopting a second condition for a fund advertisement to be 
considered to have complied with the requirement of rule 482 that 
performance be as of the most recent practicable date. Specifically, 
total return quotations current to the most recent month-end, and 
available to investors within seven business days of the most recent 
month-end, must be provided at a toll-free or collect telephone number 
or on a Web site, unless the advertisement contains total return 
quotations that are current to the most recent month ended seven 
business days prior to the date of use of the advertisement.\30\ As a 
result, investors who are provided advertisements highlighting a fund's 
performance should have ready access to performance data that is 
current to the most recent month-end and will not be forced to rely on 
performance data that may be more than three months old at the time of 
use by the investor.
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    \29\ Current 17 CFR 230.482(g).
    \30\ 17 CFR 230.482(g)(1)(ii) and (g)(2).
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    We have modified the proposed new condition to require that month-
end performance information be available to investors within seven 
business days, rather than three calendar days, of the most recent 
month-end. A number of commenters objected to the three calendar-day 
timeframe as too short to gather the necessary information, 
particularly in cases in which funds are sold through intermediaries 
such as insurance companies and fund supermarkets, which sell funds 
from multiple complexes.\31\ Some commenters suggested longer 
timeframes ranging up to seven business days. Other commenters 
indicated that it could take ten business days or more to gather all of 
the necessary information and that the Commission should adopt a 
standard permitting month-end performance information to be provided 
``as soon as reasonably practicable'' or within a ``reasonable time.''
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    \31\ A fund supermarket is a program offered by a broker-dealer 
or other financial institution through which its customers may 
purchase and redeem shares of a variety of funds from different fund 
complexes.
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    We are persuaded by the comments that the proposed timeframe should 
be extended to seven business days. Particularly in the case of 
intermediary-sold funds, it could be difficult to gather, format, and 
make available the necessary information in three calendar days. Based 
on the comments, we believe that seven business days typically will 
provide sufficient time for making month-end performance data 
available. We recognize that there may be circumstances where more time 
is needed. We note, however, that if a fund exceeds the seven business-
day timeframe in making month-end performance data available, it may 
nonetheless be in compliance with the currentness provisions of rule 
482, as long as the performance data contained in an advertisement is 
``as of the most recent practicable date considering the type of 
investment company and the media through which the data will be 
conveyed.'' \32\
---------------------------------------------------------------------------

    \32\ 17 CFR 230.482(g).
---------------------------------------------------------------------------

    We are also modifying the proposed condition in order to permit 
month-end performance information to be made available either at a 
toll-free or collect telephone number or on a Web site. The proposed 
rules would have required funds to make the information available by 
toll-free or collect telephone number. A number of commenters argued 
that funds should be permitted to make the information available 
through the Internet. They argued that telephone access to month-end 
information could be unnecessarily burdensome for both investors and 
funds. They argued that

[[Page 57764]]

an automated system could be unwieldy, requiring the investor to 
navigate through several series of menus and numerous prompts to 
retrieve the requested information when, for example, an intermediary 
offers numerous funds or a variable insurance contract issuer offers 
multiple contracts with multiple underlying investment options. They 
also argued that funds would incur significant expense in setting up 
automated telephone systems or in using live telephone operators to 
provide updated information, whereas most funds could use existing Web 
sites as an efficient means of communicating month-end performance 
data.
    We are persuaded by these comments and are revising the proposal to 
permit funds to make month-end data available at a toll-free or collect 
telephone number or at a Web site.\33\ We were particularly concerned 
that investors could become frustrated with navigating through multiple 
telephone prompts to obtain information about the particular fund in 
which they are interested. We were persuaded that funds should be 
permitted to determine whether this information could be provided in a 
more accessible, user-friendly format on a Web site. A single table 
could, for example, contain performance information for multiple funds, 
enabling an investor to find the relevant information at a glance. We 
encourage funds and their intermediaries to take advantage of the 
rule's flexibility to present month-end performance information through 
a medium and in a format that is readily accessed and understood by 
investors.
---------------------------------------------------------------------------

    \33\ 17 CFR 230.482(g)(1)(ii); 17 CFR 230.482(b)(3)(i).
---------------------------------------------------------------------------

    We remind funds that the availability of month-end performance 
information by telephone or Web site does not alter the application of 
the antifraud provisions of the federal securities laws to an 
advertisement. The month-end information obtained through a telephone 
call or Web site would not be considered part of the advertisement 
itself and would not cure any materially misleading statement or 
omission in the advertisement.
    We wish to clarify that a fund advertisement may provide the 
telephone number or Web site of a third-party intermediary as the 
source for obtaining month-end performance information. The Proposing 
Release stated that updated performance information should be available 
from the fund itself and that other forms of distribution of this 
information should supplement availability from the fund itself.\34\ We 
recognize, however, that, in some cases, it may not be practical for 
month-end performance information to be available from the fund itself. 
For example, when a fund is sold through and advertised by a fund 
supermarket, it may be most practical for the fund supermarket to 
provide updated performance information to its customers. In the case 
of a variable annuity contract, fund performance net of contract 
charges is typically calculated by the insurance company sponsor rather 
than the fund and updated contract performance may perhaps be most 
appropriately provided by the insurance company.
---------------------------------------------------------------------------

    \34\ See Proposing Release, supra note , 67 FR at 36719.
---------------------------------------------------------------------------

    Several commenters asked us to clarify whether the narrative 
disclosures that would normally be required in a rule 482 advertisement 
would be required when updated month-end performance information is 
provided through a toll-free or collect telephone number. These 
disclosures include statements regarding factors that investors should 
consider before investing, prospectus availability, limitations of past 
performance information, and sales loads.\35\ These disclosures need 
not be provided on a toll-free or collect telephone line that is 
dedicated exclusively to providing updated month-end performance 
information to investors calling in response to a rule 482 performance 
advertisement because the investors would have received those 
disclosures in the original advertisement. If, however, the telephone 
number is used more broadly (e.g., for all incoming calls to a fund 
group), the toll-free or collect telephone number should include the 
narrative disclosures required by rule 482 because a caller may not 
have seen the original advertisement with the required disclosures. 
Similarly, if updated month-end performance information is provided on 
a Web site, all of the narrative disclosures required by rule 482 
should be included because the Web site is broadly accessible to the 
public.
---------------------------------------------------------------------------

    \35\ 17 CFR 230.482(b)(1)(i), (b)(3)(i), and (b)(3)(ii).
---------------------------------------------------------------------------

    We are modifying the proposal to address the concerns of several 
commenters who suggested that the Commission not require a fund that 
advertises performance current to the most recent month-end also to 
provide that information by toll-free or collect telephone number. The 
commenters argued that, in such cases, providing a telephone number for 
obtaining this information would confuse investors. Investors would 
call the telephone number, only to be given the same information that 
already appears in the advertisement. Accordingly, we are modifying the 
proposal to provide that an advertisement containing total return 
quotations is considered to have complied with the requirement that all 
performance data be as of the most recent practicable date if the total 
return quotations are current to the most recent month ended seven 
business days prior to the date of use of the advertisement.\36\ A fund 
advertisement including information meeting this standard need not 
identify a toll-free or collect telephone number or a Web site where an 
investor may obtain performance data current to the most recent month-
end.\37\
---------------------------------------------------------------------------

    \36\ 17 CFR 230.482(g)(2).
    \37\ 17 CFR 230.482(b)(3)(i).
---------------------------------------------------------------------------

    We note that the exception from the requirement to provide month-
end performance information by toll-free or collect telephone number or 
Web site applies only to advertisements that contain total return 
quotations that are current to the most recent month ended seven 
business days prior to the date of use of the advertisement. It is not 
sufficient if the advertisement contains total return quotations that 
are current to the most recent month ended seven business days prior to 
the date of publication or submission for publication of the 
advertisement if that standard is no longer met when the advertisement 
is used. It also is not sufficient if the advertisement contains total 
return quotations that are current to the most recent month ended seven 
business days prior to the date of first use of the advertisement if 
that standard is not met throughout the entire period of use of the 
advertisement.\38\ Our intent is that an investor have access to 
current month-end information at the time he or she reviews an 
advertisement, either in the advertisement itself or through a toll-
free or collect telephone number or Web site.
---------------------------------------------------------------------------

    \38\ Note to rule 482(b)(3)(i) [17 CFR 230.482(b)(3)(i)]; note 
to rule 482(g) [17 CFR 230.482(g)].
---------------------------------------------------------------------------

    Thus, a Web site that is continuously updated so that it always 
contains total return quotations that are current to the most recent 
month ended seven business days earlier need not identify a toll-free 
or collect telephone number or a Web site where an investor may obtain 
month-end performance data. Similarly, an advertisement in a daily 
newspaper that appears on one particular day and contains total return 
quotations that are current to the most recent month ended seven 
business days prior to the date that the

[[Page 57765]]

advertisement appears need not identify a source where an investor may 
obtain month-end performance data. By contrast, an advertisement 
containing performance information for a group of funds that is 
intended to be distributed to investors for an extended period (e.g., 
throughout a quarter) would be required to identify a toll-free or 
collect telephone number or a Web site where an investor may obtain 
month-end performance data even if the advertisement contains total 
return quotations that are current to the most recent month ended seven 
business days prior to the date on which the advertisement is first 
distributed to investors.
    In determining the date of use of an advertisement, consideration 
should be given to all the facts and circumstances, such as the dates 
on which the advertisement is first published and distributed, the last 
date on which the advertisement is distributed, and, in the case of an 
advertisement appearing in a periodical, the dates on which the next 
issue of the periodical is first published and distributed. We would 
encourage funds to provide month-end performance information by toll-
free or collect telephone number or Web site in any case where a 
question about the date of use results in a question as to whether an 
advertisement contains total return quotations that are current to the 
most recent month ended seven business days prior to the date of use.
    Two commenters stated that an advertisement that includes 
performance information that is more current than the most recent 
month-end also should not be required to provide a source for month-end 
information. We disagree. When a fund chooses a date other than a 
quarter or month-end for presenting performance, there is potential for 
``cherry picking'' the date to provide particularly favorable 
information. In such a case, we believe that month-end performance 
information should be made available to investors as a check on any 
such ``cherry picking'' and to provide investors with information from 
different funds for comparable periods.
Improved Narrative Disclosure
    Advertising that focused on extraordinary fund performance during 
1999-2000 led to increasing concerns that some funds, when advertising 
their performance, may resort to techniques that create unrealistic 
investor expectations or may mislead potential investors. These 
concerns have arisen again with the recent improvement in market 
performance, as commentators have noted an increase in advertisements 
highlighting favorable short-term performance.\39\ To address these 
concerns, we are adopting, with modifications to address concerns 
raised by commenters, changes to the narrative disclosure that is 
required to accompany performance advertisements. These changes are 
intended to help investors understand the limitations of past 
performance data and enhance their ability to obtain updated 
performance information. In particular, these amendments will require 
funds to include the following information in rule 482 advertisements 
that contain performance data: (i) A statement that past performance 
does not guarantee future results; (ii) a statement that current 
performance may be lower or higher than the performance data quoted; 
and (iii) a toll-free or collect telephone number or a website where an 
investor may obtain performance data current to the most recent month-
end, unless the advertisement includes total return quotations current 
to the most recent month ended seven business days prior to the date of 
use.\40\ An advertisement may combine two or more of these required 
statements in a single sentence, provided that each of the required 
disclosures is clear and easy to understand. Similarly, an 
advertisement may use any language that clearly communicates the 
information required to be disclosed.
---------------------------------------------------------------------------

    \39\ See supra note 9.
    \40\ 17 CFR 230.482(b)(3)(i).
---------------------------------------------------------------------------

    We have modified the proposed required disclosure regarding the 
availability of month-end performance data in two ways that parallel 
modifications that we have made to the proposed requirements regarding 
availability of month-end performance data. First, the rule as adopted 
will permit identification of either a Web site or a toll-free or 
collect telephone number where an investor may obtain current month-end 
information. Second, an advertisement containing total return 
quotations current to the most recent month ended seven business days 
prior to the date of use would not be required to identify a toll-free 
or collect telephone number or a Web site where an investor may obtain 
performance data current to the most recent month end.\41\
---------------------------------------------------------------------------

    \41\ See ``Availability of Month-End Performance Information,'' 
supra.
---------------------------------------------------------------------------

    We are also adopting, with modifications suggested by a commenter, 
an amendment to rule 482 that would direct prospective investors' 
attention to a fund's charges and expenses. As proposed, the amendment 
would have required a fund to note in its rule 482 advertisement that 
information about charges and expenses is included in the statutory 
prospectus. As adopted, the rule would require rule 482 advertisements 
to include a statement that advises an investor to consider the fund's 
investment objectives, risks, and charges and expenses carefully before 
investing; explains that the prospectus contains this and other 
information about the investment company; identifies a source from 
which an investor may obtain a prospectus; and states that the 
prospectus should be read carefully before investing.\42\ We were 
persuaded by a commenter's argument that the proposed required 
disclosures, while helpful, would not adequately direct investors' 
attention to the important factors that they should consider. We agree 
with the commenter that investors should consider a fund's objectives 
and risks, and its charges and expenses, before investing because these 
factors will directly affect future returns. We are concerned that the 
many fund advertisements highlighting performance have focused 
investors' attention on fund returns and that investors may be 
overlooking other important fund features, particularly charges and 
expenses, that may diminish a fund's returns.\43\
---------------------------------------------------------------------------

    \42\ 17 CFR 230.482(b)(1)(i). Similar disclosure will also be 
required in an advertisement used with a profile pursuant to rule 
498 under the Securities Act [17 CFR 230.498]. 17 CFR 
230.482(b)(1)(ii).
    Rule 482 currently does not require a fund to highlight the 
importance of information regarding the fund's investment 
objectives, risks, and charges and expenses. The rule does, however, 
require an advertisement to identify a source from which an investor 
may obtain a prospectus containing more complete information about 
the fund, which should be read carefully before investing. Current 
17 CFR 230.482(a)(3)(i). The rule also requires that a fund that 
advertises performance data include some information about sales 
loads and other non-recurring fees. Current 17 CFR 230.482(a)(6).
    \43\ See Securities and Exchange Commission, Mutual Fund 
Investing: Look at More Than a Fund's Past Performance (last 
modified Jan. 24, 2000) http://www.sec.gov/investor/pubs/mfperform.htm (cautioning investors to look beyond performance when 
evaluating funds and to consider the costs relating to a fund 
investment). See also NASD Notice to Members No. 98-107 (1998) 
(reminding members of their obligation to ensure that discussions 
concerning fees and expenses in fund advertising are fair, balanced, 
and not misleading).
---------------------------------------------------------------------------

    One commenter sought clarification as to how this provision would 
apply in the context of variable insurance products in light of 
recently adopted changes to disclosure requirements for variable 
insurance prospectuses, which require disclosure of the range of 
operating expenses of underlying funds in the contract prospectus, with 
detailed information about the expenses of each underlying fund 
required to be

[[Page 57766]]

disclosed in the fund's prospectus.\44\ A variable insurance product 
advertisement should direct investors to both the contract prospectus 
and the underlying fund prospectuses. Both the contract prospectus and 
the underlying fund prospectuses contain information relating to the 
product's investment objectives, risks, and charges and expenses as 
well as other important information.
---------------------------------------------------------------------------

    \44\ Form N-4, Item 3 [17 CFR 239.17b; 17 CFR 274.11c]; Form N-
6, Item 3 [17 CFR 239.17c; 17 CFR 274.11d].
---------------------------------------------------------------------------

Presentation of Explanatory Information
    We are adopting, with modifications suggested by commenters, 
requirements that funds present certain information in their rule 482 
advertisements more prominently. These prominence requirements are 
designed to prevent advertisements from marginalizing or minimizing the 
presentation of the required disclosure. The amendments will require 
print advertisements to present required narrative disclosures in a 
type size at least as large as and of a style different from, but at 
least as prominent as, that used in the major portion of the 
advertisement.\45\ This requirement will apply to the required 
narrative disclosures about the prospectus and the performance 
data.\46\ The amendments will also provide an exception to this 
requirement, which was suggested by a commenter; i.e., when performance 
data is presented in a type size smaller than that of the major portion 
of the advertisement, the required narrative disclosure pertaining to 
the performance data may appear in a type size no smaller than that of 
the performance data.\47\ We were persuaded that, in such cases, 
presenting the required performance-related narrative disclosure in a 
type size larger than that of the performance data itself may be 
distracting.
---------------------------------------------------------------------------

    \45\ 17 CFR 230.482(b)(5). The presentation requirements for 
rule 482 are the same as those currently required under rule 134. 17 
CFR 230.134(a)(iii). The presentation requirements would replace the 
current rule 482 requirement that certain required disclosures be 
``conspicuous.'' Current 17 CFR 230.482(a)(3).
    \46\ 17 CFR 230.482(b)(1) and (3). The narrative disclosure 
covered by the prominence requirement will also include, if 
applicable, the ``subject to completion'' legend that will be 
required by rule 482(b)(2) and, if the advertisement is used with a 
profile under rule 498 under the Securities Act [17 CFR 230.498], 
disclosure advising investors to consider the fund's investment 
objectives, risks, and charges and expenses carefully before 
investing, explaining that the profile contains this and other 
information about the fund, describing the procedures for investing 
in the fund, and indicating the availability of the prospectus. 17 
CFR 230.482(b)(1)(ii) and (b)(2). In addition, the prominence 
requirement will extend to disclosures specific to money market 
funds. 17 CFR 230.482(b)(4).
    \47\ 17 CFR 230.482(b)(5).
---------------------------------------------------------------------------

    The newly adopted type size and style requirements will apply to 
print advertisements. We have modified the proposed requirement, as 
suggested by a commenter, to clarify that if an advertisement is 
delivered through an electronic medium, the type size and style 
requirements may be satisfied by presenting the required narrative 
disclosures in any manner reasonably calculated to draw investor 
attention to them.\48\ This is consistent with rule 420(b) under the 
Securities Act, which provides that prospectuses distributed through an 
electronic medium may satisfy legibility requirements applicable to 
printed documents 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 the specific 
information.\49\
---------------------------------------------------------------------------

    \48\ Id.
    \49\ 17 CFR 230.420(b). Rule 420 applies to rule 482 
advertisements. Note to rule 482(a) [17 CFR 230.482(a)]. See 
Securities Act Release No. 7289 (May 9, 1996) [61 FR 24652, 24652 
(May 15, 1996)] (amending Commission rules to provide that issuer, 
when delivering electronic version of document, may comply with 
requirements prescribing physical appearance of paper document by 
(i) presenting the information in a format readily communicated to 
investors; and (ii) where legends are required to be printed in red 
ink or bold-face type, or in a different font size, presenting 
legends in any manner reasonably calculated to draw attention to 
them).
---------------------------------------------------------------------------

    We are adopting, as proposed, the requirement that radio and 
television advertisements give the required narrative disclosures 
emphasis equal to that used in the major portion of the 
advertisement.\50\ Two commenters recommended that, with respect to 
television advertisements, we clarify that the required narrative 
disclosures need not be provided orally and that, instead, they may be 
provided in written text on the television screen. We do not agree that 
the required disclosures would have an emphasis equal to that of the 
major portion of the advertisement if the required disclosures are in 
written form, while the major portion of the advertisement is spoken. 
If the required disclosures appear in writing on a television screen 
during a spoken advertisement, we believe that they are more likely to 
be overlooked, and not seen as a significant part of the advertisement, 
than if they are included in the spoken presentation of the 
advertisement.
---------------------------------------------------------------------------

    \50\ 17 CFR 230.482(b)(5).
---------------------------------------------------------------------------

    In addition, we are adopting, as proposed, a requirement that the 
narrative disclosures that specifically relate to fund performance be 
presented in close proximity to the performance data in both print and 
radio and television advertisements.\51\ In a print advertisement, this 
information also would be required to appear in the body of the 
advertisement and not in a footnote. Rule 482 currently requires that 
performance advertisements identify the dates during which quoted 
performance occurred.\52\ We are adopting, as proposed, a requirement 
that this information be adjacent to, and have no less prominence than, 
the performance quotation itself.\53\ These proximity requirements are 
intended to help investors more readily find information necessary to 
understand and evaluate the performance data shown, and to remind 
investors of the limitations of performance data.
---------------------------------------------------------------------------

    \51\ Id. The disclosure subject to the proximity requirement 
would include all of the disclosures required by paragraphs 
(b)(3)(i) and (ii) of rule 482. 17 CFR 230.482(b)(3)(i) and (ii). 
Paragraph (b)(3)(i) of rule 482 requires disclosure that the 
performance data quoted represents past performance; that past 
performance does not guarantee future results; in the case of a non-
money market fund, that the investment return and principal value of 
an investment will fluctuate; that current performance may be lower 
or higher than the performance data quoted; and a toll-free 
telephone number or Web site where an investor may obtain month-end 
performance data. Paragraph (b)(3)(ii) of rule 482 requires that, if 
a sales load or any other nonrecurring fee is charged, the 
advertisement must disclose the maximum amount of the load or fee. 
In addition, if the sales load or fee is not reflected, the 
advertisement must also disclose that the performance data does not 
reflect its deduction, and that, if reflected, the load or fee would 
reduce the performance quoted. Cf. Proposing Release, supra note 7, 
67 FR at 36721 n. 82 (omitting to state explicitly that disclosures 
of paragraph (b)(3)(ii) of rule 482 are covered by proximity 
requirement).
    \52\ Current 17 CFR 230.482(d)(1)(i), (e)(1)(iv), (e)(2)(v), 
(e)(3)(iv), (e)(4)(vi), and (e)(5)(v).
    \53\ 17 CFR 230.482(d)(1)(iv), (d)(2)(v), (d)(3)(iv), 
(d)(4)(vi), (d)(5)(v), and (e)(1)(i).
---------------------------------------------------------------------------

    While the newly adopted prominence and proximity requirements apply 
only to certain information expressly required by rule 482, we wish to 
emphasize that the purpose of these requirements is to encourage fair 
and balanced advertisements. In that regard, we encourage funds and 
their underwriters and dealers to review their advertisements to ensure 
that the format of all the information in an advertisement results in a 
fair and balanced presentation. For example, an advertisement that 
hypes extraordinary performance but contains only footnote disclosure 
of unusual circumstances that have contributed to fund performance may 
not result in a fair and balanced presentation.\54\
---------------------------------------------------------------------------

    \54\ See Section II.B., ``Applicability of Antifraud Provisions 
to Fund Advertising,'' supra (discussing Commission's concerns with 
inadequate disclosure in fund performance advertising of unusual 
circumstances contributing to performance).

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[[Page 57767]]

    Two commenters also recommended that for purposes of spoken 
advertisements, such as those on radio and television, we clarify that 
the proximity requirements would not require that the required 
performance-related disclosures immediately follow any performance 
information so long as they are given emphasis equal to that of the 
major portion of the advertisement. In the case of spoken 
advertisements, we believe that the required performance-related 
disclosures should appear immediately after, immediately before, or 
briefly separated from the performance information. Our goal is that 
investors be readily able to understand the limitations of past 
performance data, and we would be concerned if performance information 
in a spoken advertisement were significantly separated from the 
required disclosures. On the other hand, we recognize that, in a 
relatively short, spoken advertisement, funds should have some 
flexibility to determine the appropriate placement of the required 
disclosures.
    One commenter requested clarification of how the proximity 
requirements would apply to advertisements consisting of lists of fund 
performance information over multiple pages. The commenter stated that 
we should not interpret the amendments to require that the required 
disclosures be repeated on every page of such a listing, which could 
result in the required disclosures being viewed as boilerplate and 
ignored. We agree that, in the case of an advertisement that consists 
of a list of performance data longer than one page in length, the 
required performance-related disclosures may appear once, at the 
beginning of the list, such as on the cover page or first page, 
provided that the required disclosures are presented in conformity with 
the prominence requirements of the rule.\55\
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    \55\ This clarification is limited to advertisements consisting 
of multi-page paper documents. Applicability of the presentation 
requirements to Web sites consisting of multiple Web pages is 
discussed infra.
---------------------------------------------------------------------------

    Several commenters requested clarification concerning the 
applicability of the proximity requirements to Web site advertisements, 
arguing that it should be sufficient if the required performance-
related disclosures appear either (i) on a screen that must be accessed 
prior to the investor accessing the actual performance information, or 
(ii) through a pop-up message or link on the screen that contains the 
performance information. As a general matter, we disagree with this 
interpretation of the proximity requirements and would expect the 
required performance-related disclosures to appear on the same webpage 
as the performance data to which the disclosures relate and in close 
proximity to that data. This will provide investors who are reviewing a 
Web site advertisement with access to the required disclosure that is 
substantially equivalent to that provided through a paper advertisement 
that meets the proximity requirements.
    We are also adopting amendments to rule 34b-1 to clarify that the 
newly adopted prominence and proximity requirements will apply to 
supplemental sales literature.\56\
---------------------------------------------------------------------------

    \56\ 17 CFR 270.34b-1(a) and (b)(1)(i).
---------------------------------------------------------------------------

D. Reorganization of Rule 482 and Technical Form Amendments

    We are adopting, as proposed, amendments reorganizing rule 482 to 
make it easier to use. We are also adopting, as proposed, amendments to 
Forms N-1A, N-3, N-4, and N-6 to reflect the removal of the ``substance 
of which'' requirement in rule 482.\57\ In addition, we are adopting 
additional technical amendments to Forms N-3 and N-4, also to reflect 
the removal of the ``substance of which'' requirement in rule 482.\58\
---------------------------------------------------------------------------

    \57\ See Item 21 of Form N-1A [17 CFR 239.15A; 17 CFR 274.11A]; 
Items 4 and 25 of Form N-3 [17 CFR 239.17a; 17 CFR 274.11b]; Items 4 
and 21 of Form N-4 [17 CFR 239.17b; 17 CFR 274.11c]. The amendments 
delete Item 25 of Form N-6 [17 CFR 239.17c; 17 CFR 274.11d].
    Form N-1A is the registration form for open-end management 
investment companies. Form N-3 is the registration form for separate 
accounts organized as management investment companies that offer 
variable annuity contracts. Form N-4 is the registration form for 
separate accounts organized as unit investment trusts that offer 
variable annuity contracts. Form N-6 is the registration form for 
separate accounts that are registered as unit investment trusts and 
that offer variable life insurance policies.
    \58\ See General Instruction F and Item 28 of Form N-3 and 
General Instruction F and Item 24 of Form N-4.
---------------------------------------------------------------------------

E. Rule 482(a)(5)(i) Relating to Variable Insurance Products

    Rule 482 generally prohibits a rule 482 advertisement from 
containing or being accompanied by an application to purchase fund 
shares.\59\ However, the rule contains an exception from the 
prohibition against applications for unit investment trusts that offer 
variable annuity or variable life insurance contracts.\60\ These 
contracts permit investors to allocate premiums among a variety of 
underlying mutual funds in which the unit investment trust invests. The 
contract prospectuses contain descriptions of the underlying mutual 
funds, which are considered rule 482 advertisements for the underlying 
funds.\61\ The underlying funds are separately registered as management 
investment companies on Form N-1A and offer their shares through 
separate prospectuses. The exception from the prohibition on 
applications for variable insurance contracts permits an application 
for the contract (which provides for investor allocation of purchase 
payments to specific underlying funds) to accompany the contract 
prospectus, even though the contract prospectus constitutes a rule 482 
advertisement for the underlying mutual funds and even though 
prospectuses for the underlying funds do not accompany the contract 
prospectus.\62\
---------------------------------------------------------------------------

    \59\ Current 17 CFR 230.482(a)(5); newly adopted 17 CFR 
230.482(c).
    \60\ Current 17 CFR 230.482(a)(5)(i); newly adopted 17 CFR 
230.482(c)(1).
    \61\ See Item 5(c) of Form N-4 and Item 4(c) of Form N-6 
(requiring brief description of each underlying mutual fund offered 
through the contract). See also Investment Company Act Release No. 
14575 (June 14, 1985) [50 FR 26145, 26155 n. 48 and accompanying 
text (June 25, 1985)] (describing treatment of underlying mutual 
funds in contract prospectus as omitting prospectuses).
    \62\ See Investment Company Act Release No. 15315 (Sept. 17, 
1986) [51 FR 34384, 34391 n. 60 (Sept. 26, 1986)].
---------------------------------------------------------------------------

    By its terms, the exception permits a contract application to 
accompany a rule 482 advertisement for the underlying funds only when 
the rule 482 advertisement is a part of the contract prospectus itself. 
As we noted in the Proposing Release, in recent years, members of the 
variable insurance industry have argued that it should be permissible 
for a contract prospectus and application to be accompanied by other 
rule 482 advertisements for the underlying funds that are not a part of 
the prospectus itself.\63\
---------------------------------------------------------------------------

    \63\ Proposing Release, supra note, 67 FR at 36723.
---------------------------------------------------------------------------

    Advocates of this position argue that rule 482 permits either of 
the following: (i) delivery of a rule 482 advertisement for an 
underlying fund (without an application); and (ii) delivery of a 
contract prospectus with an application. Therefore, they argue that, 
under rule 482, delivery of a rule 482 advertisement for an underlying 
fund (without an application) could be either preceded or followed by 
delivery of a contract prospectus with an application. As a result, 
they conclude that it should be permissible for a contract prospectus 
and application to be accompanied by other rule 482 advertisements for 
the underlying funds because whether the delivery of the additional 
rule 482 advertisements is made together with the contract material or 
separately from

[[Page 57768]]

it is a question of form rather than substance.
    We solicited comment regarding whether it should be permissible for 
a contract prospectus and application to be accompanied by other rule 
482 advertisements for the underlying funds that are not a part of the 
prospectus itself. Three commenters supported permitting the practice. 
None opposed permitting the practice.
    We agree that rule 482 advertisements for the underlying funds not 
contained in the contract prospectus itself should be permitted to be 
delivered simultaneously with the contract prospectus and the 
accompanying contract application, and we are adopting a revision to 
rule 482 to clarify that this practice is permitted.\64\ We are 
persuaded that whether the delivery of the additional rule 482 
advertisements is made together with the contract material or 
separately from it is a question of form rather than substance.
---------------------------------------------------------------------------

    \64\ 17 CFR 230.482(c)(1).
---------------------------------------------------------------------------

F. Compliance Dates

    The amendment eliminating the ``substance of which'' requirement 
from rule 482 will take effect on November 15, 2003. Fund 
advertisements submitted for publication after March 31, 2004, should 
comply with all other amendments adopted in this release. This 
timeframe is consistent with the transition period requested by most 
commenters. Some variable insurance commenters requested a 12-month 
transition period, but, in light of the modifications we have made to 
the proposal (e.g., month-end performance may be provided by Web site 
rather than by telephone), we do not believe that such a lengthy 
transition period is necessary.

III. Cost/Benefit Analysis

    The Commission is sensitive to the costs and benefits associated 
with its rules. To provide funds with the ability to disclose more 
timely information in advertisements, the amendments adopted today 
remove the ``substance of which'' requirement contained in rule 482 
under the Securities Act, and rescind the provisions in rule 134 under 
the Securities Act that apply to funds. In addition, the amendments 
reinforce the antifraud protections in the fund advertising rules, and 
require enhanced disclosure of certain information in fund 
advertisements designed to encourage advertisements that convey 
balanced information to prospective investors. Finally, the amendments 
make certain organizational changes to rule 482 and technical 
amendments to the registration forms.
    In the Proposing Release, we provided an analysis of the costs and 
benefits of the amendments then proposed, and we requested 
comments.\65\ Three commenters commented directly on this cost/benefit 
analysis, while others raised cost and benefit issues with regard to 
specific substantive provisions without specifically mentioning the 
cost/benefit analysis.
---------------------------------------------------------------------------

    \65\ See Proposing Release, supra note, at Section IV, ``Cost/
Benefit Analysis,'' 67 FR at 36723-26.
---------------------------------------------------------------------------

A. Benefits

    The amendments modify rule 482 of the Securities Act and related 
rules and forms to provide more timely, informative, and balanced 
information in fund advertising for the benefit of investors. The 
amendments also simplify and clarify the advertising rules, thus, 
reducing regulatory compliance costs, and these cost savings may be 
passed on to investors.
1. Enhanced Disclosure of Information to Investors
    Currently, the regulations concerning advertising include 
significant disclosure requirements. The amendments, as adopted, 
enhance the disclosure required to be provided to investors in fund 
advertising in several respects:
    [sbull] Availability of Monthly Performance Figures. Performance 
advertisements will have to disclose a toll-free or collect telephone 
number or a Web site where an investor may obtain performance data 
current to the most recent month-end, unless the advertisement includes 
total return quotations current to the most recent month ended seven 
business days prior to the date of use.\66\ Easy access to and 
awareness of this information will benefit investors not only by 
providing potentially more timely performance data and reducing the 
ability of funds to selectively use performance data, but also by 
highlighting for investors the limitations of relying too heavily on 
any one set of performance figures. In addition, availability of 
updated monthly performance data will make it easier for investors to 
compare performance among competing funds.
---------------------------------------------------------------------------

    \66\ 17 CFR 230.482(b)(3)(i).
---------------------------------------------------------------------------

    [sbull] Legend. If an advertisement provides performance figures, 
the amendments require the inclusion of a legend stating that past 
performance does not guarantee future results, and that current 
performance may be lower or higher than the data quoted.\67\ This 
legend will benefit investors by making them more aware of the 
limitations of relying on performance data for investment decisions and 
thus may result in more informed investment decisions.
---------------------------------------------------------------------------

    \67\ Id.
---------------------------------------------------------------------------

    [sbull] Availability of Information Regarding Investment 
Objectives, Risks, and Charges and Expenses. Rule 482 advertisements 
will have to highlight the availability of information concerning the 
fund's investment objectives, risks, and charges and expenses.\68\ This 
provision will benefit investors by directing them to important 
information that could affect their returns, and will allow investors 
to more easily compare the objectives, risks, and costs of competing 
funds.
---------------------------------------------------------------------------

    \68\ 17 CFR 230.482(b)(1)(i). This disclosure would also be 
required in an advertisement used with a profile pursuant to rule 
498 under the Securities Act. 17 CFR 482(b)(1)(ii).
---------------------------------------------------------------------------

    [sbull] Prominence Requirements. Rule 482 advertisements will be 
required to present certain disclosures, including those discussed 
above, (i) in a size and type style at least as prominent as that used 
in the major portion of the advertisement (or, in the case of 
performance-related disclosures, in a type size no smaller than that of 
the performance data when the performance data is presented in a type 
size smaller than that of the major portion of the advertisement), or 
(ii) in the case of radio or television advertisements, with emphasis 
equal to that used in the major portion of the advertisement.\69\ These 
provisions help to ensure that advertisers do not marginalize or 
minimize the presentation of the required disclosure described above.
---------------------------------------------------------------------------

    \69\ 17 CFR 230.482(b)(5).
---------------------------------------------------------------------------

    [sbull] Proximity Requirement. In addition, the required 
disclosures regarding performance data will have to be presented in the 
body of the advertisement in close proximity to the performance data 
and not in a footnote. With regard to television or radio 
advertisements, the required disclosures will also have to be presented 
in close proximity to the performance data.\70\ The length of and the 
date of the last day in the base period used in computing yield 
quotations, average annual total returns, after-tax returns, and other 
performance measures will have to be adjacent to the performance 
data.\71\ As with other disclosure requirements, this provision will 
help investors to more easily find information necessary to evaluate 
the performance figures shown and will

[[Page 57769]]

help to remind investors of the limitations of performance data.
---------------------------------------------------------------------------

    \70\ Id.
    \71\ 17 CFR 230.482(d)(1)(iv), (d)(2)(v), (d)(3)(iv), 
(d)(4)(vi), (d)(5)(v), and (e)(1)(i).
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    The benefits of these enhanced disclosure requirements to investors 
may be limited by the extent to which funds currently provide this 
disclosure voluntarily. Staff discussions with members of the fund 
industry indicate that most investment companies already comply with 
many of the requirements of the amendments, by, for example, 
calculating performance data on at least a monthly basis, inserting 
warnings in advertisements that past performance is no guarantee of 
future performance, and operating Web sites and telephone call banks.
    Nevertheless, in the case of investment companies that do not 
already voluntarily comply with the requirements of the amendments, the 
enhanced disclosure requirements provide two benefits to investors. To 
the extent investment decisions are made based on advertising, the 
improved disclosure will result in investors making better informed 
investment decisions, and therefore in a more efficient distribution of 
assets by investors among different funds. The transparency resulting 
from the enhanced disclosure in fund advertising may, in turn, also 
contribute to increased competition among funds and result in a more 
efficient allocation of resources among competing investment products. 
Although it is not possible to precisely quantify the beneficial 
effects of more efficient allocation of investors' assets and increased 
competition, they may be significant, given the size of the mutual fund 
industry.\72\
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    \72\ See Investment Company Institute, 2001 Mutual Fund Fact 
Book at 63.
---------------------------------------------------------------------------

2. Simplification and Clarification of Fund Advertising Rules
    The amendments add clarifying language to rule 482 and rule 156 
under the Securities Act and rule 34b-1 under the Investment Company 
Act to reemphasize the applicability of the antifraud provisions of the 
federal securities laws to fund advertisements. In addition, the 
amendments reorganize rule 482 to make it easier for funds to apply, by 
adding headings, reordering provisions, and clarifying certain 
language.
    The reemphasis of the applicability of the antifraud provisions may 
help to deter presentation of misleading information in advertisements. 
The amendments to reorganize rule 482 may aid funds and others in 
understanding and complying with the advertising rules, making it 
easier and cheaper for funds to advertise. Both of these improvements 
may, in turn, contribute to an increased flow of accurate and useful 
investment information to investors, which may lead to better-informed 
investment decisions and amplify the previously discussed benefits of 
efficient asset allocation.\73\ Although difficult to quantify, this 
easing of regulation may provide some reduction of burden to the funds 
that choose to advertise.
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    \73\ The trade-off between lower advertising burdens and 
increased advertising activity is complex and further complicated by 
business cycles and marketing strategy among other factors. We 
believe, however, that investors and funds will enjoy benefits in 
any event--either resources will be saved in reducing the costs and 
burdens of advertising or they will be spent to increase the amount 
and timeliness of information provided to investors in advertising.
---------------------------------------------------------------------------

3. Elimination of the ``Substance of Which'' Requirement and the 
Rescission of Rule 134 Provisions That Apply to Funds
    To simplify the current structure of fund advertising rules and to 
provide funds the ability to disclose more timely information in 
advertisements, the amendments also remove the provision contained in 
rule 482 limiting advertisements only to that information the 
``substance of which'' is in the statutory prospectus. We believe that, 
with the elimination of the ``substance of which'' requirement from 
rule 482, funds will no longer need to rely on rule 134. As a result, 
the amendments also remove the provisions of rule 134 that apply 
specifically to funds and exclude both registered investment companies 
and business development companies from relying on rule 134.
    The elimination of the ``substance of which'' requirement 
eliminates requirements for funds to include or update advertising 
related information in their prospectus or SAI, both in the initial 
registration statements and in post-effective amendments, before 
issuing an advertisement to the public. This will reduce filing costs 
for funds, including both internal costs and external costs such as 
outside legal fees. The amendments will also reduce the costs 
associated with printing and distributing prospectuses and SAIs. The 
elimination of unnecessary information from the prospectus or SAIs, 
because it will remove distracting clutter, may make the remaining 
information more understandable to investors.
    Finally, the rescission of the rule 134 provisions that apply to 
funds consolidates the regulation of most fund advertising in rule 482, 
which will cover advertisements now covered by rule 134. This 
simplification will contribute to the benefits of easier and cheaper 
advertising as discussed in section III.A.2 (`` Simplification and 
Clarification of Fund Advertising Rules'') above, principally by 
removing the unnecessary restrictions on the content of the 
advertisements and the unnecessary distinction with regard to their 
legal classification. The transfer of fund advertising regulation from 
rule 134 to rule 482 may also enhance investor protection by subjecting 
fund advertisements formerly governed by rule 134 to potential civil 
liability under section 12(a)(2) of the Securities Act.\74\
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    \74\ The benefits of potential direct investor suits in both 
remedying fraudulent advertising by funds and deterring such 
advertising in the future are difficult to quantify, but may be 
significant. The benefits will be reduced to the extent that the 
potential liability increases litigation and insurance costs for 
funds. However, because suits based on misleading advertising are 
relatively rare, we continue to estimate that the associated costs 
will be minimal.
---------------------------------------------------------------------------

    One commenter disagreed that there would be a benefit to funds as a 
result of having to comply with only one advertising rule. The 
commenter stated that, in its experience, there is no correlation 
between the number of advertising rules and the costs of advertising. 
We do not believe, however, that this commenter's particular experience 
negates our conclusion with regard to the potential benefits of 
simplifying the regulation of fund advertising. In compiling the cost/
benefit analysis, the staff found that some funds estimated no savings 
resulting from the amendments intended to simplify and clarify the 
advertising rules; these amendments included the rescission of rule 134 
as it applies to funds, as well as other amendments such as the removal 
of the ``substance of which'' requirement. On the other hand, the staff 
also found that others did anticipate such a savings. Our estimate 
below represents an average, overall benefit for all the amendments 
intended to simplify and clarify the advertising rules and, as such, 
takes into account those funds that foresee no benefits from the 
simplification and clarification of the rules.
4. Quantification of Benefits
    The Commission estimates that, on an annual basis, the amendments 
will save funds approximately 1.96 burden hours, or $73.03, per 
investment company in internal costs but only negligible amounts in 
external costs. We estimate that 5,025 investment companies will be 
affected by the amendments, and, thus, the Commission estimates that 
the annual internal burden associated with rule 482 will decrease by 
approximately 9,849 (1.96 hours per investment

[[Page 57770]]

company x 5,025 investment companies) burden hours.\75\ These burden 
hours represent a monetary savings of approximately $366,974 (9,849 
hours x $37.26 wage rate) per year.\76\
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    \75\ The estimate of the number of investment companies is based 
on data derived from the Commission's EDGAR filing system. The 
estimate of the decrease in burden hours is based on information 
gathered from the fund industry by the Commission staff and from the 
staff's experience with the various advertising regulations.
    \76\ These figures are based on a Commission estimate of 5025 
investment companies and an estimated hourly wage rate of $37.26. 
The estimated wage rate figure is based on published hourly wage 
rates for in-house attorneys ($33.66), paralegals ($19.93), and 
compliance examiners ($23.16) and the estimate, based on the 
Commission staff's discussions with certain fund complexes, that 
attorneys would account for 50% of hours spent on advertising 
regulation and that paralegals and compliance examiners would 
account for the remaining 50% in equal ratio, yielding a weighted 
wage rate of $27.60 (($33.66 x .50) + ($19.93 x .25) + (23.16 x .25) 
= $27.60). Securities Industry Association, Report on Office 
Salaries in the Securities Industry 2000 (Sept. 2002); Securities 
Industry Association, Report on Management & Professional Earnings 
in the Securities Industry 2000 (Sept. 2002). This weighted wage 
rate was then adjusted upward by 35% for overhead, reflecting the 
costs of supervision, space, and administrative support, to obtain 
the total per hour internal cost of $37.26 ($27.60 x 1.35 = $37.26).
    The benefits estimated in this analysis differ from those 
provided in the Proposing Release because of intervening changes in 
the number of investment companies and the wage rates. Although the 
Commission modified the proposed amendments, these modifications did 
not affect our estimates of the benefits associated with the 
amendments. Some commenters indicated that the cost of making 
updated month-end information available by toll-free or collect 
telephone number, as the proposal would have required, would be 
significant. Nonetheless, the modification to the proposed 
requirement to permit funds to make month-end performance data 
available through a toll-free or collect telephone number or Web 
site did not affect our estimates of costs or benefits. The staff 
indicated in the Proposing Release that it expected the costs of 
making updated month-end information available by toll-free or 
collect telephone number would be negligible, because many, if not 
most, funds already provide month-end or more current performance 
information through those means. See Proposing Release, supra note 
7, 67 FR at 36726.
---------------------------------------------------------------------------

B. Costs

    The Commission estimates that the costs of the amendments, in the 
aggregate, will be minimal and limited in duration. The Commission 
estimates that funds will incur one-time costs in modifying their 
current rule 482 advertisements to meet the new disclosure and 
presentation requirements, although many funds already provide the 
disclosure that would be required. For example, funds may have to 
modify their layouts and typesetting in order to convert existing 
advertisements to meet the requirements of the rule, or alternatively, 
replace existing advertisements more quickly than they otherwise would.
    The requirement for funds to provide access to performance figures 
that are current as of the last month end may also impose costs, some 
of which will be ongoing, both to generate such figures on a monthly 
basis and to provide the information by a toll-free or collect 
telephone number or on a Web site. This could include costs for 
computer time, accounting personnel, information technology staff, and 
additional computer and telephone equipment. The cost/benefit analysis 
in the Proposing Release estimated that the costs of making updated 
performance information available would be negligible because many, if 
not most, funds already provide this or more current performance 
information through these means and, therefore, the marginal cost for 
most funds for making updated performance information available is 
expected to be negligible.
    Several commenters, however, argued that the costs associated with 
the proposed requirement that updated performance information be 
provided by toll-free or collect telephone number would be 
significant.\77\ Such costs, commenters stated, could include those of 
setting up and maintaining an automated telephone system to provide the 
updated performance data. While two commenters did provide some 
specific estimates of their own anticipated costs of compliance with 
this proposed requirement, none of the commenters gave cost figures 
applicable to the industry as a whole.\78\ Moreover, none of the 
commenters estimated the number of funds that would incur such costs. 
The cost/benefit analysis in the Proposing Release reached its 
conclusion, in part, because information gathered by the staff 
indicated that many, if not most, funds already had toll-free telephone 
systems and used them to distribute performance data that was at least 
as current as the month-end. The information provided by the commenters 
does not persuade us that our conclusion regarding aggregate costs was 
incorrect.
---------------------------------------------------------------------------

    \77\ On the other hand, one commenter did not object to the 
telephone-only requirement, indicating that making updated monthly 
performance data available in the manner contemplated by the 
proposal would be affordable for all funds, regardless of size.
    \78\ One commenter estimated that the cost of installing an 
automated voice response telephone system for an insurance company 
to provide performance information about funds underlying variable 
contracts would be $500,000. Another commenter cited that $500,000 
estimate and added that the estimate is for hardware and software 
requirements only and does not include personnel expenses and 
further stated that expenses for companies that do not presently 
have automated telephone systems would likely be several times 
higher. It appears that the commenter that calculated the $500,000 
estimate intended that this figure represent the cost the commenter 
itself would incur and not a projection that every insurance company 
or every fund would incur a $500,000 expense. Another commenter, a 
fund supermarket, estimated the cost of updating its website to 
provide toll-free numbers for the many funds offered would amount to 
$70,000.
---------------------------------------------------------------------------

    In any event, we have modified the proposal to address these 
commenters' concerns. The amendments, as adopted, will not require 
month-end performance data to be made available by toll-free or collect 
telephone. Rather, funds may make the information available by toll-
free or collect telephone number or on the fund's Web site. In 
addition, we have modified the proposal to provide that where the fund 
advertisement includes total return quotations current to the most 
recent month ended seven business days prior to the date of use, the 
fund is not also required to make such data available by telephone or 
through its website. We expect that both of these revisions to the 
proposed amendments will further reduce any cost burden associated with 
disclosing month-end performance data.
    The elimination of the ``substance of which'' requirement and the 
rescission of rule 134 as applicable to funds may require some funds to 
incur costs to convert many of their rule 134 advertisements to rule 
482 advertisements. These costs, however, should be minimal and non-
recurring, since the rule 482 requirements would permit advertisements 
that are not significantly different from those currently permitted 
under current rule 134.
    One commenter expressed concern regarding the proposed language of 
the new notes to rule 482(a) and rule 34b-1 stating that compliance 
with the rules does not relieve the fund, underwriter, or dealer of the 
obligation to ensure that the advertisement is not false or misleading. 
The commenter was concerned that the new notes may expand liability for 
independent directors in connection with fund advertisements, resulting 
in a significant cost burden. However, as we indicate above,\79\ the 
new notes are to make clear that liability for advertisements is based 
on the federal securities laws and that the advertising rule amendments 
are not intended to change the existing liability standards.
---------------------------------------------------------------------------

    \79\ See Section II.B., ``Applicability of Antifraud Provisions 
to Fund Advertising,'' supra.
---------------------------------------------------------------------------

    With regard to the rescission of rule 134 as it applies to funds, a 
number of commenters expressed concern over costs associated with the 
higher standard of liability under rule 482, but did not provide any 
specific figures or other quantitative analysis. As we note

[[Page 57771]]

above, however, suits based on misleading advertising are relatively 
rare and we continue to estimate that the associated costs will be 
minimal.\80\
---------------------------------------------------------------------------

    \80\ See supra note 74.
---------------------------------------------------------------------------

    We further note that the amendments, as adopted, extend the 
compliance period to two full calendar quarters after adoption, 
lowering conversion costs by allowing more time for planning and 
enabling funds to come into compliance in the regular course of 
quarterly advertising cycles. This extension reinforces our estimate 
that such expenses will be minimal.
    The Commission estimates the one-time switchover costs for each 
investment company attributable to the amendments will be approximately 
2.18 hours, or $81.23 (2.18 hours x $37.26 wage rate), in internal 
costs, and $2,417 in external costs.\81\ In total this represents a 
one-time cost of approximately 10,955 (2.18 hours x 5,025 investment 
companies) internal burden hours (translating into approximately 
$408,183 (10,955 hours x $37.26 wage rate) in internal costs) and 
$12,145,425 ($2,417 cost per investment company x 5,025 investment 
companies) in external costs.\82\
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    \81\ These figures are based on averages derived from 
information gathered from several members of the fund industry by 
the Commission staff and from the staff's experience with the 
various advertising rules. Internal costs include, for example, the 
cost of reviewing all fund advertisements for compliance with the 
revised rules. External costs include, for example, the costs of 
typesetting and printing for new fund advertisements.
    The costs estimate in this analysis differ from those provided 
in the Proposing Release because of intervening changes in the 
number of investment companies and the wage rates. Although the 
Commission modified the proposed amendments, these modifications did 
not affect our estimate of the costs associated with the amendments. 
See supra note 76.
    \82\ See discussion in notes 75 and 76, supra, regarding number 
of investment companies, wage rates, and previous estimates of costs 
and benefits.
---------------------------------------------------------------------------

C. Conclusion

    The Commission expects that the advertising rule amendments will 
encourage more informed and efficient investing, while easing the 
regulatory burden on fund advertising, and that these likely benefits 
would justify the associated costs.

IV. Consideration of Effects on Efficiency, Competition, and Capital 
Formation

    Section 2(c) of the Investment Company Act, Section 2(b) of the 
Securities Act, and Section 3(f) of the Exchange Act require the 
Commission, when engaging in rulemaking that requires it to consider or 
determine whether an action is necessary or appropriate in the public 
interest, to consider, in addition to the protection of investors, 
whether the action will promote efficiency, competition, and capital 
formation.\83\
---------------------------------------------------------------------------

    \83\ 15 U.S.C. 77b(b), 78c(f), and 80a-2(c).
---------------------------------------------------------------------------

    In the Proposing Release, we requested comment on whether the 
proposed amendments would promote efficiency, competition, and capital 
formation. The Commission received one letter specifically addressing 
the effect of the proposed amendments on competition. This commenter 
objected to the rescission of rule 134 for funds on the grounds, among 
others, that investment companies would be treated less favorably than 
other issuers engaged in ongoing offerings of their securities that 
would continue to be able to rely on rule 134.
    The amendments the Commission is adopting today seek to improve 
fund advertising by enhancing disclosure requirements and by 
simplifying and clarifying the rules, including elimination of the 
requirement that rule 482 advertisements contain only information the 
``substance of which'' is included in the statutory prospectus. These 
changes may improve efficiency. The rule simplifications may lower the 
regulatory burden on funds engaged in advertising, freeing resources 
for more productive uses. For example, funds would no longer have to 
update their prospectuses or SAIs in order to change the types of 
performance information in advertisements. The enhanced disclosure 
requirements may provide greater and timelier access by investors to 
updated performance figures, which would promote more efficient 
allocation of investments by investors and more efficient allocation of 
assets among competing funds. The amendments may also improve 
competition, as enhanced disclosure may prompt funds to seek to provide 
better-informed investors with improved products and services. Finally, 
the effects of the amendments on capital formation are unclear. 
Although we believe that the amendments would benefit investors, the 
magnitude of the effect of the amendments on efficiency, competition, 
and capital formation is difficult to quantify, particularly given that 
most funds may already comply with at least some of the new disclosure 
requirements.

V. Paperwork Reduction Act

A. Introduction

    As explained in the Proposing Release, certain provisions of the 
amendments contain ``collection of information'' requirements within 
the meaning of the Paperwork Reduction Act of 1995 [44 U.S.C. 3501 et 
seq.]. The titles for the existing collections of information are: (i) 
``Form N-1A under the Investment Company Act of 1940 and Securities Act 
of 1933, Registration Statement of Open-End Management Investment 
Companies''; (ii) ``Form N-2--Registration Statement of Closed-End 
Management Investment Companies'' \84\; (iii) ``Form N-3--Registration 
Statement of Separate Accounts Organized as Management Investment 
Companies''; (iv) ``Form N-4--Registration Statement of Separate 
Accounts Organized as Unit Investment Trusts''; (v) ``Form N-6 Under 
the Investment Company Act and the Securities Act of 1933, Registration 
Statement of Insurance Company Separate Accounts Registered as Unit 
Investment Trusts that Offer Variable Life Insurance Policies''; and 
(vi) ``Rule 34b-1 of the Investment Company Act of 1940, Sales 
Literature Deemed To Be Misleading.'' A new collection of information 
has been created entitled ``Rule 482 under the Securities Act of 1933, 
Advertising by an Investment Company.''\85\
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    \84\ Although the amendments do not amend Form N-2, that form is 
included in this Paperwork Reduction Act (``PRA'') summary because 
the PRA burden for rule 482 has previously been included in the 
various investment company registration statement forms affected by 
rule 482, including Form N-2. As discussed below, the Commission has 
transferred the PRA burden associated with rule 482 from all of 
these registration statement forms to a new rule 482 category.
    \85\ The amendments modify rule 482, which is part of Regulation 
C under the Securities Act of 1933. Regulation C describes the 
disclosure that must appear in registration statements under the 
Securities Act and Investment Company Act. The PRA burden associated 
with rule 482 was previously included in the various investment 
company registration statement forms, not in Regulation C. However, 
because the amendments eliminate the rationale for allocating the 
PRA burden for rule 482 to the registration forms, the Commission 
has transferred the burden associated with rule 482 to a new 
category. The total PRA burden for each of the registration forms is 
different from that included in the PRA submissions that preceded 
this analysis because of the transfer of burden associated with rule 
482, as well as the intervening changes in the number of filings. 
However, the newly adopted amendments to the forms do not have any 
effect on the burden hours for the forms.
---------------------------------------------------------------------------

    Form N-1A (OMB Control No. 3235-0307), Form N-2 (OMB Control No. 
3235-0026), Form N-3 (OMB Control No. 3235-0316), Form N-4 (OMB Control 
No. 3235-0318), and Form N-6 (OMB Control No. 3235-0503) were adopted 
pursuant to section 5 of the Securities Act [15 U.S.C. 77e] and section 
8(a) of the Investment Company Act [15 U.S.C. 80a-8(a)]. Rule 482 of 
Regulation C (OMB Control No. 3235-0565) was adopted pursuant to 
section 10(b) of the Securities Act [15 U.S.C.

[[Page 57772]]

77j(b)]. Rule 34b-1 (OMB Control No. 3235-0346) was adopted pursuant to 
section 34(b) of the Investment Company Act [15 U.S.C. 80a-33(b)].\86\
---------------------------------------------------------------------------

    \86\ Although this release also amends rule 156, there are no 
burden hours assigned to that rule by OMB and it has no OMB control 
number.
---------------------------------------------------------------------------

    We published notice soliciting comments on the collection of 
information requirements in the Proposing Release and submitted these 
requirements to the Office of Management and Budget (``OMB'') for 
review in accordance with 44 U.S.C. 3507(d) and 5 CFR 1320.11. OMB 
approved these collection requirements.
    The amendments modify rule 482 under the Securities Act and related 
rules and forms, to provide more timely, understandable, and balanced 
information in fund advertising for the benefit of investors, while 
simplifying and clarifying the advertising rules for the benefit of 
funds.\87\ First, the amendments enhance the disclosure that funds must 
provide in advertisements, including by highlighting the availability 
of information concerning investment objectives, risks, and charges and 
expenses, and requiring an amended legend stating that past performance 
does not guarantee future results. The amendments also set forth 
requirements to help ensure that funds present these and other required 
disclosures at least as prominently as the material included in the 
body of the advertisement. Second, if a fund advertisement includes 
performance data, the fund must make month-end performance figures 
available to investors by a toll-free or collect telephone number or on 
a Web site, and disclose the availability of this month-end performance 
data in the advertisement, unless the advertisement includes total 
return quotations current to the most recent month ended seven business 
days prior to the date of use. Third, the amendments add clarifying 
language to rule 482 under the Securities Act and rule 34b-1 under the 
Investment Company Act to reemphasize the separate applicability of the 
antifraud provisions of the federal securities laws, and amend rule 156 
under the Securities Act to provide further guidance regarding the 
factors to be weighed in determining whether a statement involving a 
material fact in investment company sales literature is or might be 
misleading. Fourth, the amendments (i) remove the provision contained 
in rule 482 that limits rule 482 advertisements to only that 
information the ``substance of which'' is in the statutory prospectus, 
and (ii) rescind the provisions in rule 134 under the Securities Act 
that apply to funds. Fifth, the amendments clarify portions of rule 482 
(without changing their content) by adding headings, reordering 
provisions, and simplifying certain provisions. Finally, the amendments 
make technical and conforming changes to Forms N-1A, N-3, N-4, and N-6.
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    \87\ The Commission is adopting amendments to rules 134, 156, 
and 482 under the Securities Act, rule 34b-1 under the Investment 
Company Act, and Forms N-1A, N-3, N-4, and N-6 under the Investment 
Company Act and Securities Act.
---------------------------------------------------------------------------

    Compliance with the disclosure requirements is mandatory. Responses 
to the disclosure requirements will not be kept confidential. 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 
control number.

B. The Registration Forms Burden

    Previously, the PRA burdens imposed by rule 482 were accounted for 
under the various registration forms used by investment companies 
affected by the rule: Form N-1A, Form N-2, Form N-3, Form N-4, and Form 
N-6. We have transferred the burden hours associated with rule 482 from 
these forms to a separate rule 482 category as follows:

------------------------------------------------------------------------
                                                                Hours
                           Form                              transferred
                                                               (hours)
------------------------------------------------------------------------
Form N-1A.................................................       177,514
Form N-2..................................................         1,014
Form N-3..................................................           792
Form N-4..................................................        36,630
Form N-16.................................................         9,065
                                                           -------------
Total hours transferred to new rule 482 category..........       225,015
------------------------------------------------------------------------

The information required to be filed with the Commission pursuant to 
the information collections contained in the registration forms permits 
the verification of compliance with securities law requirements and 
assures the public availability and dissemination of the information.
1. Form N-1A
    The purpose of Form N-1A is to meet the registration and disclosure 
requirements of the Securities Act and the Investment Company Act and 
to provide investors with information necessary to evaluate an 
investment in the fund. The respondents to this information collection 
are open-end funds registering with the Commission. Compliance with the 
disclosure requirements on Form N-1A is mandatory. Responses to the 
disclosure requirements are not confidential.
    The previous hour burden for preparing an initial Form N-1A filing 
was 824 burden hours per portfolio, and the Commission attributed 23 of 
these burden hours per portfolio to compliance with rule 482, reducing 
the remaining burden hours per portfolio to 801.\88\ The previous 
annual hour burden for preparing post-effective amendments on Form N-1A 
was 122 hours per portfolio, and the Commission attributed 23 of these 
burden hours per portfolio to compliance with rule 482, reducing the 
remaining burden hours per portfolio to 99. The Commission estimated 
that, on an annual basis, 193 portfolios file initial registration 
statements on Form N-1A and 7,525 file post-effective amendments on 
Form N-1A. Thus, the burden hours attributable to rule 482 transferred 
from Form N-1A to the new rule 482 collection of information amounted 
to 177,514 ((23 hours x 193 portfolios) + (23 hours x 7,525 
portfolios)). After shifting the rule 482 burden hours to a new 
collection of information, the total burden hours that remain allocated 
to Form N-1A for all purposes unassociated with rule 482 amount to 
899,568 ((801 hours x 193 portfolios) + (99 hours x 7,525 portfolios)).
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    \88\ The estimate of the burden hours attributable to compliance 
with rule 482 for filings on Forms N-1A, and Form N-2 were based on 
information supplied to the Commission staff by members of the fund 
industry and the staff's experience with these registration forms.
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    Except for the transfer of PRA burden from Form N-1A to the new 
collection of information for rule 482, the Commission estimates no 
effect on the remaining PRA burden for Form N-1A from the amendments. 
The change in PRA burden resulting from the amendments is accounted for 
under the new rule 482 collection of information.
2. Form N-2
    The purpose of Form N-2 is to meet the registration and disclosure 
requirements of the Securities Act and the Investment Company Act and 
to enable funds to provide investors with information necessary to 
evaluate an investment in the fund. The respondents to this information 
collection are closed-end funds registering with the Commission. 
Compliance with the disclosure requirements of Form N-2 is mandatory. 
Responses to the disclosure requirements are not confidential.
    The previous hour burden for preparing an initial registration 
statement on Form N-2 was 542.4 burden hours per filing, and the 
previous hour burden for preparing a post-effective amendment on Form 
N-2

[[Page 57773]]

was 107.4 hours per filing. The Commission attributed 5.7 of these 
burden hours per filing to compliance with rule 482, reducing the 
burden hours per filing to 536.7 and 101.7, respectively. The 
Commission estimated that, on an annual basis, 140 respondents file an 
initial registration statement on Form N-2 and 38 file post-effective 
amendments on Form N-2. Thus, the burden hours attributable to rule 482 
transferred from Form N-2 to the new rule 482 collection of information 
amounted to 1,014 ((5.7 hours x 140 filings) + (5.7 hours x 38 
filings)). After shifting the rule 482 burden hours to a new collection 
of information, the total burden hours that remain allocated to Form N-
2 for all purposes unassociated with rule 482 amount to 79,003 ((536.7 
hours x 140 filings) + (101.7 hours x 38 filings)).
    Except for the transfer of PRA burden from Form N-2 to the new 
collection of information for rule 482, the Commission estimates no 
effect on the remaining Form N-2 PRA burden from the amendments. The 
change in PRA burden resulting from the amendments is accounted for 
under the new rule 482 collection of information.
3. Form N-3
    The purpose of Form N-3 is to meet the registration and disclosure 
requirements of the Securities Act and the Investment Company Act and 
to enable funds to provide investors with information necessary to 
evaluate an investment in the fund. The respondents to this information 
collection are separate accounts, organized as management investment 
companies and offering variable annuities, registering with the 
Commission. Compliance with the disclosure requirements of Form N-3 is 
mandatory. Responses to the disclosure requirements are not 
confidential.
    The previous annual hour burden for preparing an initial 
registration statement on Form N-3 was 910.5 hours per portfolio, and 
the Commission attributed 3.3 of these burden hours per portfolio to 
compliance with rule 482, reducing the remaining burden hours per 
portfolio to 907.2.\89\ The previous annual hour burden for preparing 
post-effective amendments on Form N-3 was 151.7 hours per portfolio, 
and the Commission attributed 3.3 of these burden hours per portfolio 
to rule 482, reducing the remaining burden hours per portfolio to 
148.4. The Commission estimated that, on an annual basis, no initial 
registration statements are filed on Form N-3 and 60 post-effective 
amendments, including 240 portfolios, are filed on Form N-3. Thus, the 
burden hours attributable to rule 482 transferred from Form N-3 to the 
new rule 482 collection of information amounted to 792 (3.3 hours x 240 
portfolios). After shifting the rule 482 burden hours to a new 
collection of information, the total burden hours that remain allocated 
to Form N-3 for all purposes unassociated with rule 482 amount to 
35,616 (148.4 x 240 portfolios) hours.
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    \89\ Estimates of the burden hours attributable to rule 482 for 
Forms N-3, N-4, and N-6 were derived by estimating the total burden 
hours for compliance with rule 482 for all variable insurance 
separate accounts, based on the staff's discussions with a member of 
the variable insurance products industry that issues both variable 
annuities and variable life insurance policies. We then converted 
this estimated number of burden hours associated with rule 482 into 
a percentage of the total burden hours associated with Forms N-3, N-
4, and N-6 collectively. We allocated the rule 482 burden to each 
form by multiplying the total burden of each form by this 
percentage. However, we excluded burden hours attributable to 
initial filings on Form N-3 because we anticipated no such filings.
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    Except for the transfer of PRA burden from Form N-3 to the new 
collection of information for rule 482, the Commission estimates no 
effect on the remaining PRA burden for Form N-3 resulting from the 
amendments. The change in PRA burden resulting from the amendments is 
accounted for under the new rule 482 PRA collection of information.
4. Form N-4
    The purpose of Form N-4 is to meet the registration and disclosure 
requirements of the Securities Act and the Investment Company Act and 
to enable separate accounts issuing variable annuity contracts to 
provide investors with information necessary to evaluate an investment 
in a contract. The respondents to this information collection are 
separate accounts, organized as unit investment trusts and offering 
variable annuities, registering with the Commission. Compliance with 
the disclosure requirements of Form N-4 is mandatory. Responses to the 
disclosure requirements are not confidential.
    The previous hour burden for preparing an initial Form N-4 filing 
was 298 burden hours per filing, and the Commission attributed 24.8 of 
these burden hours per filing to rule 482, reducing the remaining 
burden hours per filing to 273.2.\90\ The previous annual hour burden 
for preparing post-effective amendments on Form N-4 was 219.8 hours per 
filing, and the Commission attributed 24.8 of these burden hours per 
filing to rule 482, reducing the remaining burden hours per filing to 
195. The Commission estimated that, on an annual basis, 157 respondents 
file initial registration statements on Form N-4 and 1320 respondents 
file post-effective amendments on Form N-4. Thus, the burden hours 
attributable to rule 482 transferred from Form N-4 to the new rule 482 
collection of information amount to 36,630 ((24.8 hours x 157 filings) 
+ (24.8 hours x 1320 filings)). After shifting the rule 482 burden 
hours to a new collection of information, the total hour burden that 
remains allocated to Form N-4 for all purposes unassociated with rule 
482 amount to 300,292 ((273.2 hours x 157 filings) + (195 hours x 1320 
filings)).
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    \90\ See discussion in note 89, supra.
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    Except for the transfer of PRA burden from Form N-4 to the new 
collection of information for rule 482, the Commission estimates no 
effect on the remaining PRA burden for Form N-4 resulting from the 
amendments. The change in PRA burden resulting from the amendments is 
accounted for under the new rule 482 PRA collection of information.
5. Form N-6
    The purpose of Form N-6 is to meet the registration and disclosure 
requirements of the Securities Act and the Investment Company Act and 
to enable separate accounts issuing variable life insurance policies to 
provide investors with information necessary to evaluate an investment 
in a policy. The respondents to this information collection are 
separate accounts, organized as unit investment trusts and offering 
variable life insurance policies, registering with the Commission. 
Compliance with the disclosure requirements of Form N-6 is mandatory. 
Responses to the disclosure requirements are not confidential.
    The previous hour burden for preparing an initial registration 
statement on Form N-6 was 800 burden hours per filing and the hour 
burden for a post-effective amendment on Form N-6 was 100 hours per 
post-effective amendment filed as an annual update, and 10 hours per 
post-effective amendment filed for other purposes. The Commission 
attributed 35 of these burden hours per filing to compliance with rule 
482 for both initial registration statements and post-effective 
amendments that are annual updates.\91\ The Commission estimated no 
burden hours associated with rule 482 for additional post-effective 
amendments that are not annual updates. The Commission estimated that, 
on an annual basis, 59 initial registration

[[Page 57774]]

statements will be filed on Form N-6 and 500 post-effective amendments 
will be filed on Form N-6, 200 as annual updates and 300 as additional 
post-effective amendments.\92\ Thus, the burden hours attributable to 
rule 482 transferred from Form N-6 to the new rule 482 collection of 
information amounted to 9,065 ((35 hours x 59 filings) + (35 hours x 
200 filings)). The total hour burden that remains allocated to Form N-6 
for all purposes unassociated with rule 482 is 61,135 ((765 hours x 59 
filings) + (65 hours x 200 filings) + (10 hours x 300 filings)) hours.
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    \91\ See discussion in note 89, supra.
    \92\ Based on its analysis of data from the EDGAR filing system 
from 2000-2001, the Commission estimated that there are 
approximately 200 variable life insurance policies, with respect to 
which at least one post-effective amendment must be filed per year. 
In addition, the Commission estimated, also based on EDGAR filing 
data, that 300 additional post-effective amendments are filed for 
these variable life insurance policies each year, generally to make 
non-material changes to their registration statements.
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    Except for the transfer of PRA burden from Form N-6 to the new 
collection of information for rule 482, the Commission estimates no 
effect on the remaining PRA burden for Form N-6 resulting from the 
amendments. The change in PRA burden resulting from the amendments is 
accounted for under the new rule 482 PRA collection of information.

C. Change in Burden Attributable to Amendments

    The information required by the amendments to the advertising rules 
is primarily for the use and benefit of investors. The Commission is 
concerned that investors receive information in advertisements that is 
accurate, balanced, timely, not misleading, and otherwise appropriate 
and helpful in making investment decisions. The additional information 
that is required to be disclosed to investors pursuant to the 
collection of information provisions of the rules affected by the 
amendments, addresses these concerns regarding investor protection.
1. Rule 34b-1
    Rule 34b-1, as amended, contains collection of information 
requirements. The rule applies to supplemental sales literature, i.e., 
sales literature that is preceded or accompanied by the statutory 
prospectus, and requires the inclusion of standardized performance data 
in sales literature that includes performance data. Compliance with 
rule 34b-1 is mandatory for every registered investment company that 
issues supplemental sales literature. Responses to the disclosure 
requirements will not be kept confidential.
    We estimated that approximately 37,000 responses are filed annually 
pursuant to rule 34b-1, and the burden per response is 2.9 hours. The 
amendments change rule 34b-1 to add language to clarify the 
Commission's present interpretation of its rules, namely, that 
compliance with rule 34b-1 does not relieve the fund, underwriter, or 
dealer of any obligations with respect to the sales literature under 
the antifraud provisions of the federal securities laws. This added 
language merely confirms the present state of the law and imposes no 
additional burden hours. In addition, the amendments to rule 34b-1 make 
the newly adopted changes in the narrative disclosure and presentation 
requirements under rule 482 applicable to supplemental sales 
literature, but these narrative disclosure and presentation 
requirements also will impose no additional burden for purposes of rule 
34b-1.\93\
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    \93\ The secondary effect on the burden attributable to rule 
34b-1 due to the amendments to rule 482 is estimated to be 
negligible. Both before and after the amendments, rule 34b-1 
requires any performance data included in supplemental sales 
literature to be accompanied by performance data computed using the 
standardized formulas for advertising performance under rule 482. We 
estimate that the changes in types of disclosure and presentation 
that would be required by the amendments to rule 482 would not 
affect the amount of review necessary for funds to ensure compliance 
with rule 34b-1. Therefore, all changes in burden associated with 
the amendments are accounted for under the category associated with 
the principal rule generating the burden, i.e., the new rule 482 
collection of information.
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2. Rule 482
    Rule 482, as amended, contains collection of information 
requirements in that it permits a fund to advertise information subject 
to certain disclosure requirements. Compliance with rule 482 is 
mandatory for every fund that issues rule 482 advertisements. Responses 
to the disclosure requirements will not be kept confidential.
    The Commission currently estimates that 41,484 responses are filed 
annually by 5,025 funds pursuant to rule 482. The burden associated 
with rule 482 was previously included in the collections of information 
for the investment company registration statement forms, but at the 
time of the Proposing Release the Commission transferred this PRA 
burden to a new rule 482 collection of information. The Commission then 
adjusted this amount to account for the estimated savings of 6,890 
burden hours associated with the proposed amendments to arrive at a 
total annual burden for rule 482 of 218,125.\94\
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    \94\ The Commission calculated this adjustment at the proposing 
stage by estimating a burden hour annual increase per investment 
company of 0.727 hours and a burden hour annual decrease per 
investment company of 1.96, and then multiplying these figures by 
the then current number of investment companies (5,587) to arrive at 
an estimated net decrease of approximately 6,890 total annual burden 
hours (0.727 x 5,587-1.96 x 5,587 = -6,889). The Commission then 
subtracted this estimated annual net decrease from the rule 482 
burden hours that had been transferred from the registration forms, 
yielding the total annual rule 482 burden of 218,125 (225,015 hours 
transferred--6,890 decrease = 218,125), which was used in the 
Proposing Release.
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    The Commission's per-investment-company burden estimates calculated 
at the time of the Proposing Release remain unchanged.\95\ However, the 
Commission is adjusting the total annual burden hours associated with 
rule 482 to reflect a decrease in the number of investment companies 
from 5,587 to the current number of 5,025. The Commission estimates an 
increase of 3,653 (0.727 hours per fund x 5,025 funds) annual burden 
hours will be required to comply with the amendments as adopted, as a 
result of one-time switchover cost of 10,959 burden hours amortized 
over a three-year period. The Commission also estimates a decrease of 
9,849 annual burden hours (1.96 hours per fund x 5,025 funds) resulting 
from the amendments as adopted due to the simplification and 
clarification of rule 482, including the removal of the ``substance of 
which'' requirement. The net result would be an annual decrease of 
approximately 6,196 (3,653 hours increase - 9,849 hours decrease) 
hours.\96\ The current estimate of the total annual burden for rule 
482, as amended, is 218,819.\97\
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    \95\ The estimates of changes in the burden hours per investment 
company attributable to rule 482 are based on a survey of 
information conducted by the Commission staff of members of the 
mutual fund and variable insurance products industry at the time of 
the Proposing Release. The Commission estimates no change in these 
per-investment-company burden rates due to changes to the amendments 
between the proposing stage and this adoption.
    \96\ This estimated net decrease of 6,196 hours compares to an 
estimated net decrease of 6,890 in the Proposing Release. The 
difference of 694 hours is a result of the change in the number of 
investment companies since the time of the Proposing Release.
    \97\ 218,125 total hours (Proposing Release estimate) + 694 
hours (lower net decrease) as explained in note , supra.
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VI. Final Regulatory Flexibility Analysis

    This Final Regulatory Flexibility Analysis (``Analysis'') has been 
prepared in accordance with 5 U.S.C. 604, and relates to the 
Commission's

[[Page 57775]]

rule and form amendments under the Securities Act and the Investment 
Company Act to provide investment companies with the ability to 
disclose more timely information in advertisements and to reinforce the 
antifraud protections that apply to investment company advertisements. 
The amendments implement a provision of NSMIA \98\ by eliminating the 
requirement in rule 482 under the Securities Act that investment 
company advertisements contain only information the ``substance of 
which'' is included in the statutory prospectus. The amendments also 
require enhanced disclosure in investment company advertisements and 
are designed to encourage advertisements that convey balanced 
information to prospective investors, particularly with respect to past 
performance. The Commission is also rescinding the provisions in rule 
134 under the Securities Act that apply to investment companies.
---------------------------------------------------------------------------

    \98\ National Securities Markets Improvement Act of 1996, Pub. 
L. No. 104-290, 110 Stat. 3416, 3428, Section 204.
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    The Commission prepared an Initial Regulatory Flexibility Analysis 
(``IRFA'') in accordance with 5 U.S.C. 603. The Proposing Release 
included the IRFA and solicited comments on it. The Commission received 
one comment specifically addressing the IRFA.

A. Reasons for and Objectives of Amendments

    The Commission amended the advertising regulations described above 
to achieve two separate objectives. First, the Commission is 
simplifying and clarifying the rules governing fund advertising. 
Specifically, the amendments remove the ``substance of which'' 
requirement of rule 482 and rescind the provisions of rule 134 that 
apply to investment companies, following Congress' directive in NSMIA 
to adopt rules or regulations allowing funds the use of a section 10(b) 
prospectus that may include information the substance of which is not 
included in the statutory prospectus.\99\ We are also adopting 
technical amendments to reorganize and clarify the language of rule 
482. These simplifying and clarifying amendments will aid funds and 
others in understanding and complying with the advertising rules, 
making it easier and cheaper for funds to advertise.
---------------------------------------------------------------------------

    \99\ Id.
---------------------------------------------------------------------------

    Second, the Commission is enhancing the disclosure required in rule 
482 advertising. Specifically, we are requiring rule 482 advertisements 
to: (i) Highlight the availability of certain additional information, 
such as that regarding objectives, risks, charges, and expenses, as 
well as updated monthly performance figures; (ii) provide an amended 
legend; and (iii) present certain required disclosure with prominence 
equal to the major portion of the advertisement. We are adopting these 
amendments because of our concern about fund performance advertising 
that could create unrealistic investor expectations or even mislead 
potential investors. The enhanced disclosure requirements will help to 
ensure that investors find advertising clear, easy to use, and 
balanced, and that investors are made aware of important and timely 
information necessary to make informed investment decisions.

B. Significant Issues Raised by Public Comment

    The Commission requested comment with respect to the IRFA prepared 
and published with the Proposing Release. Two commenters indicated that 
the cost of complying with the proposed requirement that updated 
information be made available through a toll-free or collect telephone 
number would be particularly burdensome for smaller fund complexes, 
stating that some smaller complexes do not already have automated voice 
response systems. The commenters cited costs of buying and maintaining 
an automated telephone system or dedicating employees to provide the 
required information. One of these commenters, the only commenter who 
specifically addressed the IRFA, also stated that the IRFA likely 
underestimated the costs that small fund complexes would incur from 
having to satisfy the requirement that updated monthly information be 
provided by a toll-free or collect telephone number.\100\ One commenter 
indicated that making updated monthly performance data available in the 
manner contemplated by the proposal would be affordable for all funds, 
regardless of size.
---------------------------------------------------------------------------

    \100\ The commenter stated that the only costs that the IRFA 
discussed for small entities were those of actual production and 
review of advertising. However, the IRFA also refers to other one-
time switchover costs that would result from the rule and recognizes 
that these costs may have a relatively greater effect on small 
entities. The IRFA states that among these costs are those of making 
available updated monthly performance data by a toll-free telephone 
number. Proposing Release, supra note , 67 FR at 36731.
---------------------------------------------------------------------------

    None of the commenters provided additional data or figures to 
quantify this cost.\101\ The commenters did not indicate either the 
number of small funds that would need to set up a telephone system 
(versus those that already have such a system in place that could be 
adapted to meet the proposed requirements) or how much small funds may 
have to pay to establish and maintain such systems.
---------------------------------------------------------------------------

    \101\ One commenter estimated the cost of implementing an 
automatic voice response system for fund performance at $500,000. 
Another commenter cited this estimate and stated that it is for 
hardware and software requirements only and does not include 
personnel expenses. The commenter also stated that expenses for 
companies that do not presently have automated telephone systems 
would likely be several times higher than the estimate provided. 
Neither of these commenters specifically addressed the issue of 
costs incurred by small entities. Both were focusing on the costs of 
a system that insurance companies would use to provide information 
about funds underlying their variable insurance products.
---------------------------------------------------------------------------

C. Small Entities Subject to the Rule

    For purposes of the Regulatory Flexibility Act, an investment 
company is a small entity if it, together with other investment 
companies in the same group of related investment companies, has net 
assets of $50 million or less as of the end of its most recent fiscal 
year.\102\ Approximately 237 out of 5025 investment companies meet this 
definition.\103\
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    \102\ 17 CFR 270.0-10.
    \103\ This estimate is based on figures compiled by the 
Commission staff regarding investment companies registered on Form 
N-1A, N-2, N-3, N-4, and N-6. In determining whether an insurance 
company separate account is a small entity for purposes of the 
Regulatory Flexibility Act, the assets of insurance company separate 
accounts are aggregated with the assets of their sponsoring 
insurance companies. 17 CFR 270.0-10(b). Currently, no insurance 
company separate account filing on Form N-3, Form N-4, or Form N-6 
qualifies as a small entity.
---------------------------------------------------------------------------

    The Commission estimates, based on the staff's discussions with 
members of the fund industry, that approximately two-thirds of small 
entity funds do not advertise and, thus, do not incur any burdens or 
costs associated with rule 482. For small entity funds that do 
advertise, the Commission estimates an internal hour burden of 
approximately 80 hours per small entity fund. This represents 
approximately 6,320 (80 hours x 79 small entities) hours, or $235,483 
(6,320 hours x $37.26 wage rate) in internal costs, for all small 
entities. The Commission estimates that the external cost burden 
associated with rule 482 for small entities, as with other funds, is 
negligible. To the extent small entities currently advertise, the 
burden and costs may affect them to a greater extent because small 
entities are unable to take advantage of economies of scale available 
to larger fund complexes.\104\
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    \104\ We note, however, that to the extent that the amendments 
reduce the regulatory burden of advertising, small entities may be 
encouraged to increase their advertising activity.

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[[Page 57776]]

D. Reporting, Recordkeeping, and Other Compliance Requirements

    The amendments will modify the disclosure requirements applicable 
to rule 482 advertisements. Advertisements will have to contain an 
amended legend, an explanation about where information about investment 
objectives, risks, and charges and expenses can be found, and, if 
performance figures are used, information about where updated 
performance information can be found, unless the advertisement includes 
total return quotations current to the most recent month ended seven 
business days prior to the date of use. In addition, the required 
disclosure will generally have to be given as much prominence in the 
advertisement as the major portion of the advertisement. The amendments 
will also rescind the requirements of rule 134 as they apply to funds, 
but we expect that this will not result in any appreciable change in 
the disclosure that funds make in their advertisements because present 
rule 134 advertisements will generally become rule 482 advertisements.
    The Commission has considered the potential effect that the 
amendments will have on the preparation of advertisements. Without 
regard to the size of the entity, we estimate that the amendments will 
result in a net decrease of 1.23 hours, or $45.83 (1.23 hours x $37.26 
wage rate), per investment company per year in internal costs and a net 
increase of $805.67 per investment company per year in external 
costs.\105\
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    \105\ These figures are based on the Commission staff's 
discussions with several fund complexes. With regard to internal 
costs, they represent the net of the amortized one-time switchover 
cost of .727 hours per fund per year and the decrease in burden 
associated with rule 482, for purposes of the Paperwork Reduction 
Act, of 1.96 hours per fund per year. With regard to external costs, 
the $805.67 figure represents one-time switchover costs amortized 
over three years.
    The estimate provided here differs from that provided in the 
Initial Regulatory Flexibility Analysis in the Proposing Release 
because of a change in the number of small entities and the wage 
rate used. See supra note 76. Although the Commission 
modified the proposed amendments, these modifications did not affect 
our estimate of the burden on small entities.
---------------------------------------------------------------------------

    The Commission estimates some one-time switchover costs and burdens 
that will be imposed on all funds, but which may have a relatively 
greater impact on smaller firms. These costs include the costs of 
altering existing advertisements, including those now covered by rule 
134, to comply with the new provisions of rule 482; generating 
performance figures on a monthly basis; and making available the 
updated monthly performance data through a toll-free or collect 
telephone number or a Web site when required. The costs of making 
updated performance data available could include expenses for computer 
time, legal and accounting fees, information technology staff, and 
additional computer and telephone equipment. However, we believe, based 
on consultation with a number of fund complexes, that many funds that 
presently advertise already provide performance information on a basis 
at least as current as monthly through these means and, therefore, 
expect the marginal cost increases for most funds to be minimal.
    The Commission anticipates that the amendments will also provide 
ongoing reductions in the compliance burden for all funds by clarifying 
the language of rule 482, eliminating the ``substance of which'' 
requirement, and simplifying fund advertising requirements through 
rescission of rule 134 for fund advertising. These changes will effect 
savings primarily by reducing the time and money funds now spend on 
legal review and amending their prospectuses and SAIs to comply with 
the ``substance of which'' requirement in current rule 482.

E. Agency Action To Minimize Effect on Small Entities

    The Regulatory Flexibility Act directs us to consider significant 
alternatives that would accomplish our stated objective, while 
minimizing any significant adverse impact on small entities. In 
connection with the amendments, the Commission considered the following 
alternatives: (a) The establishment of differing compliance or 
reporting requirements or timetables that take into account the 
resources available to small entities; (b) the clarification, 
consolidation, or simplification of compliance and reporting 
requirements under the amendments for small entities; (c) the use of 
performance rather than design standards; and (d) an exemption from 
coverage of the amendments, or any part thereof, for small entities.
    The Commission believes at the present time that special compliance 
or reporting requirements for small entities, or an exemption from 
coverage for small entities, would not be appropriate or consistent 
with investor protection. The disclosure amendments will provide 
shareholders and the public with more balanced information about a 
fund's performance. Different disclosure requirements for small 
entities, such as reducing the level of disclosure that small entities 
would have to provide shareholders in advertising, may create the risk 
that shareholders would not receive balanced information about a fund's 
performance or would receive confusing, false, or misleading 
information. In addition, applying different standards for advertising 
by small and large funds might impede investors' ability to adequately 
compare funds. We believe it is important for the enhanced advertising 
disclosure required by the amendments to be provided to investors by 
all funds, not just funds that are not considered small entities.
    The Commission also notes that current advertising requirements, 
and its disclosure rules in general, do not distinguish between small 
entities and other funds. In addition, we believe that it would be 
inappropriate to impose a different timetable on small entities for 
complying with the requirements.\106\ Further clarification, 
consolidation, or simplification of the proposals for funds that are 
small entities may be inconsistent with investor protection. We do not 
consider using performance rather than design standards to be 
consistent with our statutory mandate of investor protection in the 
present context.
---------------------------------------------------------------------------

    \106\ The Commission has expanded the proposed compliance period 
from 90 days from the effective date to the end of the second full 
calendar quarter after adoption. This revision should lessen any 
burden for small entities, as well as other funds.
---------------------------------------------------------------------------

    We note, however, that we have modified our proposal in several 
ways that will reduce burdens on funds, including small funds, and will 
address the concerns raised by the commenters referenced above. As 
adopted, the amendments will not require funds to provide updated 
month-end performance data by toll-free or collect telephone. Rather, 
funds will be permitted to choose whether to make the month-end 
information available by telephone or on the fund's Web site. In 
general, commenters indicated that making the information available 
over a fund Web site would be less burdensome than using a telephone 
system. In addition, we have modified the proposal to provide that if 
the advertisement includes total return quotations current to the most 
recent month ended seven business days prior to the date of use, the 
fund is not required to make such data available by telephone or on its 
Web site. We expect that both of these revisions to the proposed 
amendments will reduce the cost burden for all funds, including small 
entities.

VII. Statutory Authority

    The Commission is adopting amendments to rule 134 pursuant to

[[Page 57777]]

authority set forth in sections 2(a)(10) and 19(a) of the Securities 
Act [15 U.S.C. 77b(a)(10) and 77s(a)]. The Commission is adopting 
amendments to rule 156 pursuant to authority set forth in section 19(a) 
of the Securities Act [15 U.S.C. 77s(a)] and sections 10(b) and 23(a) 
of the Exchange Act [15 U.S.C. 78j(b) and 78w(a)]. The Commission is 
adopting amendments to rule 482 pursuant to authority set forth in 
sections 5, 10(b), 19(a), and 28 of the Securities Act [15 U.S.C. 77e, 
77j(b), 77s(a), and 77z-3] and sections 24(g) and 38(a) of the 
Investment Company Act [15 U.S.C. 80a-24(g) and 80a-37(a)]. The 
Commission is adopting amendments to rule 34b-1 pursuant to authority 
set forth in sections 34(b) and 38(a) of the Investment Company Act [15 
U.S.C. 80a-33(b) and 80a-37(a)]. The Commission is adopting amendments 
to Form N-1A, Form N-3, Form N-4, and Form N-6 pursuant to authority 
set forth in sections 5, 6, 7, 10, and 19(a) of the Securities Act [15 
U.S.C. 77e, 77f, 77g, 77j, and 77s(a)] and sections 8, 24(a), 30, and 
38 of the Investment Company Act [15 U.S.C. 80a-8, 80a-24(a), 80a-29, 
and 80a-37].

List of Subjects

17 CFR Part 230

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

17 CFR Part 239

    Reporting and recordkeeping requirements, Securities.

17 CFR Parts 270 and 274

    Investment companies, Reporting and recordkeeping requirements, 
Securities.

Text of Rule and Form Amendments

0
For the reasons set out in the preamble, the Commission amends Title 
17, Chapter II, of the Code of Federal Regulations as follows.

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

0
1. The general authority citation for Part 230 is revised to read as 
follows:

    Authority: 15 U.S.C. 77b, 77c, 77d, 77f, 77g, 77h, 77j, 77r, 
77s, 77z-3, 77sss, 78c, 78d, 78j, 78l, 78m, 78n, 78o, 78t, 78w, 
78ll(d), 78mm, 79t, 80a-8, 80a-24, 80a-28, 80a-29, 80a-30, and 80a-
37, unless otherwise noted.
* * * * *

0
2. Section 230.134 is amended by:
0
a. Removing the authority citation following Sec.  230.134;
0
b. Removing paragraphs (a)(3)(iii) and (a)(13);
0
c. Redesignating paragraphs (a)(3)(iv) and (a)(14) as paragraphs 
(a)(3)(iii) and (a)(13), respectively;
0
d. In newly redesignated paragraph (a)(13)(ii), revising the reference 
``(a)(14)(i)'' to read ``(a)(13)(i)''; and
0
e. Revising paragraph (e) to read as follows:


Sec.  230.134  Communications not deemed a prospectus.

* * * * *
    (e) This Sec.  230.134 does not apply to a notice, circular, 
advertisement, letter, or other communication relating to an investment 
company registered under the Investment Company Act of 1940 (15 U.S.C. 
80a-1 et seq.) or a business development company as defined in section 
2(a)(48) of the Investment Company Act (15 U.S.C. 80a-2(a)(48)).

0
3. Section 230.156 is amended by:
0
a. Removing the authority citation following Sec.  230.156; and
0
b. Revising paragraph (b)(2)(i) to read as follows:


Sec.  230.156  Investment company sales literature.

* * * * *
    (b) * * *
    (2) * * *
    (i) Portrayals of past income, gain, or growth of assets convey an 
impression of the net investment results achieved by an actual or 
hypothetical investment which would not be justified under the 
circumstances, including portrayals that omit explanations, 
qualifications, limitations, or other statements necessary or 
appropriate to make the portrayals not misleading; and
* * * * *

0
4. Section 230.482 is revised to read as follows:


Sec.  230.482  Advertising by an investment company as satisfying 
requirements of section 10.

    (a) Scope of rule. This section applies to an advertisement or 
other sales material (advertisement) with respect to securities of an 
investment company registered under the Investment Company Act of 1940 
(15 U.S.C. 80a-1 et seq.) (1940 Act), or a business development 
company, that is selling or proposing to sell its securities pursuant 
to a registration statement that has been filed under the Act. This 
section does not apply to an advertisement that is excepted from the 
definition of prospectus by section 2(a)(10) of the Act (15 U.S.C. 
77b(a)(10)), or a Profile under Sec.  230.498. An advertisement that 
complies with this section, which may include information the substance 
of which is not included in the prospectus specified in section 10(a) 
of the Act (15 U.S.C 77j(a)), will be deemed to be a prospectus under 
section 10(b) of the Act (15 U.S.C. 77j(b)) for the purpose of section 
5(b)(1) of the Act (15 U.S.C. 77e(b)(1)).


    Note to paragraph (a): The fact that an advertisement complies 
with this section does not relieve the investment company, 
underwriter, or dealer of any obligations with respect to the 
advertisement under the antifraud provisions of the federal 
securities laws. For guidance about factors to be weighed in 
determining whether statements, representations, illustrations, and 
descriptions contained in investment company advertisements are 
misleading, see Sec.  230.156. In addition, an advertisement that 
complies with this section is subject to the legibility requirements 
of Sec.  230.420.


    (b) Required disclosure. This paragraph describes information that 
is required to be included in an advertisement in order to comply with 
this section.
    (1) Availability of additional information. An advertisement must 
include a statement that:
    (i) Advises an investor to consider the investment objectives, 
risks, and charges and expenses of the investment company carefully 
before investing; explains that the prospectus contains this and other 
information about the investment company; identifies a source from 
which an investor may obtain a prospectus; and states that the 
prospectus should be read carefully before investing; or
    (ii) If used with a Profile, advises an investor to consider the 
investment objectives, risks, and charges and expenses of the 
investment company carefully before investing; explains that the 
accompanying Profile contains this and other information about the 
investment company; describes the procedures for investing in the 
investment company; and indicates the availability of the investment 
company's prospectus.
    (2) Advertisements used prior to effectiveness of registration 
statement. An advertisement that is used prior to effectiveness of the 
investment company's registration statement or the determination of the 
public offering price (in the case of a registration statement that 
becomes effective omitting information from the prospectus contained in 
the registration statement in reliance upon Sec.  230.430A) must 
include the ``Subject to Completion'' legend required by Sec.  
230.481(b)(2).
    (3) Advertisements including performance data. An advertisement 
that includes performance data of an open-end management investment 
company or a separate account

[[Page 57778]]

registered under the 1940 Act as a unit investment trust offering 
variable annuity contracts (trust account) must include the following
    (i) A legend disclosing that the performance data quoted represents 
past performance; that past performance does not guarantee future 
results; that the investment return and principal value of an 
investment will fluctuate so that an investor's shares, when redeemed, 
may be worth more or less than their original cost; and that current 
performance may be lower or higher than the performance data quoted. 
The legend should also identify either a toll-free (or collect) 
telephone number or a Web site where an investor may obtain performance 
data current to the most recent month-end unless the advertisement 
includes total return quotations current to the most recent month ended 
seven business days prior to the date of use. An advertisement for a 
money market fund may omit the disclosure about principal value 
fluctuation; and


    Note to paragraph (b)(3)(i): The date of use refers to the date 
or dates when an advertisement is used by investors, not the date on 
which an advertisement is published or submitted for publication. 
The date of use refers to the entire period of use by investors and 
not simply the first date on which an advertisement is used.

    (ii) If a sales load or any other nonrecurring fee is charged, the 
maximum amount of the load or fee, and if the sales load or fee is not 
reflected, a statement that the performance data does not reflect the 
deduction of the sales load or fee, and that, if reflected, the load or 
fee would reduce the performance quoted.
    (4) Money market funds. An advertisement for an investment company 
that holds itself out to be a money market fund must include the 
following statement:

    An investment in the Fund is not insured or guaranteed by the 
Federal Deposit Insurance Corporation or any other government 
agency. Although the Fund seeks to preserve the value of your 
investment at $1.00 per share, it is possible to lose money by 
investing in the Fund.


A money market fund that does not hold itself out as maintaining a 
stable net asset value may omit the second sentence of this statement.
    (5) Presentation. In a print advertisement, the statements required 
by paragraphs (b)(1) through (b)(4) of this section must be presented 
in a type size at least as large as and of a style different from, but 
at least as prominent as, that used in the major portion of the 
advertisement, provided that when performance data is presented in a 
type size smaller than that of the major portion of the advertisement, 
the statements required by paragraph (b)(3) of this section may appear 
in a type size no smaller than that of the performance data. If an 
advertisement is delivered through an electronic medium, the legibility 
requirements for the statements required by paragraph (b)(1) through 
(b)(4) of this section relating to type size and style may be satisfied 
by presenting the statements in any manner reasonably calculated to 
draw investor attention to them. In a radio or television 
advertisement, the statements required by paragraph (b)(1) through 
(b)(4) of this section must be given emphasis equal to that used in the 
major portion of the advertisement. The statements required by 
paragraph (b)(3) of this section must be presented in close proximity 
to the performance data, and, in a print advertisement, must be 
presented in the body of the advertisement and not in a footnote.
    (6) Commission legend. An advertisement that complies with this 
section need not contain the Commission legend required by Sec.  
230.481(b)(1).
    (c) Use of applications. An advertisement that complies with this 
section may not contain or be accompanied by any application by which a 
prospective investor may invest in the investment company, except that:
    (1) Variable annuity and variable life insurance contracts. A 
prospectus meeting the requirements of section 10(a) of the Act (15 
U.S.C. 77j(a)) by which a unit investment trust offers variable annuity 
or variable life insurance contracts may contain a contract application 
although the prospectus includes, or is accompanied by, information 
about an investment company in which the unit investment trust invests 
that, pursuant to this section, is deemed a prospectus under section 
10(b) of the Act (15 U.S.C. 77j(b)); and
    (2) Profile. An advertisement that complies with this section may 
be used with a Profile that includes, or is accompanied by, an 
application to purchase shares of the investment company as permitted 
under Sec.  230.498.
    (d) Performance data for non-money market funds. In the case of an 
open-end management investment company or a trust account (other than a 
money market fund referred to in paragraph (e) of this section), any 
quotation of the company's performance contained in an advertisement 
shall be limited to quotations of:
    (1) Current yield. A current yield that:
    (i) Is based on the methods of computation prescribed in Form N-1A 
(Sec. Sec.  239.15A and 274.11A of this chapter), N-3 (Sec. Sec.  
239.17a and 274.11b of this chapter), or N-4 (Sec. Sec.  239.17b and 
274.11c of this chapter);
    (ii) Is accompanied by quotations of total return as provided for 
in paragraph (d)(3) of this section;
    (iii) Is set out in no greater prominence than the required 
quotations of total return; and
    (iv) Adjacent to the quotation and with no less prominence than the 
quotation, identifies the length of and the date of the last day in the 
base period used in computing the quotation.
    (2) Tax-equivalent yield. A tax-equivalent yield that:
    (i) Is based on the methods of computation prescribed in Form N-1A 
(Sec. Sec.  239.15A and 274.11A of this chapter), N-3 (Sec. Sec.  
239.17a and 274.11b of this chapter), or N-4 (Sec. Sec.  239.17b and 
274.11c of this chapter);
    (ii) Is accompanied by quotations of yield as provided for in 
paragraph (d)(1) of this section and total return as provided for in 
paragraph (d)(3) of this section;
    (iii) Is set out in no greater prominence than the required 
quotations of yield and total return;
    (iv) Relates to the same base period as the required quotation of 
yield; and
    (v) Adjacent to the quotation and with no less prominence than the 
quotation, identifies the length of and the date of the last day in the 
base period used in computing the quotation.
    (3) Average annual total return. Average annual total return for 
one, five, and ten year periods, except that if the company's 
registration statement under the Act (15 U.S.C. 77a et seq.) has been 
in effect for less than one, five, or ten years, the time period during 
which the registration statement was in effect is substituted for the 
period(s) otherwise prescribed. The quotations must:
    (i) Be based on the methods of computation prescribed in Form N-1A 
(Sec. Sec.  239.15A and 274.11A of this chapter), N-3 (Sec. Sec.  
239.17a and 274.11b of this chapter), or N-4 (Sec. Sec.  239.17b and 
274.11c of this chapter);
    (ii) Be current to the most recent calendar quarter ended prior to 
the submission of the advertisement for publication;
    (iii) Be set out with equal prominence; and
    (iv) Adjacent to the quotation and with no less prominence than the 
quotation, identify the length of and the last day of the one, five, 
and ten year periods.
    (4) After-tax return. For an open-end management investment 
company,

[[Page 57779]]

average annual total return (after taxes on distributions) and average 
annual total return (after taxes on distributions and redemption) for 
one, five, and ten year periods, except that if the company's 
registration statement under the Act (15 U.S.C. 77a et seq.) has been 
in effect for less than one, five, or ten years, the time period during 
which the registration statement was in effect is substituted for the 
period(s) otherwise prescribed. The quotations must:
    (i) Be based on the methods of computation prescribed in Form N-1A 
(Sec. Sec.  239.15A and 274.11A of this chapter);
    (ii) Be current to the most recent calendar quarter ended prior to 
the submission of the advertisement for publication;
    (iii) Be accompanied by quotations of total return as provided for 
in paragraph (d)(3) of this section;
    (iv) Include both average annual total return (after taxes on 
distributions) and average annual total return (after taxes on 
distributions and redemption);
    (v) Be set out with equal prominence and be set out in no greater 
prominence than the required quotations of total return; and
    (vi) Adjacent to the quotations and with no less prominence than 
the quotations, identify the length of and the last day of the one, 
five, and ten year periods.
    (5) Other performance measures. Any other historical measure of 
company performance (not subject to any prescribed method of 
computation) if such measurement:
    (i) Reflects all elements of return;
    (ii) Is accompanied by quotations of total return as provided for 
in paragraph (d)(3) of this section;
    (iii) In the case of any measure of performance adjusted to reflect 
the effect of taxes, is accompanied by quotations of total return as 
provided for in paragraph (d)(4) of this section;
    (iv) Is set out in no greater prominence than the required 
quotations of total return; and
    (v) Adjacent to the measurement and with no less prominence than 
the measurement, identifies the length of and the last day of the 
period for which performance is measured.
    (e) Performance data for money market funds. In the case of a money 
market fund:
    (1) Yield. Any quotation of the money market fund's yield in an 
advertisement shall be based on the methods of computation prescribed 
in Form N-1A (Sec. Sec.  239.15A and 274.11A of this chapter), N-3 
(Sec. Sec.  239.17a and 274.11b of this chapter), or N-4 (Sec. Sec.  
239.17b and 274.11c of this chapter) and may include:
    (i) A quotation of current yield that, adjacent to the quotation 
and with no less prominence than the quotation, identifies the length 
of and the date of the last day in the base period used in computing 
that quotation;
    (ii) A quotation of effective yield if it appears in the same 
advertisement as a quotation of current yield and each quotation 
relates to an identical base period and is presented with equal 
prominence; or
    (iii) A quotation or quotations of tax-equivalent yield or tax-
equivalent effective yield if it appears in the same advertisement as a 
quotation of current yield and each quotation relates to the same base 
period as the quotation of current yield, is presented with equal 
prominence, and states the income tax rate used in the calculation.
    (2) Total return. Accompany any quotation of the money market 
fund's total return in an advertisement with a quotation of the money 
market fund's current yield under paragraph (e)(1)(i) of this section. 
Place the quotations of total return and current yield next to each 
other, in the same size print, and if there is a material difference 
between the quoted total return and the quoted current yield, include a 
statement that the yield quotation more closely reflects the current 
earnings of the money market fund than the total return quotation.
    (f) Advertisements that make tax representations. An advertisement 
for an open-end management investment company (other than a company 
that is permitted under Sec.  270.35d-1(a)(4) of this chapter to use a 
name suggesting that the company's distributions are exempt from 
federal income tax or from both federal and state income tax) that 
represents or implies that the company is managed to limit or control 
the effect of taxes on company performance must accompany any quotation 
of the company's performance permitted by paragraph (d) of this section 
with quotations of total return as provided for in paragraph (d)(4) of 
this section.
    (g) Timeliness of performance data. All performance data contained 
in any advertisement must be as of the most recent practicable date 
considering the type of investment company and the media through which 
the data will be conveyed, except that any advertisement containing 
total return quotations will be considered to have complied with this 
paragraph provided that:
    (1)(i) The total return quotations are current to the most recent 
calendar quarter ended prior to the submission of the advertisement for 
publication; and
    (ii) Total return quotations current to the most recent month ended 
seven business days prior to the date of use are provided at the toll-
free (or collect) telephone number or Web site identified pursuant to 
paragraph (b)(3)(i) of this section; or
    (2) The total return quotations are current to the most recent 
month ended seven business days prior to the date of use of the 
advertisement.


    Note to paragraph (g): The date of use refers to the date or 
dates when an advertisement is used by investors, not the date on 
which an advertisement is published or submitted for publication. 
The date of use refers to the entire period of use by investors and 
not simply the first date on which an advertisement is used.


    (h) Filing. An advertisement that complies with this section need 
not be filed as part of the registration statement filed under the Act.

    Note to paragraph (h): These advertisements, unless filed with 
NASD Regulation, Inc., are required to be filed in accordance with 
the requirements of Sec.  230.497.


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

0
5. 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-24, 80a-26, 80a-29, 80a-30, and 
80a-37, unless otherwise noted.
* * * * *

PART 270--RULES AND REGULATIONS, INVESTMENT COMPANY ACT OF 1940

0
6. The authority citation for part 270 continues to read in part as 
follows:

    Authority: 15 U.S.C. 80a-1 et seq., 80a-34(d), 80a-37, and 80a-
39, unless otherwise noted.
* * * * *

0
7. Section 270.34b-1 is amended by:
0
a. Adding a note following the introductory text of Sec.  270.34b-1;
0
b. Revising paragraph (a);
0
c. Revising paragraph (b)(1)(i);
0
d. Revising the reference ``(d)(1)(i) of Sec.  230.482'' in paragraph 
(b)(1)(ii)(A) to read ``(e)(1)(i) of Sec.  230.482'';
0
e. Revising the reference ``Sec.  230.482(d)(1)(iii)'' in paragraph 
(b)(1)(ii)(B) to read ``Sec.  230.482(e)(1)(iii)'';
0
f. Revising the reference ``(d)(1)(i) of Sec.  230.482'' in the first 
sentence of paragraph (b)(1)(ii)(C) to read ``(e)(1)(i) of Sec.  
230.482'';

[[Page 57780]]

0
g. Revising the reference ``(e)(3) of Sec.  230.482'' in paragraph 
(b)(1)(iii)(A) to read ``(d)(3) of Sec.  230.482'';
0
h. Revising the reference ``(e)(4) of Sec.  230.482'' in paragraph 
(b)(1)(iii)(B) to read ``(d)(4) of Sec.  230.482'';
0
i. Revising the reference ``(e)(4) of Sec.  230.482'' in paragraph 
(b)(1)(iii)(C) to read ``(d)(4) of Sec.  230.482'';
0
j. Revising the reference ``(e)(1) of Sec.  230.482'' in paragraph 
(b)(1)(iii)(D) to read ``(d)(1) of Sec.  230.482'';
0
k. Revising the references ``(e)(2)'' and ``(e)(1) of Sec.  230.482'' 
in paragraph (b)(1)(iii)(E) to read ``(d)(2)'' and ``(d)(1) of Sec.  
230.482'', respectively;
0
l. Revising the reference ``paragraph (f) of Sec.  230.482'' in 
paragraph (b)(2) to read ``paragraph (g) of Sec.  230.482''; and
0
m. Revising the reference ``(e)(3)(ii), (e)(4)(ii)'' in paragraph 
(b)(3) to read ``(d)(3)(ii), (d)(4)(ii)'.
    The addition and revisions read as follows:


Sec.  270.34b-1  Sales literature deemed to be misleading.

* * * * *

    Note to introductory text of Sec.  270.34b-1: The fact that the 
sales literature includes the information specified in paragraphs 
(a) and (b) of this section does not relieve the investment company, 
underwriter, or dealer of any obligations with respect to the sales 
literature under the antifraud provisions of the federal securities 
laws. For guidance about factors to be weighed in determining 
whether statements, representations, illustrations, and descriptions 
contained in investment company sales literature are misleading, see 
Sec.  230.156 of this chapter.


    (a) Sales literature for a money market fund shall contain the 
information required by paragraph (b)(4) of Sec.  230.482 of this 
chapter, presented in the manner required by paragraph (b)(5) of Sec.  
230.482 of this chapter.
    (b)(1) * * *
    (i) In any sales literature that contains performance data for an 
investment company, include the disclosure required by paragraph (b)(3) 
of Sec.  230.482 of this chapter, presented in the manner required by 
paragraph (b)(5) of Sec.  230.482 of this chapter.
* * * * *

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

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

0
8. The authority citation for Part 274 continues to read in part as 
follows:

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 78c(b), 78l, 78m, 
78n, 78o(d), 80a-8, 80a-24, 80a-26, and 80a-29, unless otherwise 
noted.

    Note: The text of Forms N-1A, N-3, N-4, and N-6 does not, and 
these amendments will not, appear in the Code of Federal 
Regulations.

    9. Item 21 of Form N-1A (referenced in Sec. Sec.  239.15A and 
274.11A) is amended by:
    a. Revising the introductory text of paragraphs (a) and (b); and
    b. Removing paragraphs (a)(5) and (b)(7), to read as follows:

Form N-1A

* * * * *

Item 21. Calculation of Performance Data

    (a) Money Market Funds. Yield quotation(s) for a Money Market Fund 
included in the prospectus should be calculated according to paragraphs 
(a)(1)-(4).
* * * * *
    (b) Other Funds. Performance information included in the prospectus 
should be calculated according to paragraphs (b)(1)-(6).
* * * * *
    10. General Instruction F of Form N-3 (referenced in Sec. Sec.  
239.17a and 274.11b) is amended by:
    a. Removing General Instruction F.2; and
    b. Redesignating General Instruction F.1 as General Instruction F.
    11. Item 4 of Form N-3 (referenced in Sec. Sec.  239.17a and 
274.11b) is amended by:
    a. Removing Item 4(c); and
    b. Redesignating Item 4(d) as Item 4(c).
    12. Item 25 of Form N-3 (referenced in Sec. Sec.  239.17a and 
274.11b) is amended by:
    a. Removing Instruction 5 to paragraph (a); and
    b. Revising paragraphs (a) and (b), and Instruction 6 to paragraph 
(b)(i), to read as follows:

Form N-3

* * * * *

Item 25. Calculation of Performance Data

    (a) Money Market Accounts. Yield quotation(s) included in the 
prospectus for an account or sub-account that holds itself out as a 
``money market'' account or sub-account should be calculated according 
to paragraphs (a)(i)-(ii).
    (i) Yield Quotation. Based on the 7 days ended on the date of the 
most recent balance sheet of the Registrant included in the 
registration statement, calculate the yield by determining the net 
change, exclusive of capital changes and income other than investment 
income, in the value of a hypothetical pre-existing account having a 
balance of one accumulation unit of the account or sub-account at the 
beginning of the period, subtracting a hypothetical charge reflecting 
deductions from contractowner accounts, and dividing the difference by 
the value of the account at the beginning of the base period to obtain 
the base period return, and then multiplying the base period return by 
(365/7) with the resulting yield figure carried to at least the nearest 
hundredth of one percent.
    (ii) Effective Yield Quotation. Based on the 7 days ended on the 
date of the most recent balance sheet of the Registrant included in the 
registration statement, calculate the effective yield, carried to at 
least the nearest hundredth of one percent, by determining the net 
change, exclusive of capital changes and income other than investment 
income, in the value of a hypothetical pre-existing account having a 
balance of one accumulation unit of the account or sub-account at the 
beginning of the period, subtracting a hypothetical charge reflecting 
deductions from contractowner accounts, and dividing the difference by 
the value of the account at the beginning of the base period to obtain 
the base period return, and then compounding the base period return by 
adding 1, raising the sum to a power equal to 365 divided by 7, and 
subtracting 1 from the result, according to the following formula:

EFFECTIVE YIELD = [(BASE PERIOD RETURN +1) 365/7] - 1.

    Instructions:
* * * * *
    (b) Other Accounts. Performance information included in the 
prospectus should be calculated according to paragraphs (b)(i)-(iii).
    (i) Average Annual Total Return Quotation. For the 1-, 5-, and 10-
year periods ended on the date of the most recent balance sheet of the 
Registrant included in the registration statement, calculate the 
average annual total return by finding the average annual compounded 
rates of return over the 1-, 5-, and 10-year periods that would equate 
the initial amount invested to the ending redeemable value, according 
to the following formula:

P(1+T)n = ERV

Where:

P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at 
the beginning of the 1-, 5-, or 10-year periods at the end of the 1-, 
5-, or 10-year periods (or fractional portion).


[[Page 57781]]


    Instructions:
* * * * *
    6. Total return information in the prospectus need only be current 
to the end of the Registrant's most recent fiscal year.
    (ii) Yield Quotation. Based on a 30-day (or one month) period ended 
on the date of the most recent balance sheet of the Registrant included 
in the registration statement, calculate yield by dividing the net 
investment income per accumulation unit earned during the period by the 
maximum offering price per unit on the last day of the period, 
according to the following formula:

[GRAPHIC] [TIFF OMITTED] TR06OC03.002

Where:

a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of accumulation units outstanding during 
the period.
d = the maximum offering price per accumulation unit on the last day of 
the period.

    Instructions:
* * * * *
    (iii) Non-Standardized Performance Quotation. A Registrant may 
calculate performance using any other historical measure of performance 
(not subject to any prescribed method of computation) if the 
measurement reflects all elements of return.
* * * * *
    13. Item 28 of Form N-3 (referenced in Sec. Sec.  239.17a and 
274.11b) is amended by:
    a. Adding the word ``and'' after the semicolon at the end of Item 
28(b)(15);
    b. Removing Item 28(b)(16);
    c. Redesignating Item 28(b)(17) as Item 28(b)(16); and
    d. Revising Instruction 1 to Item 28 to read as follows:

Form N-3

* * * * *

Item 28.

* * * * *
    (b) * * *
    (15) copies of any agreements or understandings made in 
consideration for providing the initial capital between or among the 
Registrant, the Insurance Company, underwriter, adviser, or initial 
contractowners and written assurances from the Insurance Company or 
initial contractowners that the purchases were made for investment 
purposes without any present intention of redeeming; and
    (16) copies of any codes of ethics adopted under Rule 17j-1 under 
the 1940 Act [17 CFR 270.17j-1] and currently applicable to the 
Registrant (i.e., the codes of the Registrant and its investment 
advisers and principal underwriters). If there are no codes of ethics 
applicable to the Registrant, state the reason (e.g., the Registrant is 
a Money Market Fund).
    Instructions:
    1. Subject to the Rules regarding incorporation by reference and 
Instruction 2 below, the foregoing exhibits shall be filed as part of 
the Registration Statement. Exhibits numbered 5, 12, 13, and 14 above 
need be filed only as part of a 1933 Act Registration Statement. 
Exhibits shall be lettered or numbered for convenient reference. 
Exhibits incorporated by reference may bear the designation given in a 
previous filing. Where exhibits are incorporated by reference, the 
reference shall be made in the list of exhibits.
* * * * *
    14. General Instruction F of Form N-4 (referenced in Sec. Sec.  
239.17b and 274.11c) is amended by:
    a. Removing General Instruction F.2; and
    b. Redesignating General Instruction F.1 as General Instruction F.
    15. Item 4 of Form N-4 (referenced in Sec. Sec.  239.17b and 
274.11c) is amended by:
    a. Removing Item 4(b); and
    b. Redesignating Item 4(c) as Item 4(b).
    16. Item 21 of Form N-4 (referenced in Sec. Sec.  239.17b and 
274.11c) is amended by:
    a. Removing Instruction 5 to paragraph (a); and
    b. Revising paragraphs (a) and (b), and Instruction 6 to paragraph 
(b)(i), to read as follows:

Form N-4

* * * * *

Item 21. Calculation of Performance Data

    (a) Money Market Funded Sub-Accounts. Yield quotation(s) included 
in the prospectus for an account or sub-account that holds itself out 
as a ``money market'' account or sub-account should be calculated 
according to paragraphs (a)(i)--(ii).
    (i) Yield Quotation. Based on the 7 days ended on the date of the 
most recent balance sheet of the Registrant included in the 
registration statement, calculate the yield by determining the net 
change, exclusive of capital changes and income other than investment 
income, in the value of a hypothetical pre-existing account having a 
balance of one accumulation unit of the account or sub-account at the 
beginning of the period, subtracting a hypothetical charge reflecting 
deductions from contractowner accounts, and dividing the difference by 
the value of the account at the beginning of the base period to obtain 
the base period return, and then multiplying the base period return by 
(365/7) with the resulting yield figure carried to at least the nearest 
hundredth of one percent.
    (ii) Effective Yield Quotation. Based on the 7 days ended on the 
date of the most recent balance sheet of the Registrant included in the 
registration statement, calculate the effective yield, carried to at 
least the nearest hundredth of one percent, by determining the net 
change, exclusive of capital changes and income other than investment 
income, in the value of a hypothetical pre-existing account having a 
balance of one accumulation unit of the account or sub-account at the 
beginning of the period, subtracting a hypothetical charge reflecting 
deductions from contractowner accounts, and dividing the difference by 
the value of the account at the beginning of the base period to obtain 
the base period return, and then compounding the base period return by 
adding 1, raising the sum to a power equal to 365 divided by 7, and 
subtracting 1 from the result, according to the following formula:

EFFECTIVE YIELD = [(BASE PERIOD RETURN +1) 365/7]-1.

    Instructions:
* * * * *
    (b) Other Sub-Accounts. Performance information included in the 
prospectus should be calculated according to paragraphs (b)(i)--(iii).
    (i) Average Annual Total Return Quotation. For the 1-, 5-, and 10-
year periods ended on the date of the most recent balance sheet of the 
Registrant included in the registration statement, calculate the 
average annual total return by finding the average annual compounded 
rates of return over the 1-, 5-, and 10-year periods that would equate 
the initial amount invested to the ending redeemable value, according 
to the following formula:

P(1+T) \n\ = ERV

Where:

P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at 
the beginning of the 1-, 5-, or 10-

[[Page 57782]]

year periods at the end of the 1-, 5-, or 10-year periods (or 
fractional portion).

    Instructions:
* * * * *
    6. Total return information in the prospectus need only be current 
to the end of the Registrant's most recent fiscal year.
    (ii) Yield Quotation. Based on a 30-day (or one month) period ended 
on the date of the most recent balance sheet of the Registrant included 
in the registration statement, calculate yield by dividing the net 
investment income per accumulation unit earned during the period by the 
maximum offering price per unit on the last day of the period, 
according to the following formula:

[GRAPHIC] [TIFF OMITTED] TR06OC03.001

Where:

a = net investment income earned during the period by the portfolio 
company attributable to shares owned by the sub-account.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of accumulation units outstanding during 
the period.
d = the maximum offering price per accumulation unit on the last day of 
the period.

    Instructions:
* * * * *
    (iii) Non-Standardized Performance Quotation. A Registrant may 
calculate performance using any other historical measure of performance 
(not subject to any prescribed method of computation) if the 
measurement reflects all elements of return.
* * * * *
    19. Item 24 of Form N-4 (referenced in Sec. Sec.  239.17b and 
274.11c) is amended by:
    a. Adding the word ``and'' after the semicolon at the end of Item 
24(b)(11);
    b. Removing Item 24(b)(13); and
    c. Revising Instruction 1 to Item 24.
    The revisions read as follows:

Form N-4

* * * * *

Item 24

* * * * *
    (b) * * *
    (11) all financial statements omitted from Item 23; and
    (12) copies of any agreements or understandings made in 
consideration for providing the initial capital between or among the 
Registrant, the depositor, underwriter, or initial contractowners and 
written assurances from the depositor or initial contractowners that 
the purchases were made for investment purposes without any present 
intention of redeeming.
    Instructions:
    1. Subject to the Rules regarding incorporation by reference and 
Instruction 2 below, the foregoing exhibits shall be filed as part of 
the Registration Statement. Exhibits numbered 3, 9, 10, and 11 above 
need to be filed only as part of a 1933 Act Registration Statement. 
Exhibits shall be lettered or numbered for convenient reference. 
Exhibits incorporated by reference may bear the designation given in a 
previous filing. Where exhibits are incorporated by reference, the 
reference shall be made in the list of exhibits.
* * * * *
    20. General Instruction B.2.(b) of Form N-6 (referenced in 
Sec. Sec.  239.17c and 274.11d) is amended by revising the reference 
``Items 27(c), (k), (l), (n), and (o)'' to read ``Items 26(c), (k), 
(l), (n), and (o)''.
    21. Item 25 of Form N-6 (referenced in Sec. Sec.  239.17c and 
274.11d) is removed.
    22. Form N-6 (referenced in Sec. Sec.  239.17c and 274.11d) is 
further amended by:
    a. Redesignating Items 26 through 34 as Items 25 though 33;
    b. Revising the reference ``Item 26'' in paragraph (j) of newly 
redesignated Item 25 to read ``Item 25''; and
    c. Revising the reference ``Item 26'' in paragraphs (l) and (m) of 
newly redesignated Item 26 to read ``Item 25''.

    By the Commission.

    Dated: September 29, 2003.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-25114 Filed 10-3-03; 8:45 am]
BILLING CODE 8010-01-P