[Federal Register Volume 69, Number 166 (Friday, August 27, 2004)]
[Rules and Regulations]
[Pages 52788-52805]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-19575]



[[Page 52787]]

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Part III





Securities and Exchange Commission





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17 CFR Parts 239, 249, 270, and 274



Disclosure Regarding Portfolio Managers of Registered Management 
Investment Companies; Final Rule

  Federal Register / Vol. 69, No. 166 / Friday, August 27, 2004 / Rules 
and Regulations  

[[Page 52788]]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 239, 249, 270, and 274

[Release Nos. 33-8458; 34-50227; IC-26533; File No. S7-12-04]
RIN 3235-AJ16


Disclosure Regarding Portfolio Managers of Registered Management 
Investment Companies

AGENCY: Securities and Exchange Commission.

ACTION: Final rule; request for comments on Paperwork Reduction Act 
burden estimates.

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SUMMARY: The Securities and Exchange Commission is adopting amendments 
to its forms under the Securities Act of 1933, the Securities Exchange 
Act of 1934, and the Investment Company Act of 1940 to improve the 
disclosure provided by registered management investment companies 
regarding their portfolio managers. The amendments extend the existing 
requirement that a registered management investment company provide 
basic information in its prospectus regarding its portfolio managers to 
include the members of management teams. The amendments also require a 
registered management investment company to disclose additional 
information about its portfolio managers, including other accounts that 
they manage, compensation structure, and ownership of securities in the 
investment company.

DATES: Effective Date: October 1, 2004.
    Compliance Date: See Section II.I. of this release for information 
on compliance dates.
    Comment Date: Comments regarding the collection of information 
requirements within the meaning of the Paperwork Reduction Act of 1995 
of Forms N-1A and N-CSR should be received by October 1, 2004.

ADDRESSES: Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/final.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number S7-12-04 on the subject line; or
     Use the Federal eRulemaking Portal (http://www.regulations.gov). Follow the instructions for submitting comments.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609.
    All submissions should refer to File Number S7-12-04. This file 
number should be included on the subject line if e-mail is used. To 
help us process and review your comments more efficiently, please use 
only one method. The Commission will post all comments on the 
Commission's Internet Web site (http://www.sec.gov/rules/final.shtml). 
Comments are also available for public inspection and copying in the 
Commission's Public Reference Room, 450 Fifth Street, NW., Washington, 
DC 20549. All comments received will be posted without change; we do 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly.

FOR FURTHER INFORMATION CONTACT: Sanjay Lamba, Attorney, or Christopher 
P. Kaiser, Branch Chief, Office of Disclosure Regulation, Division of 
Investment Management, (202) 942-0721, at the Securities and Exchange 
Commission, 450 Fifth Street, NW., Washington, DC 20549-0506.

SUPPLEMENTARY INFORMATION: The Securities and Exchange Commission 
(``Commission'') is adopting amendments to Form N-1A,\1\ Form N-2,\2\ 
and Form N-3,\3\ registration forms used by management investment 
companies to register under the Investment Company Act of 1940 
(``Investment Company Act'') and to offer their securities under the 
Securities Act of 1933 (``Securities Act''); amendments to Form N-CSR 
\4\ under the Investment Company Act and the Securities Exchange Act of 
1934 (``Exchange Act''), the form used by registered management 
investment companies to file certified shareholder reports with the 
Commission; and an amendment to Rule 30a-2 \5\ under the Investment 
Company Act.\6\
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    \1\ 17 CFR 239.15A and 274.11A.
    \2\ 17 CFR 239.14 and 274.11a-1.
    \3\ 17 CFR 239.17a and 274.11b.
    \4\ 17 CFR 249.331 and 274.128.
    \5\ 17 CFR 270.30a-2.
    \6\ The Commission proposed these amendments in March 2004. 
Investment Company Act Release No. 26383 (March 11, 2004) [69 FR 
12752 (March 17, 2004)] (``Proposing Release'').
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Table of Contents

I. Introduction
II. Discussion
    A. Identification of Portfolio Management Team Members
    B. Disclosure Regarding Other Accounts Managed and Potential 
Conflicts of Interest
    C. Disclosure of Portfolio Manager Compensation Structure
    D. Disclosure of Securities Ownership of Portfolio Managers
    E. Date of Disclosure
    F. Removal of Exclusion for Index Funds
    G. Disclosure of Availability of Information
    H. Amendment of Form N-CSR
    I. Compliance Date
III. Paperwork Reduction Act
IV. Cost/Benefit Analysis
V. Consideration of Burden on Competition; Promotion of Efficiency, 
Competition, and Capital Formation
VI. Final Regulatory Flexibility Analysis
VII. Statutory Authority
Text of Rule and Form Amendments

I. Introduction

    Registered management investment companies (``funds'') \7\ 
typically are externally managed by an investment adviser, to which 
they pay an advisory fee from fund assets. The investment adviser in 
turn employs and compensates the individuals who act as portfolio 
managers for the fund. Our rules require funds to disclose in their 
prospectuses certain information concerning their portfolio managers. 
Fund prospectuses are required to include the name, title, length of 
service, and business experience of the individuals who are primarily 
responsible for the day-to-day management of the fund.\8\ If a 
committee, team, or other group is jointly and primarily responsible 
for management of the fund, the fund must provide disclosure to the 
effect that the fund's investments are managed by that group, but need 
not provide the names of the members of the group.\9\
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    \7\ Management investment companies typically issue shares 
representing an undivided proportionate interest in a changing pool 
of securities, and include open-end and closed-end companies. See T. 
Lemke, G. Lins, A. Smith III, Regulation of Investment Companies, 
Vol. I, ch. 4, Sec.  4.04, at 4-5 (2002). An open-end company is a 
management company that is offering for sale or has outstanding any 
redeemable securities of which it is the issuer. A closed-end 
company is any management company other than an open-end company. 
See Section 5 of the Investment Company Act [15 U.S.C. 80a-5]. Open-
end companies generally offer and sell new shares to the public on a 
continuous basis. Closed-end companies generally engage in 
traditional underwritten offerings of a fixed number of shares and, 
in most cases, do not offer their shares to the public on a 
continuous basis.
    \8\ Item 5(a)(2) of Form N-1A; Item 9.1.c of Form N-2.
    \9\ Instruction 2 to Item 5(a)(2) of Form N-1A; Instruction 2 to 
Item 9.1.c. of Form N-2.
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    Recently, several areas of concern have been identified with 
respect to fund portfolio managers. In particular, concerns have been 
raised regarding the following:
     The absence of disclosure about:
    [ctrcir] The individual members of portfolio management teams;
    [ctrcir] The compensation of portfolio managers; and

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    [ctrcir] Portfolio managers' holdings in the funds that they 
manage; and
     Potential conflicts of interest between the interests of 
shareholders in a fund that a portfolio manager oversees, and the 
interests of other clients and investment vehicles, such as hedge funds 
and pension funds, that a portfolio manager may also oversee.\10\
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    \10\ See Proposing Release, supra note 6, 69 FR at 12752-12753, 
nn. 8-13 and accompanying text (discussing concerns about portfolio 
managers).
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    In order to address these concerns, earlier this year the 
Commission proposed rules intended to provide greater transparency 
regarding portfolio managers, their incentives in managing a fund, and 
potential conflicts of interest (``Proposing Release''). These 
proposals were designed to assist investors in evaluating fund 
management and making investment decisions.
    The Commission received 34 comment letters relating to the 
proposals. The commenters generally supported the proposals, although 
some expressed concerns regarding portions of the disclosure or 
suggested changes. Today, the Commission is adopting these proposals, 
with modifications to address commenters' concerns. The amendments that 
the Commission is adopting will:
     Require a fund to identify in its prospectus each member 
of a committee, team, or other group of persons that is jointly and 
primarily responsible for the day-to-day management of the fund's 
portfolio (or, in the case of a team with more than five such members, 
the five members with the most significant responsibility for the day-
to-day management of the fund's portfolio);
     Require a fund to provide information in its Statement of 
Additional Information (``SAI'') \11\ regarding other accounts managed 
by any of its portfolio managers, including a description of material 
conflicts of interest that may arise in connection with simultaneously 
managing the fund and the other accounts;
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    \11\ The SAI is part of a fund's registration statement and 
contains information about a fund in addition to that contained in 
the prospectus. The SAI is required to be delivered to investors 
upon request and is available on the Commission's Electronic Data 
Gathering, Analysis, and Retrieval System.
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     Require a fund to disclose in its SAI the structure of, 
and the method used to determine, the compensation of each portfolio 
manager;
     Require a fund to disclose in its SAI each portfolio 
manager's ownership of securities in the fund; and
     Require a closed-end fund to provide disclosure regarding 
its portfolio managers in its reports on Form N-CSR.\12\
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    \12\ A fund is currently required to provide portfolio manager 
disclosure regardless of whether the portfolio manager is employed 
by the investment adviser or a subadviser. This would continue under 
the requirements we are adopting. See Section 2(a)(20)(B) of the 
Investment Company Act [15 U.S.C. 80a-2(a)(20)(B)] (``investment 
adviser'' includes any person who provides investment advice to an 
investment company under a contract with an investment adviser to 
the company).
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II. Discussion

A. Identification of Portfolio Management Team Members

    The Commission is adopting, with modifications to address 
commenters' concerns, proposed amendments to Forms N-1A and N-2, the 
registration forms for mutual funds and closed-end funds, that will 
require those funds to identify in their prospectuses each member of a 
committee, team, or other group of persons associated with the fund or 
its investment adviser that is jointly and primarily responsible for 
the day-to-day management of the fund's portfolio.\13\ The amendments 
we are adopting will require funds to state the name, title, length of 
service, and business experience of each member of a portfolio 
management team.
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    \13\ Item 5(a)(2) and Instruction 2 to Item 5(a)(2) of Form N-
1A; Item 9.1.c and Instruction to Item 9.1.c of Form N-2.
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    We are also adopting amendments to Form N-3, the registration form 
for insurance company managed separate accounts that issue variable 
annuity contracts, to require disclosure regarding portfolio managers, 
including members of portfolio management teams, similar to the 
disclosure that will be required by Forms N-1A and N-2.\14\ Currently, 
Form N-3 does not require disclosure about portfolio managers.
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    \14\ Item 6(e) of Form N-3.
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    Commenters generally supported the Commission's proposal to require 
improved disclosure about members of portfolio management teams. 
However, several commenters expressed concern that, while a requirement 
to identify the members of a portfolio management team may be 
appropriate for teams that consist of a relatively small number of 
members, the disclosure could become lengthy and less meaningful in the 
case of larger teams. Some of these commenters noted that some 
portfolio management teams consist of both portfolio managers, who have 
authority to make management decisions, and analysts and other junior 
members, who have no decision-making authority. These commenters argued 
that the proposed disclosure requirement could be interpreted to 
require disclosure of every such junior member of a management team, 
which would result in lengthy disclosure that would have to be updated 
frequently, whenever the composition of the team changed. In addition, 
some commenters argued that a requirement to identify all members of a 
portfolio management team could inhibit an adviser's ability to change 
the composition of a team.
    We note that, under the amendments we are adopting, disclosure is 
only required with respect to members of a management team who are 
jointly and primarily responsible for the day-to-day management of the 
fund's portfolio. To the extent that a fund is managed by a committee, 
team, or other group that includes additional members who are not 
jointly and primarily responsible for day-to-day management, 
identification of these individuals is not required. Thus, if a fund 
has a management team that includes analysts who make securities 
recommendations with respect to the portfolio, but do not have 
decision-making authority, these individuals would not have to be 
identified, unless they are jointly and primarily responsible for day-
to-day management of the fund's portfolio. An analyst could be jointly 
and primarily responsible for day-to-day management if, for example, 
the individual who has decision-making authority over the fund's 
portfolio routinely adopts the analyst's recommendations.
    We are, however, modifying our proposal in response to the 
commenters' concerns to provide that if more than five persons are 
jointly and primarily responsible for the day-to-day management of a 
fund's portfolio, the fund need only provide the required information 
for the five persons with the most significant responsibility.\15\ This 
will permit funds with large numbers of persons that are jointly and 
primarily responsible for portfolio management to provide information 
about the key decision-makers rather than lengthy disclosure about 
numerous individuals that would obscure other important information in 
the prospectus.
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    \15\ Instruction 2 to Item 5(a)(2) of Form N-1A; Instruction to 
Item 9.1.c of Form N-2; Instruction 2 to Item 6(e) of Form N-3.
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    The determination of the members of a portfolio management team who 
are jointly and primarily responsible for the day-to-day management of 
a fund's portfolio will depend on the facts and circumstances of the 
particular fund. For example, in the case of a fund with a large 
management team, where a single ``lead member'' is responsible for 
implementing and monitoring the overall portfolio management of the

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fund, it may be appropriate to identify this single ``lead member'' as 
the portfolio manager. Some funds with large management teams are 
``research-driven'' funds that may have portfolio management teams with 
as many as 50 members, each of whom is allocated a specified portion of 
the portfolio over which he or she has independent responsibility for 
research, stock selection, and portfolio construction. A research-
driven fund may have a coordinator with responsibility for allocating 
the portfolio among the various managers and analysts, implementing 
trades on behalf of analysts on the team, reviewing the overall 
composition of the portfolio to ensure its compliance with its stated 
investment objectives and strategies, and monitoring cash flows. In 
such a case, it may be appropriate for a fund to identify the 
coordinator as its portfolio manager. If a research-driven fund does 
not have such a portfolio coordinator or similar position, it may be 
appropriate to provide the required information for the five persons 
with the most significant responsibility for the day-to-day management 
of the fund's portfolio, for example, the managers with the largest 
percentages of assets under management.
    The amendments also require a fund to provide a brief description 
of each member's role on the management team (e.g., lead member).\16\ 
We are modifying the proposal to clarify that a fund's description of a 
member's role on a committee, team, or group must include a description 
of any limitations on the person's role and the relationship between 
the person's role and the roles of other persons who have 
responsibility for the day-to-day management of the fund's 
portfolio.\17\ This responds to commenters' suggestions that we require 
additional disclosure regarding the structure of each management team. 
The amended requirement is intended to provide investors with a clearer 
understanding of what an identified portfolio manager does and does not 
do in the course of day-to-day management of the fund, and the ways in 
which the responsibilities of any identified portfolio manager relate 
to those of other members of a portfolio management team, including 
members who may not be identified in the prospectus as portfolio 
managers. It will also assist investors in funds with large management 
teams, such as research-driven funds, in understanding how the 
responsibilities of an identified portfolio manager may differ from 
those of a manager who manages a fund on his or her own or with a small 
team of other managers. For example, if a portfolio management team for 
a balanced fund has one team member who is responsible only for the 
overall allocation of the fund's assets among equities, bonds, and 
money market instruments, and other team members who are responsible 
only for selection of securities within a particular segment of the 
fund, the fund's disclosure should describe these limitations in 
describing each member's role.
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    \16\ Instruction 2 to Item 5(a)(2) of Form N-1A; Instruction to 
Item 9.1.c of Form N-2; Instruction 2 to Item 6(e) of Form N-3. The 
amendments also delete current Instructions 3 and 4 to Item 5(a)(2) 
of Form N-1A, which provided additional guidance as to the 
disclosure obligations of funds for which day-to-day management 
responsibilities are shared between a portfolio management team and 
an individual.
    \17\ Instruction 2 to Item 5(a)(2) of Form N-1A; Instruction 2 
to Item 9.1.c of Form N-2; Instruction 2 to Item 6(e) of Form N-3.
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B. Disclosure Regarding Other Accounts Managed and Potential Conflicts 
of Interest

    We are adopting, with several modifications to address commenters' 
concerns, amendments that require a fund to provide disclosure in its 
SAI regarding other accounts for which the fund's portfolio manager is 
primarily responsible for the day-to-day portfolio management.\18\ If a 
committee, team, or other group that includes the portfolio manager is 
jointly and primarily responsible for the day-to-day management of an 
account, the fund is required to include that account in responding to 
the disclosure requirement.\19\ Commenters generally supported this 
disclosure requirement, which is designed to enable investors to assess 
the conflicts of interest to which a portfolio manager may be subject 
as a result of managing the fund and other portfolios, such as other 
registered investment companies and hedge funds.\20\
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    \18\ Item 15(a) of Form N-1A; Item 21.1 of Form N-2; Item 22(a) 
of Form N-3.
    \19\ Instruction 2 to Item 15(a) of Form N-1A; Instruction 2 to 
Item 21.1 of Form N-2; Instruction 2 to Item 22(a) of Form N-3.
    \20\ The disclosure requirement applies to accounts managed in a 
personal capacity as well as accounts managed in a professional 
capacity. Conflicts of interest may also arise in connection with 
the manager's management of such accounts.
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    This disclosure requirement, as well as the disclosure requirements 
discussed below regarding compensation structure and ownership of fund 
securities,\21\ applies to any portfolio manager who is required to be 
identified in the prospectus. If a fund identifies more than five 
persons as portfolio managers in its prospectus, it need only provide 
the required disclosure regarding other accounts managed, compensation, 
and securities ownership for the five persons with the most significant 
responsibility for the day-to-day management of the fund's portfolio.
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    \21\ See Section II.C. ``Disclosure of Portfolio Manager 
Compensation Structure'' and Section II.D. ``Disclosure of 
Securities Ownership of Portfolio Managers,'' infra.
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    As adopted, the amendments require a fund to disclose the number of 
other accounts managed by a portfolio manager, and the total assets in 
the accounts, within each of the following categories: Registered 
investment companies; other pooled investment vehicles; and other 
accounts.\22\ For each such category, a fund is also required to 
disclose the number of accounts and the total assets in the accounts 
with respect to which the advisory fee is based on account 
performance.\23\ We had proposed an additional category of ``other 
investment companies.'' A commenter suggested, however, that breaking 
out ``other investment companies'' as a separate category would not be 
helpful in enabling investors to assess a portfolio manager's potential 
conflicts of interest. We agree and are eliminating ``other investment 
companies'' as a separate category. Accounts that would have been 
included in this category will now be included in ``other pooled 
investment vehicles.''
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    \22\ Item 15(a)(2) of Form N-1A; Item 21.1.b of Form N-2; Item 
22(a)(ii) of Form N-3.
    \23\ Item 15(a)(3) of Form N-1A; Item 21.1.c of Form N-2; Item 
22(a)(iii) of Form N-3.
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    The amendments, as adopted, also require a fund to describe any 
material conflicts of interest that may arise in connection with the 
portfolio manager's management of the fund's investments, on the one 
hand, and the investments of the other accounts, on the other.\24\ This 
description would include, for example, material conflicts between the 
investment strategy of the fund and the investment strategy of the 
other accounts managed by the portfolio manager and material conflicts 
in allocation of investment opportunities between the fund and such 
other accounts. We have limited the conflicts disclosure requirement to 
material conflicts of interest in order to address commenters' concerns 
that the proposed requirement would encourage funds to provide an 
overinclusive, boilerplate list of potential conflicts. A conflict 
would be material if there is a substantial likelihood that disclosure 
of the conflict would be viewed by a reasonable investor as 
significantly altering the ``total mix'' of information available

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about the fund.\25\ In our view, this would include, for example, a 
conflict that a reasonable investor would consider likely to affect the 
manager's professional judgment with respect to management of the fund.
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    \24\ Item 15(a)(4) of Form N-1A; Item 21.1.d of Form N-2; Item 
22(a)(iv) of Form N-3.
    \25\ See TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438, 
449 (1976).
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    We are not adopting our proposal to require a fund to include a 
description of the policies and procedures used by the fund or its 
investment adviser to address conflicts of interest.\26\ We agree with 
several commenters who argued that requiring disclosure of these 
policies and procedures would result in lengthy disclosure that most 
investors would not find useful. We note that our recently adopted 
compliance rules require investment advisers to implement policies and 
procedures that address conflicts arising from management of multiple 
funds and accounts, such as the allocation of investment opportunities 
and the allocation of aggregated trades.\27\ The requirement to adopt 
policies and procedures to address conflicts, coupled with the 
disclosure of other accounts managed and the material conflicts of 
interest that may arise, should sufficiently address potential 
conflicts of interest without burdening investors with extensive, 
technical disclosure. We emphasize that fund boards of directors and 
investment advisers are responsible for addressing conflicts of 
interest that may arise from a portfolio manager's management of 
multiple accounts, and the disclosure we are requiring does not 
diminish this responsibility.\28\
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    \26\ Proposed Item 15(a)(4) of Form N-1A; proposed Item 21.1.d 
of Form N-2; proposed Item 22(a)(iv) of Form N-3.
    \27\ See Investment Company Act Release No. 26299 (Dec. 17, 
2003) [68 FR 74714, 74716 (Dec. 24, 2003)] (adopting rule 206(4)-7 
under the Investment Advisers Act of 1940 and rule 38a-1 under the 
Investment Company Act).
    \28\ See Investment Company Act Release No. 26323 (Jan. 15, 
2004) [69 FR 3472, 3472-3473 (Jan. 23, 2004)] (discussing 
responsibility of independent directors to bring `` `a high degree 
of rigor and skeptical objectivity to the evaluation of [fund] 
management and its plans and proposals,' particularly when 
evaluating conflicts of interest''); Mutual Fund Directors Forum, 
Report Of The Mutual Fund Directors Forum: Best Practices And 
Practical Guidance For Mutual Fund Directors 35-36 (July 2004) 
(recommending that a fund's board establish a process for 
identifying and reviewing conflicts of interest, including potential 
conflicts of interest that may arise between the fund and its 
adviser or affiliates due to other business activities of the 
adviser or affiliates).
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    Finally, we requested comment in the Proposing Release on whether 
to prohibit portfolio managers of funds from managing certain types of 
accounts, such as hedge funds. We have determined not to do so, because 
we agree with several commenters that a prohibition could reduce 
investors' access to talented portfolio managers and could have a 
particularly disruptive effect on smaller investment management firms 
that may not have the resources to maintain separate staffs for 
different types of accounts. We believe that the disclosure of other 
accounts managed and material conflicts of interest, together with the 
requirement in the compliance rules for policies and procedures to 
address conflicts, is a preferable approach to addressing conflicts of 
interest arising from side-by-side management of multiple accounts.

C. Disclosure of Portfolio Manager Compensation Structure

    We are adopting, with modifications to address commenters' 
concerns, a requirement that a fund provide disclosure in its SAI 
regarding the structure of, and the method used to determine, the 
compensation of its portfolio managers.\29\ Commenters supported this 
proposal and agreed that it may help investors to better understand a 
portfolio manager's incentives in managing a fund and shed light on 
possible conflicts of interest that could arise when a portfolio 
manager manages other accounts.
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    \29\ Item 15(b) of Form N-1A; Item 21.2 of Form N-2; Item 22(b) 
of Form N-3.
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    The amendments require a description of the structure of, and the 
method used to determine, the compensation received by a fund's 
portfolio manager from the fund, its investment adviser, or any other 
source with respect to management of the fund and any other account 
included by the fund in response to the disclosure requirement 
described above regarding other accounts managed by the portfolio 
manager.\30\ This disclosure requirement applies to any portfolio 
manager who is required to be identified in the prospectus. The 
amendments do not require disclosure of the value of compensation 
received by a portfolio manager.\31\
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    \30\ See Section II.B, ``Disclosure Regarding Other Accounts 
Managed and Potential Conflicts of Interest,'' supra (describing 
required disclosure regarding other accounts for which the fund's 
portfolio manager is primarily responsible); Instruction 3 to Item 
15(b) of Form N-1A; Instruction 3 to Item 21.2 of Form N-2; 
Instruction 3 to Item 22(b) of Form N-3.
    \31\ Instruction 2 to Item 15(b) of Form N-1A; Instruction 2 to 
Item 21.2 of Form N-2; Instruction 2 to Item 22(b) of Form N-3.
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    For purposes of the disclosure requirement, compensation includes, 
without limitation, salary, bonus, deferred compensation, and pension 
and retirement plans and arrangements, whether the compensation is cash 
or non-cash.\32\ We are modifying the proposal to permit funds to omit 
disclosure regarding group life, health, hospitalization, medical 
reimbursement, relocation, and pension and retirement plans and 
arrangements, provided that they do not discriminate in scope, terms, 
or operation in favor of the portfolio manager or a group of employees 
that includes the portfolio manager and are available generally to all 
salaried employees.\33\ We agree with several commenters who suggested 
that, while a portfolio manager may often receive certain benefits of 
this type as part of his or her overall compensation, requiring 
disclosure about these benefits would be of little or no value to 
investors in assessing whether the manager's interests are aligned with 
those of investors.
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    \32\ Instruction 2 to Item 15(b) of Form N-1A; Instruction 2 to 
Item 21.2 of Form N-2; Instruction 2 to Item 22(b) of Form N-3.
    \33\ Cf. Item 402(a)(7)(ii) of Regulation S-K [17 CFR 
229.402(a)(7)(ii)] (permitting operating companies, in disclosing 
information about executive officers, to omit information regarding 
group life, health, hospitalization, medical reimbursement, or 
relocation plans that do not discriminate in scope, terms, or 
operation in favor of executive officers or directors of the 
registrant and that are available generally to all salaried 
employees).
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    For each type of compensation (e.g., salary, bonus, deferred 
compensation, retirement plans and arrangements), a fund is required to 
describe with specificity the criteria on which that type of 
compensation is based, for example, whether compensation is fixed, 
whether (and, if so, how) compensation is based on the fund's pre-or 
after-tax performance over a certain period, and whether (and, if so, 
how) compensation is based on the value of assets held in the fund's 
portfolio.\34\ This description is required to clearly disclose any 
differences between the method used to determine the portfolio 
manager's compensation with respect to the fund and other accounts, 
e.g., if the portfolio manager receives part of an advisory fee that is 
based on performance with respect to some accounts but not the fund, 
this must be disclosed.\35\
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    \34\ Item 15(b) of Form N-1A; Item 21.2 of Form N-2; Item 22(b) 
of Form N-3.
    \35\ Instruction 3 to Item 15(b) of Form N-1A; Instruction 3 to 
Item 21.2 of Form N-2; Instruction 3 to Item 22(b) of Form N-3.
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    We have modified the proposal in order to elicit better disclosure 
of the basis on which a portfolio manager is compensated. We have made 
these changes based on commenters' suggestions that a fund should be 
required to disclose the specific metrics used to measure performance. 
We believe that where compensation is based on criteria such as 
performance,

[[Page 52792]]

requiring more detailed disclosure about the criteria may provide 
greater insight into a manager's incentives to manage a fund's 
portfolio in a certain way. First, we are requiring that the criteria 
on which each type of compensation is based be described with 
specificity. Second, we are clarifying that a fund must not only 
describe whether compensation is based on criteria such as fund pre- or 
after-tax performance over a certain time period, and the value of 
assets held in the fund's portfolio, but also how compensation is based 
on these criteria. For example, if compensation is based solely or in 
part on performance, a fund is required to identify any benchmark used 
to measure performance and state the length of the period over which 
performance is measured.

D. Disclosure of Securities Ownership of Portfolio Managers

    We are adopting a requirement that a fund disclose in its SAI the 
securities ownership in the fund of each portfolio manager who is 
required to be identified in the fund's prospectus.\36\ This disclosure 
is intended to help investors assess the extent to which the portfolio 
manager's interests are aligned with theirs.
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    \36\ Item 15(c) of Form N-1A; Item 21.3 of Form N-2; Item 22(c) 
of Form N-3.
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    Commenters generally supported the goal of this proposal. Several 
commenters argued, however, that while the level of a portfolio 
manager's securities ownership may be an indicator of the manager's 
confidence in the fund's investment strategy where the manager owns 
shares in the fund, it does not necessarily follow that a manager who 
owns few or no securities has any less confidence or is any less 
concerned about the fund's performance. We continue to believe, 
however, that a portfolio manager's ownership in a fund provides a 
direct indication of his or her alignment with the interests of 
shareholders in that fund. While a manager could have reasons for not 
holding shares of a specific fund that are unrelated to the manager's 
lack of confidence in the fund, e.g., that its investment objectives do 
not match the manager's, we note that a fund is free to include an 
explanation of these reasons in its disclosure.
    We have modified our proposed disclosure requirement with respect 
to securities ownership significantly, to address concerns raised by 
commenters. In particular, we have limited the requirement to a 
portfolio manager's ownership of equity securities in the fund 
itself.\37\ As a result, we are also eliminating the proposed 
requirements to include the name of the investment company or account 
in which the manager owns shares and the title of the class of 
securities owned, as well as the mandatory tabular format. Our proposed 
amendments would have required a fund to disclose a portfolio manager's 
ownership not only of the securities of the fund, but also of the 
securities of other accounts managed by the fund's investment adviser 
or the portfolio manager.\38\ This disclosure requirement was intended, 
in part, to assist fund investors in assessing potential conflicts 
between their interests and the interests of other clients or 
investment vehicles in which the manager has an interest. We were 
persuaded by commenters who argued that expanding the disclosure 
requirement to include securities ownership in other accounts would 
result in overly detailed, complex disclosure that would not help 
investors assess the extent to which a portfolio manager's interests 
are aligned with theirs. In addition, commenters noted that the 
objective of providing investors with information about conflicts of 
interest is more effectively addressed by the amendments we are 
adopting that require disclosure of conflicts and the compensation 
structure of portfolio managers. The commenters also argued that the 
disclosure would be time-consuming and burdensome to prepare, 
particularly in the case of funds with one or more subadvisers.
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    \37\ A mutual fund that issues two or more series of preferred 
or special stock each of which is preferred over all other series in 
respect of assets specifically allocated to that series is required 
to disclose a portfolio manager's securities ownership in each 
series in the statement of additional information for that series.
    \38\ Proposed Item 15(c) of Form N-1A; proposed Item 21.3 of 
Form N-2; proposed Item 22(c) of Form N-3.
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    The disclosure requirement we are adopting applies to fund 
securities beneficially owned by a portfolio manager.\39\ For purposes 
of the requirement to disclose a portfolio manager's beneficial 
ownership of fund securities, ``beneficial ownership'' will be 
determined in accordance with rule 16a-1(a)(2) under the Exchange 
Act.\40\ Our proposal would have required disclosure of securities 
owned either beneficially or of record, and would have deemed a person 
to be a ``beneficial owner'' of a security if he or she is a 
``beneficial owner'' under either rule 13d-3 under the Exchange Act, 
which focuses on a person's voting and investment power, or rule 16a-
1(a)(2) under the Exchange Act, which focuses on a person's economic 
interests in a security.\41\ We had proposed to require disclosure of 
record ownership, and a broader definition of beneficial ownership, in 
order to help investors assess potential conflicts of interest. 
However, in light of our current objective of providing information 
about the alignment of managers' and shareholders' economic interests, 
we believe that disclosure of record holdings should not be required 
and that the focus of ``beneficial ownership'' should be on whether a 
manager's economic interests are tied to the securities, rather than 
his or her ability to exert voting power or to dispose of the 
securities. This definition is also consistent with the requirements 
for disclosure of fund securities ownership by fund directors.\42\
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    \39\ Item 15(c) of Form N-1A; Item 21.3 of Form N-2; Item 22(c) 
of Form N-3.
    \40\ Instruction 2 to Item 15(c) of Form N-1A; Instruction 2 to 
Item 21.3 of Form N-2; Instruction 2 to Item 22(c) of Form N-3; 17 
CFR 240.16a-1(a)(2).
    \41\ Proposed Item 15(c) and Instruction 2 to Item 15(c) of Form 
N-1A; proposed Item 21.3 and Instruction 2 to Item 21.3 of Form N-2; 
proposed Item 22(c) and Instruction 2 to Item 22(c) of Form N-3; 17 
CFR 240.13d-3; 17 CFR 240.16a-1(a)(2).
    \42\ Item 12(b)(4) of Form N-1A; Item 18.7 of Form N-2; Item 
20(f) of Form N-3.
---------------------------------------------------------------------------

    Our proposal also would have required disclosure of securities 
owned by a portfolio manager's immediate family members, and would have 
defined ``immediate family member'' for this purpose as a person's 
spouse; child residing in the person's household (including step and 
adoptive children); and any dependent of the person, as defined in 
section 152 of the Internal Revenue Code.\43\ We are deleting the 
reference to immediate family members and the proposed definition as 
unnecessary. Under the definition of beneficial ownership in rule 16a-
1(a)(2) under the Exchange Act that we are adopting, a person is 
presumed to be a beneficial owner of securities that are held by the 
person's immediate family members sharing the same household.\44\
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    \43\ See proposed Item 15(c) and Instruction 4 of Form N-1A; 
proposed Item 21.3 and Instruction 4 of Form N-2; proposed Item 
22(c) and Instruction 4 of Form N-3.
    \44\ See Rule 16a-1(a)(2)(ii)(A) under the Exchange Act [17 CFR 
240.16a-1(a)(2)(ii)(A)] (indirect pecuniary interest in securities 
includes securities held by any member of a person's immediate 
family sharing the same household). ``Immediate family'' is defined 
for purposes of rule 16a-1 as any child, stepchild, grandchild, 
parent, stepparent, grandparent, spouse, sibling, mother-in-law, 
father-in-law, son-in-law, daughter-in-law, brother-in-law, or 
sister-in-law, and includes adoptive relationships. Rule 16a-1(e) 
under the Exchange Act [17 CFR 240.16a-1(e)].
---------------------------------------------------------------------------

    We are adopting, as proposed, a requirement that funds disclose 
portfolio managers' ownership of securities in the fund using the

[[Page 52793]]

following dollar ranges: None, $1-$10,000, $10,001-$50,000, $50,001-
$100,000, $100,001-$500,000, $500,001-$1,000,000, or over 
$1,000,000.\45\ Commenters' views on this proposed approach varied. 
Several commenters argued that the maximum dollar range of securities 
owned should be lowered from ``over $1,000,000'' to ``over $100,000,'' 
which would be consistent with the requirement for fund directors.\46\ 
These commenters expressed concern that the proposed dollar ranges 
would require portfolio managers to provide too much information about 
their net worth and would unduly infringe on their privacy interests. 
Another commenter, by contrast, argued that any maximum dollar range 
chosen should accurately reflect the likely value of shares owned by a 
representative cross section of managers in the mutual fund industry. 
This commenter suggested that if a lower maximum range of $100,000 were 
used, an overwhelming majority of managers would likely exceed that 
threshold. Finally, other commenters suggested that we require 
disclosure of the precise number of shares of the fund owned by a 
portfolio manager.
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    \45\ Item 15(c) of Form N-1A; Item 21.3 of Form N-2; Item 22(c) 
of Form N-3.
    \46\ Item 12(b)(4) of Form N-1A; Item 18.7 of Form N-2; Item 
20(f) of Form N-3.
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    We continue to believe, on balance, that requiring disclosure of 
securities owned using a maximum dollar range of ``over $1,000,000'' is 
appropriate. Disclosure of the dollar range of securities owned by a 
portfolio manager, rather than precise dollar holdings, is intended to 
provide shareholders with significant information to use in evaluating 
whether a manager's interests are aligned with their own, while 
protecting managers' legitimate privacy interests.\47\ The maximum 
range of ``over $1,000,000'' is intended to reflect a level of 
investment that would be significant. At the same time, we are not 
persuaded that requiring disclosure of the precise dollar holdings of 
securities owned is necessary.
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    \47\ Cf. Investment Company Act Release No. 24816 (Jan. 2, 2001) 
[66 FR 3734, 3741 (Jan. 16, 2001)] (explaining reasons for requiring 
disclosure of a director's holdings of securities using dollar 
ranges rather than an exact dollar amount).
---------------------------------------------------------------------------

E. Date of Disclosure

    The required information regarding other accounts managed by a 
portfolio manager, compensation structure, and ownership of fund 
securities must be provided as of the end of the fund's most recently 
completed fiscal year.\48\ However, in the case of an initial 
registration statement or an update to a fund's registration statement 
that discloses a new portfolio manager, information with respect to any 
newly identified portfolio manager is required to be provided as of the 
most recent practicable date.\49\ The date as of which the information 
is provided must be disclosed. In effect, this means that a fund is 
required to disclose changes to this information with respect to a 
previously identified portfolio manager once a year, as part of its 
post-effective amendment that is an annual update to its registration 
statement.\50\ A fund is not required to update its SAI during the year 
for each change in any of the required information regarding a 
previously identified portfolio manager, such as changes in the fund 
securities that a portfolio manager owns.
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    \48\ Instruction 1 to each of Items 15(a), (b), and (c) of Form 
N-1A; Instruction 1 to each of Items 21.1, 21.2, and 21.3 of Form N-
2; Instruction 1 to each of Items 22(a), (b), and (c) of Form N-3.
    \49\ This includes an update to a mutual fund's registration 
statement that adds a new series to the fund.
    \50\ In the case of a change in portfolio manager, however, a 
fund is required to update its registration statement to disclose 
the change and provide information about the new manager as 
necessary to comply with its obligations under the Securities Act.
---------------------------------------------------------------------------

    Several commenters suggested that we should require the information 
regarding other accounts managed by a portfolio manager, compensation 
structure, and ownership of fund securities as of the most recent 
calendar year-end, rather than the fund's most recent fiscal year-end. 
These commenters noted that a fund complex frequently has multiple 
funds managed by the same portfolio manager, and argued that requiring 
information as of the most recent fiscal year-end would complicate the 
administrative burden of compiling the required disclosure for a 
portfolio manager who manages several funds with different fiscal year-
ends. Another commenter, however, supported requiring the information 
as of the most recent fiscal year-end, arguing that this approach would 
strike a reasonable balance between timeliness and practicality. We are 
adopting the requirement as proposed, because we believe that requiring 
the disclosure to be provided as of calendar year-end would, in many 
instances, result in investors receiving excessively stale information. 
For example, if a fund updated its prospectus on December 1 and 
provided information about its portfolio managers as of the most recent 
calendar year-end, investors would receive information that is already 
11 months old at the time of the update. We note that other 
modifications we are making to the amendments, in particular, limiting 
the disclosure of a portfolio manager's securities ownership to 
ownership of securities in the fund itself, will significantly reduce 
the burden to funds of preparing this disclosure.

F. Removal of Exclusion for Index Funds

    We are removing the current provision in Form N-1A that excludes a 
fund that has as its investment objective replication of the 
performance of an index from the requirement to identify and provide 
disclosure regarding its portfolio managers.\51\ We are removing this 
exclusion in order to shed light on the alignment of index fund 
portfolio managers with investors' interests and on their potential 
conflicts of interest. Commenters were split on the proposed removal of 
the index fund exclusion. A commenter who objected to the proposal 
argued that there are few, if any, conflicts between the interests of 
shareholders of an index fund and those of a portfolio manager who is 
also managing an actively-managed fund, because the index fund 
structure imposes strict constraints on the portfolio manager's 
actions. Another commenter, however, agreed with the Commission that 
conflicts of interest, such as conflicts in determining trading 
execution priorities, may arise when a portfolio manager for an index 
fund also manages an actively-managed fund. We are removing the current 
index fund exclusion because we continue to believe that concerns about 
the alignment of portfolio managers and their conflicts of interest are 
important to investors in index funds.
---------------------------------------------------------------------------

    \51\ Instruction 1 to Item 5(a)(2) of current Form N-1A.
---------------------------------------------------------------------------

G. Disclosure of Availability of Information

    In order to assist investors in finding the additional information 
about portfolio managers that is required in the SAI, we are adopting 
amendments that require a fund to state in its prospectus that the SAI 
provides this information.\52\ This disclosure is required to appear 
adjacent to the disclosure identifying the portfolio managers.
---------------------------------------------------------------------------

    \52\ Item 5(a)(2) of Form N-1A; Item 9.1.c of Form N-2; Item 
6(e) of Form N-3.
---------------------------------------------------------------------------

    We are also adopting the proposed requirement that the back cover 
page of a mutual fund's prospectus state whether the fund makes 
available its SAI and annual and semi-annual reports, free of charge, 
on or through its Web site at a specified Internet

[[Page 52794]]

address.\53\ If a mutual fund does not make its SAI and shareholder 
reports available in this manner, the fund is required to disclose the 
reasons why it does not do so (including, where applicable, that the 
fund does not have an Internet Web site). We are also adopting 
amendments to Forms N-2 and N-3 that require similar disclosure on the 
front cover page of the prospectus for closed-end funds and insurance 
company managed separate accounts that issue variable annuity 
contracts.\54\ In addition, the amendments to Forms N-2 and N-3 require 
that the front cover page of the prospectus include a statement 
explaining how to obtain the fund's shareholder reports and a toll-free 
(or collect) telephone number for investors to call to request the 
fund's SAI, annual and semi-annual reports, and other information, and 
to make shareholder inquiries. They also change from optional to 
mandatory disclosure of the Commission's Internet Web site address. 
These requirements are similar to existing requirements of Form N-
1A.\55\
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    \53\ Item 1(b)(1) of Form N-1A.
    \54\ Item 1.1.d of Form N-2; Item 1(a)(vi) of Form N-3.
    \55\ See Items 1(b)(1) and 1(b)(3) of Form N-1A.
---------------------------------------------------------------------------

H. Amendment of Form N-CSR

    Because closed-end funds do not offer their shares continuously, 
and are therefore generally not required to maintain an updated SAI to 
meet their obligations under the Securities Act of 1933,\56\ we are 
adopting, as proposed, the requirement that closed-end funds provide 
disclosure regarding their portfolio managers in their annual reports 
on Form N-CSR.\57\ This will include the basic information (name, 
title, length of service, and business experience), as well as the 
disclosure that we are requiring regarding other accounts managed by a 
portfolio manager, compensation structure, and ownership of fund 
securities.\58\ A closed-end fund is required to disclose any change in 
its portfolio managers, and to provide all of the required portfolio 
manager disclosure for any newly identified portfolio manager, in its 
semi-annual reports on Form N-CSR.\59\
---------------------------------------------------------------------------

    \56\ Pursuant to rule 8b-16(b) under the Investment Company Act 
[17 CFR 270.8b-16(b)], closed-end funds are not required to file 
amendments to their registration statements (including their SAIs) 
in order to comply with their Investment Company Act registration 
obligations, provided that they include specified information in 
their annual reports to shareholders.
    \57\ Item 8 of Form N-CSR.
    \58\ Item 8(a) of Form N-CSR.
    \59\ Item 8(b) of Form N-CSR.
---------------------------------------------------------------------------

    The disclosure in Form N-CSR with respect to the name, title, 
length of service, and business experience of a portfolio manager is 
required to be current as of the date of filing of the report, and the 
disclosure regarding other accounts managed, compensation structure, 
and fund securities ownership generally is required to be current as of 
the end of the fund's most recently completed fiscal year.\60\ In the 
case of a newly identified portfolio manager in an annual or semi-
annual report, however, this disclosure is required to be current as of 
the most recent practicable date.\61\ This will result in basic 
information about a closed-end fund's portfolio manager in Form N-CSR 
that is current on the date of filing, and will make the date with 
respect to which other disclosure about a portfolio manager is provided 
consistent with the requirements for the SAI in Forms N-1A, N-2, and N-
3.
---------------------------------------------------------------------------

    \60\ Instruction 1 to Item 8(a)(1), Instruction 1 to Item 
8(a)(2), Instruction 1 to Item 8(a)(3), and Instruction 1 to Item 
8(a)(4) of Form N-CSR.
    \61\ Instruction 1 to Item 8(a)(1), Instruction 1 to Item 
8(a)(2), Instruction 1 to Item 8(a)(3), Instruction 1 to Item 
8(a)(4), and Item 8(b) of Form N-CSR.
---------------------------------------------------------------------------

I. Compliance Date

    The effective date of the amendments is October 1, 2004. All 
initial registration statements on Forms N-1A, N-2, and N-3, and all 
post-effective amendments that are annual updates to effective 
registration statements on these forms, filed on or after February 28, 
2005, must include the disclosure required by the amendments. Moreover, 
all post-effective amendments that add a new series, filed on or after 
February 28, 2005, must comply with the amendments with respect to the 
new series. Every annual report by a closed-end fund on Form N-CSR 
filed for a fiscal year ending on or after December 31, 2005, and every 
semi-annual report by a closed-end fund on Form N-CSR filed after the 
first such annual report, must include the disclosure required by the 
amendments. Based on the comments and the changes we have made to the 
proposed requirements, we believe that this will provide adequate time 
for funds to compile and review the information that must be disclosed.

III. Paperwork Reduction Act

    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 collections of information are: (1) ``Form N-
1A under the Investment Company Act of 1940 and Securities Act of 1933, 
Registration Statement of Open-End Management Investment Companies''; 
(2) ``Form N-2 under the Investment Company Act of 1940 and Securities 
Act of 1933, Registration Statement of Closed-End Management Investment 
Companies''; (3) ``Form N-3--Registration Statement of Separate 
Accounts Organized as Management Investment Companies''; and (4) ``Form 
N-CSR--Certified Shareholder Report of Registered Management Investment 
Companies.'' An agency may not conduct or sponsor, and a person is not 
required to respond to, a collection of information unless it displays 
a currently valid OMB control number.
    Form N-1A (OMB Control No. 3235-0307), Form N-2 (OMB Control No. 
3235-0026), and Form N-3 (OMB Control No. 3235-0316) were adopted 
pursuant to Section 8(a) of the Investment Company Act [15 U.S.C. 80a-
8(a)] and Section 5 of the Securities Act [15 U.S.C. 77e]. Form N-CSR 
(OMB Control No. 3235-0570) was adopted pursuant to Section 30 of the 
Investment Company Act [15 U.S.C. 80a-29] and Sections 13 and 15(d) of 
the Exchange Act [15 U.S.C. 78m and 78o(d)].
    We published notice soliciting comments on the collection of 
information requirements in the Proposing Release and submitted these 
proposed collections of information to the Office of Management and 
Budget (``OMB'') for review in accordance with 44 U.S.C. 3507(d) and 5 
CFR 1320.11.\62\ OMB has approved the collection of information for the 
amendments to Forms N-2 and N-3. We are resubmitting the collections of 
information for the amendments to Forms N-1A and N-CSR. We received no 
comments on any of the proposed collection of information requirements. 
However, as discussed below, we are requesting comment again with 
regard to the collection of information requirements related to Forms 
N-1A and N-CSR.
---------------------------------------------------------------------------

    \62\ See Proposing Release, supra note 6, 69 FR at 12759-60.
---------------------------------------------------------------------------

    The amendments to Forms N-1A, N-2, and N-3 adopted in this release 
require funds to provide improved disclosure regarding their portfolio 
managers in fund prospectuses and SAIs. The amendments also amend Form 
N-CSR to require similar disclosure for closed-end funds in reports on 
Form N-CSR. The paperwork burden estimates for the amendments, 
described below, represent the estimated total burden annualized over a 
three-year period. We expect that

[[Page 52795]]

funds will incur greater internal hour burdens and external costs in 
the first year, but will incur lower burdens and costs in the following 
two years as funds become more efficient in preparing the disclosure.

Form N-1A

    Form N-1A, including the amendments, contains collection of 
information requirements. The likely respondents to this information 
collection are open-end funds registering with the Commission. 
Compliance with the disclosure requirements of Form N-1A is mandatory. 
Responses to the disclosure requirements are not confidential.
    We estimate that, on an annual basis, registrants file initial 
registration statements on Form N-1A covering 483 portfolios, and file 
post-effective amendments on Form N-1A covering 6,542 portfolios. The 
current hour burden for Form N-1A is 1,142,296 hours.\63\ We have 
reduced the estimates provided in the Proposing Release of the 
increases in the hour burden per portfolio per filing of registration 
statements and post-effective amendments on Form N-1A related to the 
amendments, in light of modifications we are making to the proposal 
that will reduce the burden of the amendments.\64\ These modifications 
include eliminating the requirement to describe policies and procedures 
related to conflicts and limiting the disclosure of the portfolio 
managers' ownership of securities to securities of the fund itself. We 
now estimate that the amendments will increase the hour burden per 
portfolio per filing of an initial registration statement on Form N-1A 
by 6 hours and will increase the hour burden per portfolio per filing 
of a post-effective amendment on Form N-1A by 2 hours. Thus, the 
incremental hour burden for Form N-1A resulting from the amendments 
relating to portfolio manager disclosure will be 15,982 hours (483 
portfolios filing initial registration statements x 6 hours per 
portfolio + 6,542 portfolios filing post effective amendments x 2 hours 
per portfolio). This represents a reduction of 15,016 burden hours from 
the estimate of 30,998 burden hours contained in the Proposing Release. 
The estimated total annual hour burden for all funds for the 
preparation and filing of initial registration statements and post-
effective amendments to Form N-1A will be 1,127,280 hours (1,142,296 
hours-15,016 hours).
---------------------------------------------------------------------------

    \63\ This number includes a requested increase of 30,998 burden 
hours in connection with the Proposing Release, but does not include 
a reduction of 17,876 burden hours in connection with the amendments 
in Investment Company Act Release No. 26486 (June 23, 2004) [69 FR 
39798 (June 30, 2004)] that remove disclosure from Form N-1A 
regarding the reasons for board approval of an investment advisory 
contract.
    \64\ In the Proposing Release, we estimated that the amendments 
would increase the hour burden per portfolio per filing of an 
initial registration statement on Form N-1A by 10 hours and would 
increase the hour burden per portfolio per filing of a post-
effective amendment to a registration statement on Form N-1A by 4 
hours.
---------------------------------------------------------------------------

    In addition to reducing the estimate of internal burden hours to 
take into account modifications to the proposal, we are adding an 
estimate of external costs to reflect the possibility that funds will 
engage outside counsel to review the new disclosure and provide related 
legal services. We estimate that, as a result of the amendments, funds 
will incur an additional 1 hour of outside counsel time per portfolio 
per filing of an initial registration statement on Form N-1A and will 
incur an additional 0.5 hours of outside counsel time per portfolio per 
filing of a post-effective amendment on Form N-1A. Thus, we estimate 
that the incremental external costs for Form N-1A resulting from the 
amendments will be $1,126,200 ((483 portfolios filing initial 
registration statements x 1 hour per portfolio + 6,542 portfolios 
filing post-effective amendments x 0.5 hours per portfolio) x $300 per 
hour).\65\
---------------------------------------------------------------------------

    \65\ The estimated average hourly wage of $300 for outside 
counsel is based on estimates provided by industry sources to the 
Commission in connection with other recent rulemakings.
---------------------------------------------------------------------------

Form N-2

    Form N-2, including the amendments, contains collection of 
information requirements. The likely 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.
    We estimate that, on an annual basis, 234 closed-end funds will 
file initial registration statements on Form N-2 and 38 closed-end 
funds will file post-effective amendments on Form N-2. The current hour 
burden for Form N-2 is 134,301 hours. In light of the modifications we 
are making to the proposal, we now estimate that the amendments will 
increase the hour burden per filing of an initial registration 
statement on Form N-2 by 6 hours and the hour burden per filing of a 
post-effective amendment on Form N-2 by 2 hours.\66\ Thus, the 
incremental hour burden resulting from the amendments relating to 
portfolio manager disclosure will be 1,480 hours ((6 hours per fund x 
234 funds) + (2 hours per fund x 38 funds)). This represents a 
reduction of 1,012 burden hours from the estimate of 2,492 in the 
Proposing Release. The total annual hour burden for all funds for 
preparation and filing of initial registration statements and post-
effective amendments on Form N-2 will be 133,289 hours (134,301 hours - 
1,012 hours).
---------------------------------------------------------------------------

    \66\ In the Proposing Release, we estimated that the amendments 
would increase the hour burden per filing of an initial registration 
statement on Form N-2 by 10 hours and would increase the hour burden 
per filing of a post-effective amendment on Form N-2 by 4 hours.
---------------------------------------------------------------------------

    As with Form N-1A above, we estimate that, as a result of the 
amendments, funds will incur an additional 1 hour of outside counsel 
time per filing of an initial registration statement on Form N-2 and 
will incur an additional 0.5 hours of outside counsel time per filing 
of a post-effective amendment on Form N-2. Thus, we estimate that the 
incremental external costs for Form N-2 resulting from the amendments 
will be $75,900 ((1 hour per fund x 234 funds + 0.5 hours per fund x 38 
funds) x $300).\67\
---------------------------------------------------------------------------

    \67\ See supra note 65 regarding the hourly wage estimate for 
outside counsel.
---------------------------------------------------------------------------

Form N-3

    Form N-3, including the amendments, contains collection of 
information requirements. The likely respondents to this information 
collection are separate accounts, organized as management investment 
companies offering variable annuities, registering with the Commission 
on Form N-3. Compliance with the disclosure requirements of Form N-3 is 
mandatory. Responses to the disclosure requirements are not 
confidential.
    The Commission estimates that, on an annual basis, initial 
registration statements covering 3 portfolios are filed on Form N-3 and 
post-effective amendments covering 35 portfolios are filed on Form N-3. 
The current hour burden for Form N-3 is 34,756 hours. In light of the 
modifications we are making to the proposal, we now estimate that the 
amendments will increase the hour burden per portfolio per filing of an 
initial registration statement on Form N-3 by 6 hours and the hour 
burden per portfolio per filing of a post-effective amendment on Form 
N-3 by 2 hours.\68\ Thus, the incremental hour burden resulting from 
the amendments relating

[[Page 52796]]

to portfolio manager disclosure will be 88 hours ((6 hours x 3 
portfolios) + (2 hours x 35 portfolios)). This represents a reduction 
of 82 burden hours from the 170 burden hours estimated in the Proposing 
Release. The total annual hour burden for all funds for preparation and 
filing of initial registration statements and post-effective amendments 
on Form N-3 will be 34,674 hours (34,756 hours - 82 hours).
---------------------------------------------------------------------------

    \68\ In the Proposing Release, we estimated that the amendments 
would increase the hour burden per portfolio per filing of an 
initial registration statement on Form N-3 by 10 hours and would 
increase the hour burden per portfolio per filing of a post-
effective amendment to a registration statement on Form N-3 by 4 
hours.
---------------------------------------------------------------------------

    As with Forms N-1A and N-2 above, we estimate that, as a result of 
the amendments, funds will incur an additional 1 hour of outside 
counsel time per portfolio per filing of an initial registration 
statement on Form N-3 and will incur an additional 0.5 hours of outside 
counsel time per portfolio per filing of a post-effective amendment on 
Form N-3. Thus, we estimate that the incremental external costs for 
Form N-3 resulting from the amendments will be $6,150 ((1 hour x 3 
portfolios) + (0.5 hours x 35 portfolios) x $300).\69\
---------------------------------------------------------------------------

    \69\ See supra note 65 regarding the hourly wage estimate for 
outside counsel.
---------------------------------------------------------------------------

Form N-CSR

    Form N-CSR, including the amendments, contains collection of 
information requirements. The respondents to this information 
collection will be closed-end funds subject to rule 30e-1 under the 
Investment Company Act registering with the Commission on Form N-2. 
Compliance with the disclosure requirements of Form N-CSR is mandatory. 
Responses to the disclosure requirements are not confidential.
    We estimate that, on an annual basis, 733 closed-end funds 
registered on Form N-2 file reports on Form N-CSR.\70\ The current 
total annual hour burden for preparing reports on Form N-CSR is 146,053 
hours.\71\ In light of the modifications we are making to the proposal, 
we now estimate that the amendments will increase the hour burden per 
filing of an annual report on Form N-CSR by 2 hours, and will increase 
the hour burden per filing of a semi-annual report by 1 hour.\72\ Thus, 
the incremental hour burden resulting from the amendments relating to 
portfolio manager disclosure will be 2,199 hours ((2 hours per fund x 
733 closed-end funds) + (1 hour per fund x 733 closed-end funds)). This 
represents a reduction of 2,199 burden hours from the 4,398 burden 
hours estimated in the Proposing Release. The total annual hour burden 
for all funds for preparation and filing of reports on Form N-CSR will 
be 143,854 hours (146,053 hours - 2,199 hours).
---------------------------------------------------------------------------

    \70\ The estimate of the number of affected closed-end funds 
registered on Form N-2 is based on the Commission staff's analysis 
of reports filed on Form N-SAR in 2003.
    \71\ This current total annual burden figure does not include 
the hour burden of 121 hours proposed to be added to Form N-CSR in 
Investment Company Act Release No. 26206 (Oct. 15, 2003) [68 FR 
60784 (Oct. 23, 2003)], in connection with the proposed rules 
regarding security holder director nominations. It does, however, 
include the hour burden of 167 hours added to Form N-CSR in 
Investment Company Act Release No. 26262 (Nov. 24, 2003) [68 FR 
69204 (Dec. 11, 2003)], in connection with the adoption of rules 
requiring disclosure regarding nominating committee functions, and 
the burden of 4,398 hours in connection with the Proposing Release.
    \72\ In the Proposing Release, we estimated that the amendments 
would increase the hour burden per filing of a report on Form N-CSR 
for closed-end funds by 4 hours per annual report on Form N-CSR, and 
by 2 hours per semi-annual report on Form N-CSR.
---------------------------------------------------------------------------

    We estimate that, as a result of the amendments, funds will incur 
an additional 1 hour of outside counsel time per filing of an annual 
report on Form N-CSR and will incur an additional 0.5 hours of outside 
counsel time per filing of a semi-annual report on Form N-CSR. Thus, we 
estimate that the incremental external costs for Form N-CSR resulting 
from the amendments will be $329,850 ((1 hour per fund x 733 closed-end 
funds + 0.5 hours per fund x 733 closed-end funds) x $300).\73\
---------------------------------------------------------------------------

    \73\ See supra note 65 regarding the hourly wage estimate for 
outside counsel.
---------------------------------------------------------------------------

Request for Comments

    The Commission previously submitted burden estimates to OMB for the 
collections of information with respect to Forms N-1A and N-CSR which 
have not yet been approved. The amendments as adopted result in 
modifications to the burden hours associated with these collections of 
information. Because the burden estimates under review at OMB do not 
reflect the modifications made by the Commission in this release, we 
are submitting new estimates to OMB with respect to Forms N-1A and N-
CSR and requesting comments on these new estimates. The Commission 
requests comment in order to:
     Evaluate whether the proposed collections of information 
are necessary for the proper performance of the functions of the 
Commission, including whether the information has practical utility;
     Evaluate the accuracy of the Commission's estimates of the 
burden of the proposed collections of information;
     Determine whether there are ways to enhance the quality, 
utility, and clarity of the information to be collected; and
     Evaluate whether there are ways to minimize the burden of 
the collections of information on the respondents, including through 
the use of automated collection techniques or other forms of 
information technology.
    Persons submitting comments on the collection of information 
requirements should direct the comments to the Office of Management and 
Budget, Attention: Desk Officer for the Securities and Exchange 
Commission, Office of Information and Regulatory Affairs, Room 10102, 
New Executive Office Building, Washington, DC 20503, and should send a 
copy to Jonathan G. Katz, Secretary, Securities and Exchange 
Commission, 450 5th Street, NW., Washington, DC 20549, with reference 
to File No. S7-12-04. Requests for materials submitted to OMB by the 
Commission with regard to this collection of information should be in 
writing, refer to File No. S7-12-04, and be submitted to the Securities 
and Exchange Commission, Office of Filing and Information Services, 450 
Fifth Street, NW., Washington, DC 20549-0609. OMB is required to make a 
decision concerning the collection of information between 30 and 60 
days after publication of this release. Consequently, a comment to OMB 
is best assured of having its full effect if OMB receives it within 30 
days after publication of this release.

IV. Cost/Benefit Analysis

    The Commission is sensitive to the costs and benefits imposed by 
its rules. Our amendments will require funds to provide enhanced 
disclosure about their portfolio managers. Specifically, the amendments 
will:
     Require a fund to identify in its prospectus each member 
of a committee, team, or other group of persons that is jointly and 
primarily responsible for the day-to-day management of the fund's 
portfolio (or in the case of a team with more than five such members, 
the five members with the most significant responsibility for the day-
to-day management of the fund's portfolio);
     Require a fund to provide information in its SAI regarding 
other accounts managed by any of its portfolio managers, including a 
description of material conflicts of interest that may arise in 
connection with simultaneously managing the fund and the other 
accounts;
     Require a fund to disclose in its SAI the structure of, 
and the method used to determine, the compensation of each portfolio 
manager;

[[Page 52797]]

     Require a fund to disclose in its SAI each portfolio 
manager's ownership of securities in the fund; and
     Require a closed-end fund to provide parallel disclosure 
regarding its portfolio managers in its reports on Form N-CSR.
    These amendments are intended to provide greater transparency 
regarding portfolio managers, their incentives in managing a fund, and 
the potential conflicts of interest that may arise when they or the 
adviser that employs them also manages other investment vehicles.
    In the Proposing Release, we provided an analysis of the costs and 
benefits of the proposed amendments, and we requested comments.\74\ 
Although some commenters addressed the costs and benefits of specific 
substantive provisions of the proposed rules, no commenters commented 
directly on the Cost/Benefit Analysis or provided figures related to 
cost-benefit issues.
---------------------------------------------------------------------------

    \74\ See Section V, ``Cost/Benefit Analysis,'' Proposing 
Release, supra note 6, 69 FR at 12760-61.
---------------------------------------------------------------------------

A. Benefits

    The enhanced disclosure regarding portfolio managers that will be 
required under our amendments will benefit investors in several ways. 
First, enhanced disclosure regarding portfolio managers who are members 
of management teams will help investors better evaluate the identity, 
background, and experience of fund management in cases where the fund 
is managed using a team approach. Second, requiring a fund to provide 
disclosure regarding other accounts for which its portfolio managers 
are primarily responsible for day-to-day portfolio management will 
enable investors to assess the conflicts of interest to which a 
portfolio manager may be subject as a result of managing the fund and 
other portfolios, such as hedge funds. Third, requiring a fund to 
provide disclosure regarding the structure of, and method used to 
determine, the compensation of its portfolio managers will help 
investors better understand a portfolio manager's incentives in running 
a fund, and will also shed light on possible conflicts of interest that 
may arise when a portfolio manager manages other accounts. Finally, 
requiring a fund to disclose the ownership of fund securities of each 
of its portfolio managers should help investors to assess the extent to 
which the portfolio manager's interests are aligned with theirs.

B. Costs

    The amendments impose new requirements on funds to provide enhanced 
disclosure regarding their portfolio managers. We estimate that 
complying with these new disclosure requirements will entail a 
relatively small financial burden. Much of the information required 
regarding a fund's portfolio managers, including basic information 
about their identity and business experience, and information about 
other accounts that they manage and their compensation structure, 
should be readily available to a fund's investment adviser. We note 
that our recently adopted code of ethics rules for investment advisers 
require portfolio managers to report to the investment adviser 
information on their securities holdings, including securities in the 
fund, on an annual basis, and to report information on their securities 
transactions each calendar quarter.\75\ Because a portfolio manager 
will be required to report information on his or her fund securities 
ownership periodically, we expect that the cost to a fund of compiling 
and reporting this information for purposes of the amendments should be 
limited.
---------------------------------------------------------------------------

    \75\ See Investment Company Act Release No. 26492 (July 2, 2004) 
[69 FR 41696 (July 9, 2004)] (adopting rule 204A-1(b)(1) under the 
Investment Advisers Act of 1940).
---------------------------------------------------------------------------

    These costs may include both internal costs (for attorneys and 
other non-legal staff of a fund, such as computer programmers, to 
prepare and review the required disclosure) and external costs (for 
printing and typesetting of the disclosure and outside legal counsel). 
For purposes of the Paperwork Reduction Act, we have estimated that the 
new disclosure requirements will add 19,749 hours to the internal 
burden of completing Forms N-1A, N-2, N-3 and N-CSR.\76\ We estimate 
that this additional internal burden will equal total internal costs of 
$1,654,374 annually, or approximately $435 per fund.\77\ In addition, 
we estimate that the external costs of providing the new disclosure 
related to expenses for outside legal counsel will equal $1,538,100 
annually, or approximately $405 per fund.\78\ Thus, the estimated total 
cost of the new disclosure would be approximately $3,192,474 annually 
or approximately $840 per fund.
---------------------------------------------------------------------------

    \76\ This represents 23,490 additional hours for Form N-1A, 
1,986 additional hours for Form N-2, 129 additional hours for Form 
N-3, and 2,566 additional hours for Form N-CSR.
    \77\ These figures are based on a Commission estimate that 
approximately 3,800 investment companies would be subject to the 
amendments and an estimated hourly wage rate of $83.77. The estimate 
of the number of investment companies is based on data derived from 
the Commission's EDGAR filing system. The estimated wage rate is a 
blended rate, based on published hourly wage rates for assistant/
associate general counsels ($82.05) and programmers ($42.05) in New 
York City, and the estimate that staff in these categories will 
divide time equally on compliance with the disclosure requirements, 
yielding a weighted wage rate of $62.05 (($82.05 x .50) + (42.05 x 
.50))= $62.05). See Securities Industry Association, Report on 
Management & Professional Earnings in the Securities Industry 2003 
(Sept. 2003). 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 $83.77 ($62.05 x 1.35) = $83.77). This estimated wage rate for 
compliance attorneys differs from the estimate in the Proposing 
Release, which was based on published compensation for compliance 
attorneys in New York City ($74.22) contained in the Securities 
Industry Association's Report on Management & Professional Earnings 
in the Securities Industry 2001 (Oct. 2001).
    \78\ See supra note 65 regarding the hourly wage estimate for 
outside counsel.
---------------------------------------------------------------------------

    We expect that the external costs relating to the physical delivery 
of the disclosure required by the amendments, such as printing, 
typesetting, and mailing, will be minimal, because this disclosure will 
be required in a fund's SAI (and in the case of a closed-end fund, on 
Form N-CSR also). The SAI is typically not typeset, and is only 
required to be provided to shareholders upon request. Similarly, 
because the disclosure in Form N-CSR for closed-end funds is not 
required to be delivered to shareholders, we estimate that the external 
costs of this disclosure will be minimal as well.

V. Consideration of Burden on Competition; Promotion of Efficiency, 
Competition, and Capital Formation

    Section 23(a)(2) of the Exchange Act requires us, when adopting 
rules under the Exchange Act, to consider the impact that any new rule 
will have on competition.\79\ Section 23(a)(2) also prohibits us from 
adopting any rule that will impose a burden on competition not 
necessary or appropriate in furtherance of the purposes of the Exchange 
Act. In addition, 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.\80\ In the Proposing Release, we requested comments 
on whether the proposed amendments would promote efficiency, 
competition, and capital formation. We received no comments on this 
section of the proposal.
---------------------------------------------------------------------------

    \79\ 15 U.S.C. 78w(a)(2).
    \80\ 15 U.S.C. 77(b), 78c(f), and 80a-2(c).
---------------------------------------------------------------------------

    The amendments are intended to provide greater transparency for 
fund

[[Page 52798]]

shareholders regarding the identity, incentives, and potential 
conflicts of interest of a fund's portfolio managers. These changes may 
improve efficiency. The enhanced disclosure requirements will enable 
shareholders to make a more informed assessment as to whether the 
interests of fund management are aligned with their own interests, 
which could promote more efficient allocation of investments by 
investors. These amendments will also improve competition, as enhanced 
transparency regarding a fund's portfolio managers may encourage 
investors to consider more carefully the background, incentives, and 
potential conflicts of interest of the portfolio managers of the funds 
in which they are invested, or in which they are considering investing. 
Finally, the effect that the amendments will have on capital formation 
are unclear.
    Although, as noted above, we believe that the amendments will 
benefit investors, the magnitude of the effect of the amendments on 
efficiency and competition, and the extent to which they will be offset 
by the costs of the amendments, are difficult to quantify. We note that 
most funds are currently required to provide disclosure in their 
prospectuses regarding the identity and background of their portfolio 
managers.

VI. Final Regulatory Flexibility Analysis

    This Final Regulatory Flexibility Analysis (``Analysis'') has been 
prepared in accordance with 5 U.S.C. 603. It relates to the 
Commission's amendments to Forms N-1A, N-2, and N-3 under the 
Securities Act and the Investment Company Act, and to Form N-CSR under 
the Investment Company Act and the Exchange Act, that will require 
funds to provide improved disclosure about their portfolio managers. We 
published in the release proposing these amendments an Initial 
Regulatory Flexibility Analysis (``IRFA''), which we prepared in 
accordance with 5 U.S.C. 603.

A. Reasons for, and Objectives of, Amendments

    Sections I and II of this Release describe the reasons for and 
objectives of the form amendments. As we discuss in detail above, these 
amendments are designed to require a fund to provide improved 
information regarding its portfolio managers, in order to better help 
investors evaluate their background, incentives in managing the fund, 
and potential conflicts of interest.

B. Significant Issues Raised by Public Comment

    In the IRFA for the proposed amendments, we requested comment on 
any aspect of the IRFA, including the number of small entities that 
would be affected by the proposed amendments, the likely impact of the 
proposal on small entities, the nature of any impact, and providing any 
empirical data supporting the extent of the impact. We received no 
comment letters addressing this section.

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.\81\ Approximately 145 mutual funds registered on Form N-1A and 
approximately 70 closed-end funds registered on Form N-2 meet this 
definition.\82\ We estimate that few, if any, registered separate 
accounts registered on Form N-3 are small entities.\83\
---------------------------------------------------------------------------

    \81\ 17 CFR 270.0-10.
    \82\ This estimate is based on analysis by the Division of 
Investment Management staff of information from databases compiled 
by third-party information providers, including Morningstar, Inc., 
and Lipper.
    \83\ This estimate is based on figures compiled by Division of 
Investment Management staff regarding separate accounts registered 
on Form N-3. 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. 
Rule 0-10(b) under the Investment Company Act [17 CFR 270.0-10(b)].
---------------------------------------------------------------------------

D. Reporting, Recordkeeping, and Other Compliance Requirements

    The amendments will require a fund to identify and provide basic 
information in its prospectus regarding each member of a team 
responsible for managing the fund's portfolio. In addition, a fund will 
be required to provide additional disclosure in its SAI about its 
portfolio managers, including other accounts they manage, compensation 
structure, and ownership of fund securities. A closed-end fund will 
also be required to provide this disclosure in its reports on Form N-
CSR.
    The Commission estimates some one-time formatting and ongoing costs 
and burdens that will be imposed on all funds, including funds that are 
small entities. We note, however, that in many cases mutual funds and 
closed-end funds currently provide disclosure in their prospectuses 
about their portfolio managers, including their names, titles, length 
of service, and business experience. For purposes of the Paperwork 
Reduction Act, we have estimated that the new disclosure requirements 
will increase the hour burden of filings on Forms N-1A, N-2, N-3, and 
N-CSR by 19,749 hours annually, or $1,654,374.\84\ We have also 
estimated that funds will incur an additional $1,583,100 in external 
costs.\85\ We therefore estimate that the amendments will increase 
total costs per fund, including funds that are small entities, by 
approximately $3,192,474 annually, or approximately $840 per fund.\86\
---------------------------------------------------------------------------

    \84\ These figures are based on an estimated hourly wage rate of 
$83.77. See supra note 77.
    \85\ See supra note 65 regarding the hourly wage estimate for 
outside counsel.
    \86\ See supra note 77 regarding the number of investment 
companies subject to the amendments.
---------------------------------------------------------------------------

    We expect that the external costs of providing the additional 
disclosure relating to a fund's portfolio managers, including other 
accounts they manage, compensation structure, and ownership of fund 
securities, will be minimal, because this disclosure will be required 
in a fund's SAI (and in the case of a closed-end fund, on Form N-CSR 
also). The SAI is typically not typeset, and is only required to be 
provided to shareholders upon request. Similarly, because the 
disclosure in Form N-CSR for closed-end funds is not required to be 
delivered to shareholders, we estimate that the external costs of this 
disclosure on Form N-CSR will be minimal as well.

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 issuers. In 
connection with the amendments, the Commission considered the following 
alternatives: (i) The establishment of differing compliance or 
reporting requirements or timetables that take into account the 
resources available to small entities; (ii) the clarification, 
consolidation, or simplification of compliance and reporting 
requirements under the amendments for small entities; (iii) the use of 
performance rather than design standards; and (iv) 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

[[Page 52799]]

for small entities, would not be appropriate or consistent with 
investor protection. The amendments will provide investors with greater 
transparency of information regarding fund portfolio managers, 
including their compensation structure, other accounts that they 
manage, and their ownership of securities in the fund. This increased 
transparency will allow investors to better assess portfolio managers' 
incentives, alignment with shareholders' interests, and potential 
conflicts of interest. Different disclosure requirements for funds that 
are small entities may create the risk that investors in these funds 
would be less able to evaluate the portfolio management of these funds, 
and less able to make informed choices among funds. We believe it is 
important for the disclosure that will be required by the amendments to 
be provided to investors in all funds, not just funds that are not 
considered small entities.
    We have endeavored through the amendments to minimize the 
regulatory burden on all funds, including small entities, while meeting 
our regulatory objectives. For example, we have modified our proposal 
to eliminate the proposed requirement to describe policies and 
procedures related to conflicts of interest in the SAI, and to limit 
the disclosure of a portfolio manager's ownership of securities to 
securities of the fund that he or she manages. In addition, we have 
modified our proposed compliance date to allow funds additional time to 
provide the required disclosure in their initial registration 
statements and post-effective amendments. Small entities should benefit 
from the Commission's reasoned approach to the amendments to the same 
degree as other investment companies. Further clarification, 
consolidation, or simplification of the amendments for funds that are 
small entities would be inconsistent with the Commission's concern for 
investor protection. Finally, we do not consider using performance 
rather than design standards to be consistent with our statutory 
mandate of investor protection in the present context. Based on our 
past experience, we believe that the disclosure will be more useful to 
investors if there are enumerated informational requirements.

VII. Statutory Authority

    The Commission is adopting amendments to Forms N-1A, N-2, and N-3 
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]. The Commission is also adopting 
amendments to Form N-CSR pursuant to authority set forth in sections 
10(b), 13, 15(d), 23(a), and 36 of the Exchange Act [15 U.S.C. 78j(b), 
78m, 78o(d), 78w(a), and 78mm] 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 Parts 239 and 249

    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, Title 17, Chapter II, of the 
Code of Federal Regulations is amended as follows.

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

0
1. 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 249--FORMS, SECURITIES EXCHANGE ACT OF 1934

0
2. The authority citation for part 249 continues to read, in part, as 
follows:

    Authority: 15 U.S.C. 78a et seq. and 7201 et seq.; and 18 U.S.C. 
1350, unless otherwise noted.
* * * * *

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

0
3. 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.
* * * * *


Sec.  270.30a-2  [Amended]

0
4. Section 270.30a-2 is amended by:
0
a. Revising the reference ``Item 11(a)(2)'' in paragraph (a) to read 
``Item 12(a)(2)''; and
0
b. Revising the reference ``Item 11(b)'' in paragraph (b) to read 
``Item 12(b)''.

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

0
5. 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.
* * * * *

0
6. Form N-1A (referenced in Sec. Sec.  239.15A and 274.11A) is amended 
by:
0
a. Revising Item 1(b)(1) and Instruction 1 to Item 1(b)(1);
0
b. Revising Item 5(a)(2) and Instructions 1 and 2 to Item 5(a)(2) and 
removing Instructions 3 and 4 to Item 5(a)(2);
0
c. Redesignating Items 15 through 29 as Items 16 through 30;
0
d. Adding new Item 15;
0
e. In paragraph B.2(b) of the General Instructions, revising the phrase 
``(except Items 1, 2, 3, and 8), B, and C (except Items 22(e) and (i)-
(k))'' to read ``(except Items 1, 2, 3, and 8), B, and C (except Items 
23(e) and (i)-(k))'';
0
f. In Item 2(c)(2)(iii), revising the phrase ``Instruction 5 to Item 
21(b)(7)'' to read ``Instruction 5 to Item 22(b)(7)'';
0
g. In Instruction 2(a) to Item 2(c)(2), revising the references ``Item 
20(a)'', Item 20(b)(1)'', and ``Items 20(b)(2) and (3)'' to read ``Item 
21(a)'', Item 21(b)(1)'', and ``Items 21(b)(2) and (3)'', respectively;
0
h. In Instruction 2(b) to Item 2(c)(2), revising the phrase 
``Instruction 6 to Item 21(b)(7)'' to read ``Instruction 6 to Item 
22(b)(7)'';
0
i. In Instruction 2(d) to Item 2(c)(2), revising the references ``Item 
20(b)(2)'' and ``Item 20'' to read ``Item 21(b)(2)'' and ``Item 21'', 
respectively;
0
j. In Instruction 4 to Item 2(c)(2), revising the phrase ``Instruction 
11 to Item 21(b)(7)'' to read ``Instruction 11 to Item 22(b)(7)'';
0
k. In Instruction to paragraph (a) of newly redesignated Item 18, 
revising the reference ``Item 17(a)'' to read ``Item 18(a)'';
0
l. In Instruction 4 to paragraph (c) of newly redesignated Item 18 and 
paragraph (k) of newly redesignated Item 23, revising the reference 
``Item 21'' to read ``Item 22'';
0
m. In Instruction 1 to paragraph (c) of newly redesignated Item 20, 
revising the reference ``Item 29'' to read ``Item 30'';
0
n. In paragraph (b) of newly redesignated Item 27, revising the 
reference ``Item 19'' to read ``Item 20'';
0
o. In Instruction 2 to paragraph (c) of newly redesignated Item 27, 
revising the reference ``Item 19(c)'' to read ``Item 20(c)'';
0
p. In paragraph (b)(7)(ii)(B) of newly redesignated Item 22, revising 
the

[[Page 52800]]

reference ``Item 20(b)(1)'' to read ``Item 21(b)(1)'';
0
q. In Instruction to paragraph (c)(1)(ii) of newly redesignated Item 
22, revising the references ``Item 21(b)(1)'' and ``Item 21(c)(1)'' to 
read ``Item 22(b)(1)'' and ``Item 22(c)(1)'', respectively; and
0
r. In Instruction 2(a)(ii) to paragraph (d)(1) of newly redesignated 
Item 22, revising the reference ``Item 21(d)(1)'' to read ``Item 
22(d)(1)''.
    The additions and revisions are to read as follows:


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

FORM N-1A

* * * * *

Item 1. Front and Back Cover Pages

* * * * *
    (b) Back Cover Page. Include the following information, in plain 
English under rule 421(d) under the Securities Act, on the outside back 
cover page of the prospectus:
    (1) A statement that the SAI includes additional information about 
the Fund, and a statement to the following effect:

    Additional information about the Fund's investments is available 
in the Fund's annual and semi-annual reports to shareholders. In the 
Fund's annual report, you will find a discussion of the market 
conditions and investment strategies that significantly affected the 
Fund's performance during its last fiscal year.

    Explain that the SAI and the Fund's annual and semi-annual reports 
are available, without charge, upon request, and explain how 
shareholders in the Fund may make inquiries to the Fund. Provide a 
toll-free (or collect) telephone number for investors to call: To 
request the SAI; to request the Fund's annual report; to request the 
Fund's semi-annual report; to request other information about the Fund; 
and to make shareholder inquiries. Also, state whether the Fund makes 
available its SAI and annual and semi-annual reports, free of charge, 
on or through the Fund's Web site at a specified Internet address. If 
the Fund does not make its SAI and shareholder reports available in 
this manner, disclose the reasons why it does not do so (including, 
where applicable, that the Fund does not have an Internet Web site).

Instructions

    1. A Fund may indicate, if applicable, that the SAI, annual and 
semi-annual reports, and other information are available by E-mail 
request.
* * * * *

Item 5. Management, Organization, and Capital Structure

    (a) * * *
    (2) Portfolio Manager. State the name, title, and length of service 
of the person or persons employed by or associated with the Fund or an 
investment adviser of the Fund who are primarily responsible for the 
day-to-day management of the Fund's portfolio (``Portfolio Manager''). 
Also state each Portfolio Manager's business experience during the past 
5 years. Include a statement, adjacent to the foregoing disclosure, 
that the SAI provides additional information about the Portfolio 
Manager's(s') compensation, other accounts managed by the Portfolio 
Manager(s), and the Portfolio Manager's(s') ownership of securities in 
the Fund.

Instructions

    1. This requirement does not apply to a Money Market Fund.
    2. If a committee, team, or other group of persons associated with 
the Fund or an investment adviser of the Fund is jointly and primarily 
responsible for the day-to-day management of the Fund's portfolio, 
information in response to this Item is required for each member of 
such committee, team, or other group. For each such member, provide a 
brief description of the person's role on the committee, team, or other 
group (e.g., lead member), including a description of any limitations 
on the person's role and the relationship between the person's role and 
the roles of other persons who have responsibility for the day-to-day 
management of the Fund's portfolio. If more than five persons are 
jointly and primarily responsible for the day-to-day management of the 
Fund's portfolio, the Fund need only provide information for the five 
persons with the most significant responsibility for the day-to-day 
management of the Fund's portfolio.
* * * * *

Item 15. Portfolio Managers

    (a) Other Accounts Managed. If a Portfolio Manager required to be 
identified in response to Item 5(a)(2) is primarily responsible for the 
day-to-day management of the portfolio of any other account, provide 
the following information:
    (1) The Portfolio Manager's name;
    (2) The number of other accounts managed within each of the 
following categories and the total assets in the accounts managed 
within each category:
    (A) Registered investment companies;
    (B) Other pooled investment vehicles; and
    (C) Other accounts.
    (3) For each of the categories in paragraph (a)(2) of this Item, 
the number of accounts and the total assets in the accounts with 
respect to which the advisory fee is based on the performance of the 
account; and
    (4) A description of any material conflicts of interest that may 
arise in connection with the Portfolio Manager's management of the 
Fund's investments, on the one hand, and the investments of the other 
accounts included in response to paragraph (a)(2) of this Item, on the 
other. This description would include, for example, material conflicts 
between the investment strategy of the Fund and the investment strategy 
of other accounts managed by the Portfolio Manager and material 
conflicts in allocation of investment opportunities between the Fund 
and other accounts managed by the Portfolio Manager.

Instructions

    1. Provide the information required by this paragraph as of the end 
of the Fund's most recently completed fiscal year, except that, in the 
case of an initial registration statement or an update to the Fund's 
registration statement that discloses a new Portfolio Manager, 
information with respect to any newly identified Portfolio Manager must 
be provided as of the most recent practicable date. Disclose the date 
as of which the information is provided.
    2. If a committee, team, or other group of persons that includes 
the Portfolio Manager is jointly and primarily responsible for the day-
to-day management of the portfolio of an account, include the account 
in responding to paragraph (a) of this Item.
    (b) Compensation. Describe the structure of, and the method used to 
determine, the compensation of each Portfolio Manager required to be 
identified in response to Item 5(a)(2). For each type of compensation 
(e.g., salary, bonus, deferred compensation, retirement plans and 
arrangements), describe with specificity the criteria on which that 
type of compensation is based, for example, whether compensation is 
fixed, whether (and, if so, how) compensation is based on Fund pre-or 
after-tax performance over a certain time period, and whether (and, if 
so, how) compensation is based on the value of assets held in the 
Fund's portfolio. For example, if compensation is based solely or in 
part on performance, identify any benchmark used to measure performance 
and state the length of the period over which performance is measured.

[[Page 52801]]

Instructions

    1. Provide the information required by this paragraph as of the end 
of the Fund's most recently completed fiscal year, except that, in the 
case of an initial registration statement or an update to the Fund's 
registration statement that discloses a new Portfolio Manager, 
information with respect to any newly identified Portfolio Manager must 
be provided as of the most recent practicable date. Disclose the date 
as of which the information is provided.
    2. Compensation includes, without limitation, salary, bonus, 
deferred compensation, and pension and retirement plans and 
arrangements, whether the compensation is cash or non-cash. Group life, 
health, hospitalization, medical reimbursement, relocation, and pension 
and retirement plans and arrangements may be omitted, provided that 
they do not discriminate in scope, terms, or operation in favor of the 
Portfolio Manager or a group of employees that includes the Portfolio 
Manager and are available generally to all salaried employees. The 
value of compensation is not required to be disclosed under this Item.
    3. Include a description of the structure of, and the method used 
to determine, any compensation received by the Portfolio Manager from 
the Fund, the Fund's investment adviser, or any other source with 
respect to management of the Fund and any other accounts included in 
the response to paragraph (a)(2) of this Item. This description must 
clearly disclose any differences between the method used to determine 
the Portfolio Manager's compensation with respect to the Fund and other 
accounts, e.g., if the Portfolio Manager receives part of an advisory 
fee that is based on performance with respect to some accounts but not 
the Fund, this must be disclosed.
    (c) Ownership of Securities. For each Portfolio Manager required to 
be identified in response to Item 5(a)(2), state the dollar range of 
equity securities in the Fund beneficially owned by the Portfolio 
Manager using the following ranges: none, $1-$10,000, $10,001-$50,000, 
$50,001-$100,000, $100,001-$500,000, $500,001-$1,000,000, or over 
$1,000,000.

Instructions

    1. Provide the information required by this paragraph as of the end 
of the Fund's most recently completed fiscal year, except that, in the 
case of an initial registration statement or an update to the Fund's 
registration statement that discloses a new Portfolio Manager, 
information with respect to any newly identified Portfolio Manager must 
be provided as of the most recent practicable date. Specify the 
valuation date.
    2. Determine ``beneficial ownership'' in accordance with rule 16a-
1(a)(2) under the Exchange Act (17 CFR 240.16a-1(a)(2)).
* * * * *

0
7. Form N-2 (referenced in Sec. Sec.  239.14 and 274.11a-1) is amended 
by:
0
a. Revising Item 1.1.d;
0
b. Revising Item 9.1.c and the Instructions to Item 9.1.c;
0
c. Redesignating Items 21 through 33 as Items 22 through 34;
0
d. Adding new Item 21;
0
e. In paragraph E.3 of the General Instructions, revising the reference 
``Item 33.4'' to read ``Item 34.4'';
0
f. In paragraph F of the General Instructions, revising the reference 
``Items 4.1 or 23'' to read ``Items 4.1 or 24'';
0
g. In paragraph F of the General Instructions, revising the reference 
``Items 4.2, 8.6.c or 23'' to read ``Items 4.2, 8.6.c or 24'';
0
h. In paragraph F of the General Instructions, revising the reference 
``Items 4.1, 4.2, 8.6.c or 23'' to read ``Items 4.1, 4.2, 8.6.c or 
24'';
0
i. In paragraph F of the General Instructions, revising the reference 
``Item 24.1'' to read ``Item 25.1'';
0
j. In paragraph G.3 of the General Instructions, revising the reference 
``Items 24.2.h, 24.2.l, 24.2.n, and 24.2.o'' to read ``Items 25.2.h, 
25.2.l, 25.2.n, and 25.2.o'';
0
k. In the first paragraph of General Instructions for Part B: Statement 
of Additional Information, revising the reference ``Item 33.6'' to read 
``Item 34.6'';
0
l. In Instruction 6 to Item 1.1.g, revising the reference ``Item 26'' 
to read ``Item 27'';
0
m. In Instruction 3 to Item 8.6.c, revising the reference ``Item 23'' 
to read ``Item 24'';
0
n. In Instruction 2 to Item 10.6, revising the reference ``Item 
24.2.n'' to read ``Item 25.2n'';
0
o. In newly redesignated Item 24.1.b, revising the reference ``Item 
23'' to read ``Item 24'';
0
p. In newly redesignated Item 25.2.o, revising the reference ``Items 
8.6 or 23'' to read ``Items 8.6 or 24''; and
0
q. In Instruction 2 to newly redesignated Item 25, revising the 
reference ``Items 8.6 or 23'' to read ``Items 8.6 or 24''.
    The additions and revisions are to read as follows:

    Note: The text of Form N-2 does not, and these amendments will 
not, appear in the Code of Federal Regulations.

Form N-2

* * * * *

Item 1. Outside Front Cover

    1. * * *
    d. A statement that (A) The prospectus sets forth concisely the 
information about the Registrant that a prospective investor ought to 
know before investing; (B) the prospectus should be retained for future 
reference; and (C) additional information about the Registrant has been 
filed with the Commission and is available upon written or oral request 
and without charge. (This statement should explain how to obtain the 
SAI, whether any of it has been incorporated by reference into the 
prospectus, and where the table of contents of the SAI appears in the 
prospectus. This statement should also explain how to obtain the 
Registrant's annual and semi-annual reports to shareholders. Provide a 
toll-free (or collect) telephone number for investors to call: to 
request the SAI; to request the Registrant's annual report; to request 
the Registrant's semi-annual report; to request other information about 
the Registrant; and to make shareholder inquiries. Also state whether 
the Registrant makes available its SAI and annual and semi-annual 
reports, free of charge, on or through the Registrant's Web site at a 
specified Internet address. If the Registrant does not make its SAI and 
shareholder reports available in this manner, disclose the reasons why 
it does not do so (including, where applicable, that the Registrant 
does not have an Internet Web site.) Also include the information that 
the Commission maintains an Internet Web site (http://www.sec.gov) that 
contains the SAI, material incorporated by reference, and other 
information regarding registrants.);
* * * * *

Item 9. Management

    1. * * *
    c. Portfolio Management: the name, title, and length of service of 
the person or persons employed by or associated with the Registrant or 
an investment adviser of the Registrant who are primarily responsible 
for the day-to-day management of the Registrant's portfolio 
(``Portfolio Manager''). Also state each Portfolio Manager's business 
experience during the past 5 years. Include a statement, adjacent to 
the foregoing disclosure, that the SAI provides additional information 
about the Portfolio Manager's(s') compensation, other accounts managed 
by the Portfolio Manager(s), and the Portfolio Manager's(s') ownership 
of securities in the Registrant.

[[Page 52802]]

Instruction

    If a committee, team, or other group of persons associated with the 
Registrant or an investment adviser of the Registrant is jointly and 
primarily responsible for the day-to-day management of the Registrant's 
portfolio, information in response to this Item is required for each 
member of such committee, team, or other group. For each such member, 
provide a brief description of the person's role on the committee, 
team, or other group (e.g., lead member), including a description of 
any limitations on the person's role and the relationship between the 
person's role and the roles of other persons who have responsibility 
for the day-to-day management of the Registrant's portfolio. If more 
than five persons are jointly and primarily responsible for the day-to-
day management of the Registrant's portfolio, the Registrant need only 
provide information for the five persons with the most significant 
responsibility for the day-to-day management of the Registrant's 
portfolio.
* * * * *

Item 21. Portfolio Managers

    1. Other Accounts Managed: If a Portfolio Manager required to be 
identified in response to Item 9.1.c is primarily responsible for the 
day-to-day management of the portfolio of any other account, provide 
the following information:
    a. The Portfolio Manager's name;
    b. The number of other accounts managed within each of the 
following categories and the total assets in the accounts managed 
within each category:
    (1) Registered investment companies;
    (2) Other pooled investment vehicles; and
    (3) Other accounts.
    c. For each of the categories in Item 21.1.b., the number of 
accounts and the total assets in the accounts with respect to which the 
advisory fee is based on the performance of the account; and
    d. A description of any material conflicts of interest that may 
arise in connection with the Portfolio Manager's management of the 
Registrant's investments, on the one hand, and the investments of the 
other accounts included in response to Item 21.1b., on the other. This 
description would include, for example, material conflicts between the 
investment strategy of the Registrant and the investment strategy of 
other accounts managed by the Portfolio Manager and material conflicts 
in allocation of investment opportunities between the Registrant and 
other accounts managed by the Portfolio Manager.

Instructions

    1. Provide the information required by Item 21.1 as of the end of 
the Registrant's most recently completed fiscal year, except that, in 
the case of an initial registration statement or an update to the 
Registrant's registration statement that discloses a new Portfolio 
Manager, information with respect to any newly identified Portfolio 
Manager must be provided as of the most recent practicable date. 
Disclose the date as of which the information is provided.
    2. If a committee, team, or other group of persons that includes 
the Portfolio Manager is jointly and primarily responsible for the day-
to-day management of the portfolio of an account, include the account 
in responding to Item 21.1.
    2. Compensation: Describe the structure of, and the method used to 
determine, the compensation of each Portfolio Manager required to be 
identified in response to Item 9.1.c. For each type of compensation 
(e.g., salary, bonus, deferred compensation, retirement plans and 
arrangements), describe with specificity the criteria on which that 
type of compensation is based, for example, whether compensation is 
fixed, whether (and, if so, how) compensation is based on the 
Registrant's pre- or after-tax performance over a certain time period, 
and whether (and, if so, how) compensation is based on the value of 
assets held in the Registrant's portfolio. For example, if compensation 
is based solely or in part on performance, identify any benchmark used 
to measure performance and state the length of the period over which 
performance is measured.

Instructions

    1. Provide the information required by Item 21.2 as of the end of 
the Registrant's most recently completed fiscal year, except that, in 
the case of an initial registration statement or an update to the 
Registrant's registration statement that discloses a new Portfolio 
Manager, information with respect to any newly identified Portfolio 
Manager must be provided as of the most recent practicable date. 
Disclose the date as of which the information is provided.
    2. Compensation includes, without limitation, salary, bonus, 
deferred compensation, and pension and retirement plans and 
arrangements, whether the compensation is cash or non-cash. Group life, 
health, hospitalization, medical reimbursement, relocation, and pension 
and retirement plans and arrangements may be omitted, provided that 
they do not discriminate in scope, terms, or operation in favor of the 
Portfolio Manager or a group of employees that includes the Portfolio 
Manager and are available generally to all salaried employees. The 
value of compensation is not required to be disclosed under this Item.
    3. Include a description of the structure of, and the method used 
to determine, any compensation received by the Portfolio Manager from 
the Registrant, the Registrant's investment adviser, or any other 
source with respect to management of the Registrant and any other 
accounts included in the response to Item 21.1.b. This description must 
clearly disclose any differences between the method used to determine 
the Portfolio Manager's compensation with respect to the Registrant and 
other accounts, e.g., if the Portfolio Manager receives part of an 
advisory fee that is based on performance with respect to some accounts 
but not the Registrant, this must be disclosed.
    3. Ownership of Securities: For each Portfolio Manager required to 
be identified in response to Item 9.1.c, state the dollar range of 
equity securities in the Registrant beneficially owned by the Portfolio 
Manager using the following ranges: none, $1-$10,000, $10,001-$50,000, 
$50,001-$100,000, $100,001-$500,000, $500,001-$1,000,000, or over 
$1,000,000.

Instructions

    1. Provide the information required by Item 21.3 as of the end of 
the Registrant's most recently completed fiscal year, except that, in 
the case of an initial registration statement or an update to the 
Registrant's registration statement that discloses a new Portfolio 
Manager, information with respect to any newly identified Portfolio 
Manager must be provided as of the most recent practicable date. 
Specify the valuation date.
    2. Determine ``beneficial ownership'' in accordance with rule 16a-
1(a)(2) under the Exchange Act (17 CFR 240.16a-1(a)(2)).
* * * * *
0
8. Form N-3 (referenced in Sec. Sec.  239.17a and 274.11b) is amended 
by:
0
a. Revising Item 1(a)(vi);
0
b. Adding new Item 6(e);
0
c. Redesignating Items 22 through 37 as Items 23 through 38;
0
d. Adding new Item 22;
0
e. In paragraph G of the General Instructions, revising the reference 
``Items 4(a) or 27'' to read ``Items 4(a) or 28'';
0
f. In paragraph G(2) of the General Instructions, revising the 
reference ``Item 28(a)'' to read ``Item 29(a)'';

[[Page 52803]]

0
g. In paragraph H(3) of the General Instructions, revising the 
reference ``Item 28(b)(5), (12), (13), and (14)'' to read ``Items 
29(b)(5), (12), (13), and (14)'';
0
h. In Instruction 3(d) of Item 4(b), revising the reference ``Item 27'' 
to read ``Item 28'';
0
i. In Instruction 2 of Item 9, revising the reference ``Item 26'' to 
read ``Item 27'';
0
j. In Instruction 1 of newly redesignated Item 24, revising the 
reference ``Item 23(f)'' to read ``Item 24(f)'';
0
k. In newly redesignated Item 29(b)(14), revising the reference ``Item 
27'' to read ``Item 28''; and
0
l. In Instruction 2 of newly redesignated Item 29, revising the 
reference ``Item 27'' to read ``Item 28''.
    The additions and revisions are to read as follows:


    Note: The text of Form N-3 does not, and these amendments will 
not, appear in the Code of Federal Regulations.

Form N-3

* * * * *

Item 1. Cover Page

    (a) * * *
    (vi) A statement or statements that (A) The prospectus sets forth 
information about the Registrant that a prospective investor ought to 
know before investing; (B) the prospectus should be retained for future 
reference; and (C) additional information about the Registrant has been 
filed with the Commission and is available upon written or oral request 
and without charge (This statement should explain how to obtain the 
Statement of Additional Information (``SAI''), whether any of it has 
been incorporated by reference into the prospectus, and where the table 
of contents of the SAI appears in the prospectus. This statement should 
also explain how to obtain the Registrant's annual and semi-annual 
reports to shareholders. Provide a toll-free (or collect) telephone 
number for investors to call: to request the SAI; to request the 
Registrant's annual report; to request the Registrant's semi-annual 
report; to request other information about the Registrant; and to make 
shareholder inquiries. Also state whether the Registrant makes 
available its SAI and annual and semi-annual reports, free of charge, 
on or through the Registrant's Web site at a specified Internet 
address. If the Registrant does not make its SAI and shareholder 
reports available in this manner, disclose the reasons why it does not 
do so (including, where applicable, that the Registrant does not have 
an Internet Web site.) Also include the information that the Commission 
maintains an Internet Web site (http://www.sec.gov) that contains the 
SAI, material incorporated by reference, and other information 
regarding registrants.);
* * * * *

Item 6. Management

* * * * *
    (e) The name, title, and length of service of the person or persons 
employed by or associated with the Registrant or an investment adviser 
of the Registrant who are primarily responsible for the day-to-day 
management of the Registrant's portfolio (``Portfolio Manager''). Also 
state each Portfolio Manager's business experience during the past 5 
years. Include a statement, adjacent to the foregoing disclosure, that 
the SAI provides additional information about the Portfolio 
Manager's(s') compensation, other accounts managed by the Portfolio 
Manager(s), and the Portfolio Manager's(s') ownership of securities in 
the Registrant.

Instructions

    1. This requirement does not apply to a Registrant that holds 
itself out as a money market fund and meets the maturity, quality, and 
diversification requirements of rule 2a-7 [17 CFR 270.2a-7].
    2. If a committee, team, or other group of persons associated with 
the Registrant or an investment adviser of the Registrant is jointly 
and primarily responsible for the day-to-day management of the 
Registrant's portfolio, information in response to this Item is 
required for each member of such committee, team, or other group. For 
each such member, provide a brief description of the person's role on 
the committee, team, or other group (e.g., lead member), including a 
description of any limitations on the person's role and the 
relationship between the person's role and the roles of other persons 
who have responsibility for the day-to-day management of the 
Registrant's portfolio. If more than five persons are jointly and 
primarily responsible for the day-to-day management of the Registrant's 
portfolio, the Registrant need only provide information for the five 
persons with the most significant responsibility for the day-to-day 
management of the Registrant's portfolio.
* * * * *

Item 22. Portfolio Managers

    (a) If a Portfolio Manager required to be identified in response to 
Item 6(e) is primarily responsible for the day-to-day management of the 
portfolio of any other account, provide the following information:
    (i) The Portfolio Manager's name;
    (ii) The number of other accounts managed within each of the 
following categories and the total assets in the accounts managed 
within each category:
    (A) Registered investment companies;
    (B) Other pooled investment vehicles; and
    (C) Other accounts.
    (iii) For each of the categories in paragraph (a)(ii) of this Item, 
the number of accounts and the total assets in the accounts with 
respect to which the advisory fee is based on the performance of the 
account; and
    (iv) A description of any material conflicts of interest that may 
arise in connection with the Portfolio Manager's management of the 
Registrant's investments, on the one hand, and the investments of the 
other accounts included in response to paragraph (a)(ii) of this Item, 
on the other. This description would include, for example, material 
conflicts between the investment strategy of the Registrant and the 
investment strategy of other accounts managed by the Portfolio Manager 
and material conflicts in allocation of investment opportunities 
between the Registrant and other accounts managed by the Portfolio 
Manager.

Instructions

    1. Provide the information required by paragraph (a) of this Item 
as of the end of the Registrant's most recently completed fiscal year, 
except that, in the case of an initial registration statement or an 
update to the Registrant's registration statement that discloses a new 
Portfolio Manager, information with respect to any newly identified 
Portfolio Manager must be provided as of the most recent practicable 
date. Disclose the date as of which the information is provided.
    2. If a committee, team, or other group of persons that includes 
the Portfolio Manager is jointly and primarily responsible for the day-
to-day management of the portfolio of an account, include the account 
in responding to paragraph (a) of this Item.
    (b) Describe the structure of, and the method used to determine, 
the compensation of each Portfolio Manager required to be identified in 
response to Item 6(e). For each type of compensation (e.g., salary, 
bonus, deferred compensation, retirement plans and arrangements), 
describe with specificity the criteria on which that type of 
compensation is based, for example, whether compensation is fixed, 
whether (and, if so, how)

[[Page 52804]]

compensation is based on the Registrant's pre-or after-tax performance 
over a certain time period, and whether (and, if so, how) compensation 
is based on the value of assets held in the Registrant's portfolio. For 
example, if compensation is based solely or in part on performance, 
identify any benchmark used to measure performance and state the length 
of the period over which performance is measured.

Instructions

    1. Provide the information required by paragraph (b) of this Item 
as of the end of the Registrant's most recently completed fiscal year, 
except that, in the case of an initial registration statement or an 
update to the Registrant's registration statement that discloses a new 
Portfolio Manager, information with respect to any newly identified 
Portfolio Manager must be provided as of the most recent practicable 
date. Disclose the date as of which the information is provided.
    2. Compensation includes, without limitation, salary, bonus, 
deferred compensation, and pension and retirement plans and 
arrangements, whether the compensation is cash or non-cash. Group life, 
health, hospitalization, medical reimbursement, relocation, and pension 
and retirement plans and arrangements may be omitted, provided that 
they do not discriminate in scope, terms, or operation in favor of the 
Portfolio Manager or a group of employees that includes the Portfolio 
Manager and are available generally to all salaried employees. The 
value of compensation is not required to be disclosed under this Item.
    3. Include a description of the structure of, and the method used 
to determine, any compensation received by the Portfolio Manager from 
the Registrant, the Registrant's investment adviser, or any other 
source with respect to management of the Registrant and any other 
accounts included in the response to paragraph (a)(ii) of this Item. 
This description must clearly disclose any differences between the 
method used to determine the Portfolio Manager's compensation with 
respect to the Registrant and other accounts, e.g., if the Portfolio 
Manager receives part of an advisory fee that is based on performance 
with respect to some accounts but not the Registrant, this must be 
disclosed.
    (c) For each Portfolio Manager required to be identified in 
response to Item 6(e), state the dollar range of equity securities in 
the Registrant beneficially owned by the Portfolio Manager using the 
following ranges: none, $1-$10,000, $10,001-$50,000, $50,001-$100,000, 
$100,001-$500,000, $500,001-$1,000,000, or over $1,000,000.

Instructions

    1. Provide the information required by paragraph (c) of this Item 
as of the end of the Registrant's most recently completed fiscal year, 
except that, in the case of an initial registration statement or an 
update to the Registrant's registration statement that discloses a new 
Portfolio Manager, information with respect to any newly identified 
Portfolio Manager must be provided as of the most recent practicable 
date. Specify the valuation date.
    2. Determine ``beneficial ownership'' in accordance with rule 16a-
1(a)(2) under the Exchange Act (17 CFR 240.16a-1(a)(2)).
* * * * *
0
9. Form N-CSR (referenced in Sec. Sec.  249.331 and 274.128) is amended 
by:
0
a. Revising the reference ``11(a)(1)'' in General Instruction D and 
paragraphs (c) and (f)(1) of Item 2 to read ``12(a)(1) '';
0
b. Redesignating Items 8 through 11 as Items 9 through 12; and
0
c. Adding new Item 8.
    The additions and revisions are to read as follows:


    Note: The text of Form N-CSR does not, and these amendments will 
not, appear in the Code of Federal Regulations.

Form N-CSR

* * * * *

Item 8. Portfolio Managers of Closed-End Management Investment 
Companies

    (a) If the registrant is a closed-end management investment company 
that is filing an annual report on this Form N-CSR, provide the 
following information:
    (1) State the name, title, and length of service of the person or 
persons employed by or associated with the registrant or an investment 
adviser of the registrant who are primarily responsible for the day-to-
day management of the registrant's portfolio (``Portfolio Manager''). 
Also state each Portfolio Manager's business experience during the past 
5 years.

Instructions to Paragraph (a)(1)

    1. Provide the information required by this paragraph as of the 
date of filing of the report. Disclose the date as of which the 
information is provided.
    2. If a committee, team, or other group of persons associated with 
the registrant or an investment adviser of the registrant is jointly 
and primarily responsible for the day-to-day management of the 
registrant's portfolio, information in response to this Item is 
required for each member of such committee, team, or other group. For 
each such member, provide a brief description of the person's role on 
the committee, team, or other group (e.g., lead member), including a 
description of any limitations on the person's role and the 
relationship between the person's role and the roles of other persons 
who have responsibility for the day-to-day management of the 
registrant's portfolio. If more than five persons are jointly and 
primarily responsible for the day-to-day management of the registrant's 
portfolio, the registrant need only provide information for the five 
persons with the most significant responsibility for the day-to-day 
management of the registrant's portfolio.
    (2) If a Portfolio Manager required to be identified in response to 
paragraph (a)(1) of this Item is primarily responsible for the day-to-
day management of the portfolio of any other account, provide the 
following information:
    (i) The Portfolio Manager's name;
    (ii) The number of other accounts managed within each of the 
following categories and the total assets in the accounts managed 
within each category:
    (A) Registered investment companies;
    (B) Other pooled investment vehicles; and
    (C) Other accounts.
    (iii) For each of the categories in paragraph (a)(2)(ii) of this 
Item, the number of accounts and the total assets in the accounts with 
respect to which the advisory fee is based on the performance of the 
account; and
    (iv) A description of any material conflicts of interest that may 
arise in connection with the Portfolio Manager's management of the 
registrant's investments, on the one hand, and the investments of the 
other accounts included in response to paragraph (a)(2)(ii) of this 
Item, on the other. This description would include, for example, 
material conflicts between the investment strategy of the registrant 
and the investment strategy of other accounts managed by the Portfolio 
Manager and material conflicts in allocation of investment 
opportunities between the registrant and other accounts managed by the 
Portfolio Manager.

Instructions to Paragraph (a)(2)

    1. Provide the information required by this paragraph as of the end 
of the registrant's most recently completed fiscal year, except that, 
in the case of any newly identified Portfolio Manager,

[[Page 52805]]

information must be provided as of the most recent practicable date. 
Disclose the date as of which the information is provided.
    2. If a committee, team, or other group of persons that includes 
the Portfolio Manager is jointly and primarily responsible for the day-
to-day management of the portfolio of an account, include the account 
in responding to paragraph (a)(2) of this Item.
    (3) Describe the structure of, and the method used to determine, 
the compensation of each Portfolio Manager required to be identified in 
response to paragraph (a)(1) of this Item. For each type of 
compensation (e.g., salary, bonus, deferred compensation, retirement 
plans and arrangements), describe with specificity the criteria on 
which that type of compensation is based, for example, whether 
compensation is fixed, whether (and, if so, how) compensation is based 
on the registrant's pre-or after-tax performance over a certain time 
period, and whether (and, if so, how) compensation is based on the 
value of assets held in the registrant's portfolio. For example, if 
compensation is based solely or in part on performance, identify any 
benchmark used to measure performance and state the length of the 
period over which performance is measured.

Instructions to Paragraph (a)(3)

    1. Provide the information required by this paragraph as of the end 
of the registrant's most recently completed fiscal year, except that, 
in the case of any newly identified Portfolio Manager, information must 
be provided as of the most recent practicable date. Disclose the date 
as of which the information is provided.
    2. Compensation includes, without limitation, salary, bonus, 
deferred compensation, and pension and retirement plans and 
arrangements, whether the compensation is cash or non-cash. Group life, 
health, hospitalization, medical reimbursement, relocation, and pension 
and retirement plans and arrangements may be omitted, provided that 
they do not discriminate in scope, terms, or operation in favor of the 
Portfolio Manager or a group of employees that includes the Portfolio 
Manager and are available generally to all salaried employees. The 
value of compensation is not required to be disclosed under this Item.
    3. Include a description of the structure of, and the method used 
to determine, any compensation received by the Portfolio Manager from 
the registrant, the registrant's investment adviser, or any other 
source with respect to management of the registrant and any other 
accounts included in the response to paragraph (a)(2)(ii) of this Item. 
This description must clearly disclose any differences between the 
method used to determine the Portfolio Manager's compensation with 
respect to the registrant and other accounts, e.g., if the Portfolio 
Manager receives part of an advisory fee that is based on performance 
with respect to some accounts but not the registrant, this must be 
disclosed.
    (4) For each Portfolio Manager required to be identified in 
response to paragraph (a)(1) of this Item, state the dollar range of 
equity securities in the registrant beneficially owned by the Portfolio 
Manager using the following ranges: none, $1-$10,000, $10,001-$50,000, 
$50,001-$100,000, $100,001-$500,000, $500,001-$1,000,000, or over 
$1,000,000.

Instructions to paragraph (a)(4)

    1. Provide the information required by this paragraph as of the end 
of the registrant's most recently completed fiscal year, except that, 
in the case of any newly identified Portfolio Manager, information must 
be provided as of the most recent practicable date. Specify the 
valuation date.
    2. Determine ``beneficial ownership'' in accordance with rule 16a-
1(a)(2) under the Exchange Act (17 CFR 240.16a-1(a)(2)).
    (b) If the registrant is a closed-end management investment company 
that is filing a report on this Form N-CSR other than an annual report, 
disclose any change, as of the date of filing, in any of the Portfolio 
Managers identified in response to paragraph (a)(1) of this Item in the 
registrant's most recent annual report on Form N-CSR. In addition, for 
any newly identified Portfolio Manager, provide the information 
required by paragraph (a)(1) of this Item as of the date of filing of 
the report and the information required by paragraphs (a)(2), (a)(3), 
and (a)(4) of this Item as of the most recent practicable date.
* * * * *

    Dated: August 23, 2004.

    By the Commission.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 04-19575 Filed 8-26-04; 8:45 am]
BILLING CODE 8010-01-P