[Federal Register Volume 73, Number 84 (Wednesday, April 30, 2008)]
[Rules and Regulations]
[Pages 23328-23333]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-9410]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 249 and 274

[Release Nos. 34-57711; IC-28254; File No. S7-02-08]
RIN 3235-AK05


Disclosure of Divestment by Registered Investment Companies in 
Accordance With Sudan Accountability and Divestment Act of 2007

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

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SUMMARY: The Securities and Exchange Commission is adopting amendments 
to its forms under the Securities Exchange Act of 1934 and the 
Investment Company Act of 1940 that will require disclosure by a 
registered investment company that divests, in accordance with the 
Sudan Accountability and Divestment Act of 2007, from securities of 
issuers that the investment company determines, using credible 
information that is available to the public, conduct or have direct 
investments in certain business operations in Sudan. The Sudan 
Accountability and Divestment Act limits civil, criminal, and 
administrative actions that may be brought against a registered 
investment company that divests itself from such securities, provided 
that the investment company makes disclosures in accordance with 
regulations prescribed by the Commission.

DATES: April 30, 2008.

FOR FURTHER INFORMATION CONTACT: Devin F. Sullivan, Attorney, Office of 
Disclosure Regulation, Division of Investment Management, at (202) 551-
6784, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-5720.

SUPPLEMENTARY INFORMATION: The Securities and Exchange Commission 
(``Commission'') is adopting amendments to Form N-CSR \1\ and Form N-
SAR \2\ under the Securities Exchange Act of 1934 (``Exchange Act'') 
\3\ and the Investment Company Act of 1940 (``Investment Company 
Act'').\4\
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    \1\ 17 CFR 294.331 and 274.128.
    \2\ 17 CFR 294.330 and 274.101.
    \3\ 15 U.S.C. 78a et seq.
    \4\ 15 U.S.C. 80a-1 et seq.
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I. Discussion

    On December 31, 2007, the President signed the Sudan Accountability 
and Divestment Act of 2007 (``Sudan Divestment Act'') into law.\5\ 
Among other things, the Sudan Divestment Act provides that no person 
may bring any civil, criminal, or administrative action against any 
registered investment company, or any employee, officer, director, or 
investment adviser of the investment company, based solely upon the 
investment company divesting from, or avoiding investing in, securities 
issued by persons that the investment company determines, using 
credible information that is available to the public, conduct or have 
direct investments in certain business operations in Sudan.\6\ This 
limitation on actions does not apply to a registered investment 
company, or any of its employees, officers, directors, or investment 
advisers, unless the investment company makes disclosures about the 
divestments in accordance with regulations prescribed by the 
Commission.\7\ To that end, the Sudan Divestment Act requires us to 
prescribe regulations not later than 120 days after enactment that 
require disclosure by each registered investment company that divests 
itself of securities in accordance with the Act. The Sudan Divestment 
Act states that these rules shall require this disclosure to be 
included in the next periodic report filed under Section 30 of the 
Investment Company Act following the divestment.\8\
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    \5\ Pub. L. 110-174, 121 Stat. 2516 (2007).
    \6\ Section 4(a) of the Sudan Divestment Act [to be codified at 
15 U.S.C. 80a-13(c)(1)].
    \7\ Section 4(a) of the Sudan Divestment Act [to be codified at 
15 U.S.C. 80a-13(c)(2)(B)].
    \8\ Section 4(b) of the Sudan Divestment Act.
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    To implement the Sudan Divestment Act, we proposed amendments to 
Form N-CSR and Form N-SAR that would require disclosure by a registered 
investment company that divests, in accordance with the Sudan 
Divestment Act, from securities of issuers that the investment company 
determines conduct or directly invest in certain business operations in 
Sudan.\9\ We received two comment letters in response to our 
proposals.\10\ The commenters generally supported the proposals, while 
recommending several changes. We are adopting the proposed amendments 
with certain modifications suggested by the commenters.
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    \9\ Investment Company Act Release No. 28148 (Feb. 11, 2008) [73 
FR 8976 (Feb. 15, 2008)] (``Proposing Release'').
    \10\ Letter of Calvert Group, Ltd. (Mar. 14, 2008) (``Calvert 
letter''); Letter of Investment Company Institute (Mar. 10, 2008) 
(``ICI letter'').
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A. Amendments

    To implement the Sudan Divestment Act, we are requiring each 
registered investment company that divests securities in accordance 
with the Sudan Divestment Act to disclose the divestment on the next 
Form N-CSR or Form N-SAR that it files following the divestment. 
Management investment companies will provide the disclosure on Form N-
CSR, and unit investment trusts will provide the disclosure on Form N-
SAR.\11\ We are requiring disclosure of information that will identify 
the securities divested and the magnitude of the divestment. This 
includes the issuer's name; exchange ticker symbol; Committee on 
Uniform Securities Identification Procedures (``CUSIP'') number; total 
number of shares or, for debt securities, principal amount divested; 
and dates that the securities were divested.\12\ In addition, if the 
registered investment company continues to hold any securities of the 
divested issuer, it will be required to disclose the exchange ticker 
symbol; CUSIP number; and total number of shares or, for debt 
securities, principal amount of such securities, held on the date of 
filing.\13\ We believe that this disclosure is in the public interest 
and protects investors.
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    \11\ Item 6(b) of Form N-CSR; Item 133 of Form N-SAR.
    \12\ Item 6(b)(1)-(5) of Form N-CSR; Item 133.A.-E. of Form N-
SAR. We are also adopting technical amendments to Form N-SAR to 
change cross-references to Item 132 to reflect the addition of Item 
133.
    \13\ Item 6(b)(6) of Form N-CSR; Item 133.F. of Form N-SAR.
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    One commenter suggested that the Commission require disclosure of 
divestments in accordance with the Sudan Divestment Act in shareholder 
reports, as well as in Form N-CSR and Form N-SAR, in order to bring 
more prominence to the issue and make the information more easily 
accessible by shareholders.\14\ Consistent with the Sudan Divestment 
Act, which directs the Commission to prescribe regulations that 
``require the disclosure to be included in the next periodic report 
filed with the Commission,'' (emphasis added) \15\ we are not making 
the requested change. We have concluded that disclosure of divestments 
under the Sudan Divestment Act in Form N-CSR and Form N-SAR, coupled 
with existing requirements for complete quarterly portfolio holdings 
disclosure in semi-annual shareholder reports and on Form N-Q filed 
with the Commission, will provide shareholders with ready access to 
information about such divestments.
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    \14\ Calvert letter at 3.
    \15\ Section 4(b) of the Sudan Divestment Act.
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    We also received comment recommending that, rather than requiring 
disclosure of divestment of

[[Page 23329]]

securities in accordance with the Sudan Divestment Act on the next Form 
N-CSR or Form N-SAR filed following such divestment, we should instead 
require disclosure of divestments made during the period covered by the 
financial information included with the Form N-CSR or Form N-SAR (i.e., 
the prior semi-annual fiscal period).\16\ Under this recommendation, a 
divestment made between the close of a semi-annual fiscal period and 
the filing of the Form N-CSR or Form N-SAR for that period would not be 
disclosed in that Form but would be disclosed on the next succeeding 
Form N-CSR or Form N-SAR. Disclosure of a divestment made shortly after 
the close of a semi-annual fiscal period would be delayed for 
approximately 10 months. Consistent with the Sudan Divestment Act,\17\ 
we are not adopting that recommendation but instead are adopting the 
rule as proposed. We are requiring the disclosure to be included in the 
next periodic report filed with the Commission,\18\ which will help to 
reduce extended delays between divestments and the associated 
disclosure to investors.
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    \16\ ICI letter at 2-3.
    \17\ Section 4(b) of the Sudan Divestment Act.
    \18\ As proposed, a registered investment company that divests 
securities in accordance with the Sudan Divestment Act during the 
period that begins on the fifth business day before the date of 
filing a Form N-CSR or Form N-SAR and ends on the date of filing may 
disclose the divestment in either that filing or an amendment 
thereto. The registered investment company must file the amendment 
not later than five business days after the date of filing the Form 
N-CSR or Form N-SAR. Instruction 2. to Item 6(b) of Form N-CSR; 
Instructions to Item 133 of Form N-SAR.
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    One commenter recommended that the amendments not require 
disclosure of the exchange ticker symbol and CUSIP number of securities 
divested in accordance with the Sudan Divestment Act.\19\ We are 
retaining this requirement, which we believe will help to more 
precisely identify the specific securities for which a registered 
investment company may claim the benefit of the limitation on actions 
provided by the Sudan Divestment Act.
    Both commenters addressed the proposed requirement that a 
registered investment company disclose information about continued 
holdings of securities of a divested issuer. One commenter supported it 
as enhancing investment company accountability to shareholders.\20\ The 
other commenter opposed it on the grounds that the Sudan Divestment 
Act's limitation on actions only requires disclosure made in connection 
with a decision to divest and that this additional disclosure is 
unnecessary because registered investment companies are already 
required to disclose their portfolio holdings.\21\ We are retaining 
this requirement because we believe that it will help assure that 
investors do not confuse a registered investment company's divestment 
from a portion of its holdings of a particular issuer's securities with 
divestment from all of its holdings of that issuer's securities. The 
disclosure of portfolio holdings that is currently required will not 
necessarily prevent such confusion because that disclosure is required 
as of the end of each fiscal quarter, which often will not coincide 
with the date of a divestment.
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    \19\ ICI letter at 2.
    \20\ Calvert letter at 3.
    \21\ ICI letter at 3.
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    We are adopting, as proposed, Instructions to Form N-CSR and Form 
N-SAR clarifying that while a registered investment company is not 
required to disclose divestments of securities of an issuer that 
conducts or has direct investments in certain business operations in 
Sudan, the limitation on actions provided in the Sudan Divestment Act 
does not apply with respect to a divestment that is not disclosed.\22\ 
We are also adopting, as proposed, Instructions to Form N-CSR and Form 
N-SAR providing that, for purposes of determining when a divestment 
should be reported, if a registered investment company divests its 
holdings in a particular security in a related series of transactions, 
the company may deem the divestment to occur at the time of the final 
transaction in the series.\23\ We received no comments on these 
Instructions.
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    \22\ Instruction 1. to Item 6(b) of Form N-CSR; Instructions to 
Item 133 of Form N-SAR.
    \23\ Instruction 3. to Item 6(b) of Form N-CSR; Instructions to 
Item 133 of Form N-SAR.
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B. Termination Provision

    The provisions of the Sudan Divestment Act concerning registered 
investment company divestments terminate 30 days after the President 
certifies to Congress that the Government of Sudan has undertaken 
certain actions.\24\ We are adopting a termination provision in order 
to clarify that the new disclosure requirements will not apply to 
divestitures occurring after the investment company provisions of the 
Sudan Divestment Act terminate. Both Form N-CSR and Form N-SAR will 
provide for termination of the amendments we are adopting one year 
after the date on which the related provisions of the Sudan Divestment 
Act terminate pursuant to the terms of the Act. The termination 
provision responds to commenters' requests that we include a provision 
terminating the amendments to the forms that is parallel to the 
termination provision of the Sudan Divestment Act.\25\ We have provided 
that the amendments terminate one year after termination pursuant to 
the Sudan Divestment Act to allow sufficient time for disclosure, after 
termination of the Act's provisions, of divestments that occur prior to 
termination of the Act's provisions.\26\
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    \24\ Section 12 of the Sudan Divestment Act.
    \25\ Calvert letter at 3; ICI letter at 3-4.
    \26\ Item 6(b) of Form N-CSR; Item 133 of Form N-SAR.
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C. Effective Date

    The amendments to the Commission's forms are effective immediately, 
in accordance with the Administrative Procedure Act, which permits 
rules to become effective less than 30 days after publication as 
``provided by the agency for good cause found and published with the 
rule.'' \27\ The Commission finds that good cause exists for immediate 
effectiveness in light of the statutory requirement that the Commission 
prescribe regulations not later than 120 days after the date of the 
enactment of the Sudan Divestment Act.\28\
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    \27\ 5 U.S.C. 553(d)(3).
    \28\ Section 4(b) of the Sudan Divestment Act.
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D. Transition Period

    We solicited comment on whether our amendments should address 
divestments that occur after the enactment of the Sudan Divestment Act 
and before the effective date of our amendments. As suggested by a 
commenter,\29\ the Rule permits a registered investment company that 
makes a divestment in accordance with the Sudan Divestment Act between 
December 31, 2007 (the date of enactment), and April 30, 2008 (the 
effective date of the form amendments), and that filed a Form N-CSR or 
Form N-SAR after the divestment but before April 30, 2008, to disclose 
the divestment on an amendment to that Form N-CSR or Form N-SAR filed 
no later than May 14, 2008. This provision will permit registered 
investment companies, and their employees, officers, directors, and 
investment advisers, to rely on the Sudan Divestment Act's limitation 
on actions for divestments that occurred after enactment but before the 
effective date of our form amendments. The period between April 30, 
2008, the effective date of our form amendments, and May 14, 2008, the 
latest permitted transition filing date, should provide registered 
investment companies with a reasonable opportunity to review the form

[[Page 23330]]

amendments and make any necessary filing.
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    \29\ ICI letter at 3.
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II. Paperwork Reduction Act

    The form amendments contain ``collection of information'' 
requirements within the meaning of the Paperwork Reduction Act of 1995 
(``PRA'').\30\ The titles for the collections of information are ``Form 
N-CSR under the Investment Company Act of 1940 and Securities Exchange 
Act of 1934, Certified Shareholder Report,'' and ``Form N-SAR under the 
Investment Company Act of 1940, Semi-Annual Report for Registered 
Investment Companies.'' We published notice soliciting comments on the 
collection of information requirements in the release proposing the 
amendments \31\ and submitted the proposed collections of information 
to OMB for review and approval in accordance with 44 U.S.C. 3507(d) and 
5 CFR 1320.11. We received no comments on the collection of information 
requirements. OMB has approved the collections of information.
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    \30\ 44 U.S.C. 3501 et seq.
    \31\ See Proposing Release, supra note 9, 73 FR at 8978.
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    Form N-CSR (OMB Control No. 3235-0570) under the Exchange Act and 
the Investment Company Act \32\ is used by registered management 
investment companies filing certified shareholder reports. Form N-SAR 
(OMB Control No. 3235-0330) under the Exchange Act and the Investment 
Company Act \33\ is used by registered investment companies to file 
periodic reports with the Commission. 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.
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    \32\ 17 CFR 249.331 and 17 CFR 274.128.
    \33\ 17 CFR 249.330 and 17 CFR 274.101.
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A. Summary of Amendments

    The Sudan Divestment Act, enacted on December 31, 2007, requires 
the Commission to prescribe regulations not later than 120 days after 
enactment that require disclosure by each registered investment company 
that divests itself of securities in accordance with the Act.\34\ The 
Sudan Divestment Act states that these rules shall require this 
disclosure to be included in the next periodic report filed under 
Section 30 of the Investment Company Act following the divestment.\35\
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    \34\ Section 4(b) of the Sudan Divestment Act.
    \35\ Id.
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    To implement the Sudan Divestment Act, we are requiring each 
registered investment company that divests securities in accordance 
with the Sudan Divestment Act to disclose the divestment on the next 
Form N-CSR or Form N-SAR that it files following the divestment. 
Management investment companies will provide the disclosure on Form N-
CSR, and unit investment trusts will provide the disclosure on Form N-
SAR.\36\ We are requiring disclosure of information that will identify 
the securities divested and the magnitude of the divestment. This 
includes the issuer's name; exchange ticker symbol; CUSIP number; total 
number of shares or, for debt securities, principal amount divested; 
and dates that the securities were divested.\37\ In addition, if the 
registered investment company continues to hold any securities of the 
divested issuer, it is required to disclose the exchange ticker symbol; 
CUSIP number; and total number of shares or, for debt securities, 
principal amount of such securities, held on the date of filing.\38\ 
Compliance with the form amendments is necessary to obtain the benefit 
of the limitation on civil, criminal, and administrative actions 
provided in the Sudan Divestment Act. The information provided will not 
be kept confidential.
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    \36\ Item 6(b) of Form N-CSR; Item 133 of Form N-SAR.
    \37\ Item 6(b)(1)-(5) of Form N-CSR; Item 133.A.-E. of Form N-
SAR.
    \38\ Item 6(b)(6) of Form N-CSR; Item 133.F. of Form N-SAR.
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B. Reporting and Cost Burden Estimates

    The compliance burden estimates for the collections of information 
are based on several assumptions. The compliance burden for the 
amendments to Form N-CSR and Form N-SAR will be the reporting burden of 
collecting information necessary to make the disclosures under new Item 
6(b) of Form N-CSR and new Item 133 of Form N-SAR. We estimate that the 
new collections of information will result in an increase of one-half 
burden hour per filing. Further, we believe that the number of 
registered investment companies that hold securities in companies 
conducting or directly investing in certain business operations in 
Sudan, and that will divest from these securities in accordance with 
the Sudan Divestment Act, will be relatively small. We estimate that 
approximately 15% of all registered investment company portfolios have 
an objective of investing internationally.\39\ Based on a conservative 
assumption that each of these portfolios will make a divestment in 
accordance with the Sudan Divestment Act prior to each filing it makes 
on Form N-CSR or Form N-SAR, we estimate that approximately 15% of the 
filings on Form N-CSR and Form N-SAR will include disclosures of 
divestments in accordance with the Sudan Divestment Act.
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    \39\ This estimate is based on analysis done by the Division of 
Investment Management staff of publicly available data.
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    Based on a burden hour estimate of one-half hour per filing for 
each respondent that makes disclosures under the amendments, we 
estimate that registered management investment companies filing Form N-
CSR will incur approximately 510 annual burden hours,\40\ and unit 
investment trusts will incur approximately 10 annual burden hours,\41\ 
to comply with the form amendments.
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    \40\ 6,743 annual and semi-annual filings on Form N-CSR x 15% of 
filings on Form N-CSR x \1/2\ burden hour = approximately 510 total 
burden hours (rounded to the nearest 10).
    \41\ 90 filings on Form N-SAR x 15% of filings on Form N-SAR x 
\1/2\ burden hour = approximately 10 total burden hours (rounded to 
the nearest 10).
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    The total annual burden hours for Form N-CSR, revised to include 
the burden hours expected from the form amendments, are estimated to be 
138,662.5 burden hours, an increase of 510 burden hours from the 
current annual burden of 138,152.5 hours. The total annual burden hours 
for Form N-SAR, revised to include the burden hours expected from the 
form amendments, are estimated to be 107,213 burden hours, an increase 
of 10 burden hours from the current annual burden of 107,203 hours.

III. Cost/Benefit Analysis

    The Commission is sensitive to the costs and benefits imposed by 
its rules. Our amendments to Form N-CSR and Form N-SAR require each 
registered investment company that divests securities in accordance 
with the Sudan Divestment Act to disclose the divestment on the next 
Form N-CSR or Form N-SAR that it files following the divestment. In the 
release proposing form amendments under the Sudan Divestment Act, we 
requested comments on our cost/benefit analysis. We received no 
comments in response.

A. Benefits

    In adopting these form amendments, we are implementing the Sudan 
Divestment Act's mandate for rulemaking by the Commission. The 
amendments meet the Sudan Divestment Act's directive that the 
Commission ``prescribe regulations, in the public interest and for the 
protection of investors, to require disclosure by each registered 
investment company that divests itself of securities in accordance with 
section 13(c) of the Investment Company Act of 1940.'' \42\

[[Page 23331]]

Disclosure under the form amendments will make applicable to a 
registered investment company, and its employees, officers, directors, 
and investment advisers, the limitation on actions provided by the 
Sudan Divestment Act. The amendments also will make important 
information about divestments in accordance with the Sudan Divestment 
Act available to investors, including information identifying the 
securities divested, the dates of divestment, and any securities of the 
issuer that the registered investment company continues to hold.
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    \42\ Section 4(b) of the Sudan Divestment Act.
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B. Costs

    While the form amendments may lead to some additional costs for 
registered investment companies, we believe that these costs should be 
minimal. We are requiring each registered investment company that 
divests securities in accordance with the Sudan Divestment Act to 
disclose the divestment on the next Form N-CSR or Form N-SAR that it 
files following the divestment. Registered investment companies retain 
records of securities transactions that, we believe, will permit them 
to readily identify and disclose, for divestments made in accordance 
with the Sudan Divestment Act, the securities divested, the dates of 
divestment, and any securities of the issuer retained by the investment 
company. Further, to ease the burden of information collection and 
disclosure, we have included an instruction in Form N-CSR and Form N-
SAR stating that a registered investment company that divests 
securities in accordance with the Sudan Divestment Act during the 
period that begins on the fifth business day before the date of filing 
a Form N-CSR or Form N-SAR and ends on the date of filing may disclose 
the divestment in either that filing or an amendment thereto that is 
filed not later than five business days after the date of filing the 
Form N-CSR or Form N-SAR.\43\ We believe that this flexibility may 
lessen the compliance burdens associated with reporting divestments 
that occur shortly before a registered investment company files a Form 
N-CSR or Form N-SAR.
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    \43\ Instruction 2. to Item 6(b) of Form N-CSR; Instructions to 
Item 133 of Form N-SAR.
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    For purposes of the PRA, we estimate that it will take 
approximately 510 annual burden hours \44\ to comply with the 
amendments to Form N-CSR and approximately 10 annual burden hours \45\ 
to comply with the amendments to Form N-SAR, for an aggregate of 
approximately 520 total annual burden hours to comply with the form 
amendments. We estimate that this additional burden will equal total 
costs of approximately $145,000 annually.\46\ We believe that the 
incremental costs of disclosing divestments in accordance with the 
Sudan Divestment Act on Form N-CSR and Form N-SAR are justified by the 
fact that such disclosures will make applicable to a registered 
investment company, and its employees, officers, directors, and 
investment advisers, the limitation on actions provided by the Sudan 
Divestment Act. These disclosures also will make important information 
about divestments in accordance with the Sudan Divestment Act available 
to investors, including information identifying the securities 
divested, the dates of divestment, and any securities of the issuer 
that the registered investment company continues to hold.
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    \44\ See supra note 40.
    \45\ See supra note 41.
    \46\ This cost increase is estimated by multiplying the total 
annual hour burden (520 hours) by the estimated hourly wage rate of 
$279.50 and rounding to the nearest 1,000. The estimated wage figure 
is based on published rates for compliance attorneys and senior 
programmers, modified to account for an 1800-hour work-year and 
multiplied by 5.35 to account for bonuses, firm size, employee 
benefits, and overhead, yielding effective hourly rates of $270 and 
$289, respectively. See Securities Industry Association, Report on 
Management & Professional Earnings in the Securities Industry 2007 
(Sept. 2007). The estimated wage rate is further based on the 
estimate that attorneys and programmers would divide time equally, 
resulting in a weighted wage rate of $279.50 (($270 x .50) + ($289 x 
.50)).
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IV. Consideration of Burden on Competition; Promotion of Efficiency, 
Competition, and Capital Formation

    Section 23(a)(2) of the Exchange Act \47\ requires us, when 
adopting rules under the Exchange Act, to consider the impact that any 
new rule will have on competition. 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,\48\ 
Section 2(b) of the Securities Act of 1933,\49\ and Section 3(f) of the 
Exchange Act \50\ 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. In the release 
proposing form amendments under the Sudan Divestment Act, we requested 
comments on whether the proposed amendments, if adopted, would promote 
efficiency, competition, and capital formation and whether they would 
impose a burden on competition. We received no comments in response.
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    \47\ 15 U.S.C. 78w(a)(2).
    \48\ 15 U.S.C. 80a-2(c).
    \49\ 15 U.S.C. 77b(b).
    \50\ 15 U.S.C. 78c(f).
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    The form amendments implement the Sudan Divestment Act's 
requirement that we prescribe regulations not later than 120 days after 
enactment that require disclosure by each registered investment company 
that divests itself of securities in accordance with the Act. 
Disclosure provided in response to the amendments will make applicable 
to a registered investment company, and its employees, officers, 
directors, and investment advisers, the limitation on actions provided 
by the Sudan Divestment Act. These disclosures also will make important 
information about divestments in accordance with the Sudan Divestment 
Act available to investors, including information identifying the 
securities divested, the dates of divestment, and any securities of the 
issuer that the registered investment company continues to hold.
    These amendments may improve efficiency. Disclosure provided in 
response to the amendments could increase efficiency at registered 
investment companies by making applicable to a registered investment 
company, and its employees, officers, directors, and investment 
advisers, the limitation on actions provided by the Sudan Divestment 
Act. These disclosures also could promote efficiency because they make 
important information about divestments in accordance with the Sudan 
Divestment Act available to investors, including information 
identifying the securities divested, the dates of divestment, and any 
securities of the issuer that the registered investment company 
continues to hold. Making such information available to investors may 
enable them to make more informed investment decisions.
    The amendments may promote competition. We anticipate that our form 
amendments may promote competition because they may make it easier for 
registered investment companies to choose whether or not to offer 
portfolios that include holdings in companies that conduct or directly 
invest in certain business operations in Sudan. Thus, the form 
amendments may facilitate competition by making it easier for 
registered investment companies to offer different types of portfolios 
that appeal to different investors. We do not anticipate that the 
amendments will impose a measurable burden on competition. We also do 
not anticipate that the form amendments

[[Page 23332]]

will have a significant impact on capital formation.

V. Final Regulatory Flexibility Analysis

    This Final Regulatory Flexibility Analysis (``Analysis'') has been 
prepared in accordance with the Regulatory Flexibility Act.\51\ It 
relates to the Commission's form amendments under the Exchange Act and 
the Investment Company Act that require each registered investment 
company that divests securities in accordance with the Sudan Divestment 
Act to disclose the divestment on the next Form N-CSR or Form N-SAR 
that it files following the divestment. We published in the release 
proposing these amendments an Initial Regulatory Flexibility Analysis 
(``IRFA''), which we prepared in accordance with the Regulatory 
Flexibility Act.
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    \51\ 5 U.S.C. 601 et seq.
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A. Need for the Form Amendments

    The purpose of the form amendments is to implement the Sudan 
Divestment Act's requirement that the Commission adopt rules requiring 
disclosure of divestments made in accordance with the Act. Disclosure 
provided in response to the amendments will make applicable to a 
registered investment company, and its employees, officers, directors, 
and investment advisers, the limitation on actions provided by the 
Sudan Divestment Act. These disclosures also will make important 
information about divestments in accordance with the Sudan Divestment 
Act available to investors, including information identifying the 
securities divested, the dates of divestment, and any securities of the 
issuer that the registered investment company continues to hold.

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.\52\ We received no 
comment letters aaddressing the IRFA.
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    \52\ See Proposing Release, supra note 9, 73 FR at 8981.
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C. Small Entities Subject to the Rule

    The form amendments will affect registered investment companies 
that are small entities. 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.\53\ Approximately 160 registered investment companies 
currently meet this definition.\54\
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    \53\ 17 CFR 270.0-10.
    \54\ This estimate is based on analysis by the Division of 
Investment Management staff of publicly available data.
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D. Projected Reporting, Recordkeeping, and Other Compliance 
Requirements

    The amendments to Form N-CSR and Form N-SAR require each registered 
investment company that divests securities in accordance with the Sudan 
Divestment Act to disclose the divestment on the next Form N-CSR or 
Form N-SAR that it files following the divestment.
    For purposes of the PRA, we estimate that it will take 
approximately 510 annual burden hours to comply with the amendments to 
Form N-CSR and approximately 10 annual burden hours to comply with the 
amendments to Form N-SAR, for an aggregate of approximately 520 total 
annual burden hours to comply with the form amendments. We estimate 
that this additional burden will equal total costs of approximately 
$145,000 annually.

E. Agency Action To Minimize the 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: (1) The establishment of differing compliance or 
reporting requirements or timetables that take into account the 
resources available to small entities; (2) the clarification, 
consolidation, or simplification of compliance and reporting 
requirements under the amendments for small entities; (3) the use of 
performance rather than design standards; and (4) an exemption from 
coverage of the amendments, or any part thereof, for small entities.
    The Commission believes that special compliance or reporting 
requirements for small entities, or an exemption from coverage for 
small entities, would not be appropriate or consistent with investor 
protection or the requirements of the Sudan Divestment Act. Disclosure 
provided in response to the amendments will make applicable to a 
registered investment company, and its employees, officers, directors, 
and investment advisers, the limitation on actions provided by the 
Sudan Divestment Act. These disclosures also will make important 
information about divestments in accordance with the Sudan Divestment 
Act available to investors, including information identifying the 
securities divested, the dates of divestment, and any securities of the 
issuer that the registered investment company continues to hold. 
Different disclosure requirements or different timetables for 
registered investment companies that are small entities would not be 
consistent with the requirements of the Sudan Divestment Act. Finally, 
in this rulemaking, we do not consider using performance rather than 
design standards to be consistent with the statutory requirement that 
we adopt rules for the protection of investors.
    We have endeavored through the amendments to minimize the 
regulatory burden on all registered investment companies, including 
small entities, while meeting the requirements of the Sudan Divestment 
Act. Small entities should benefit from the Commission's reasoned 
approach to the amendments to the same degree as other registered 
investment companies.

VI. Statutory Authority

    The Commission is adopting amendments to Form N-SAR and 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, 13(c), 24(a), 30, and 38 of the Investment 
Company Act [15 U.S.C. 80a-8, 80a-13(c), 80a-24(a), 80a-29, and 80a-
37].

List of Subjects

17 CFR Part 249

    Reporting and recordkeeping requirements, Securities.

17 CFR Part 274

    Investment companies, Reporting and recordkeeping requirements, 
Securities.

Text of Form Amendments

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

PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934

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


[[Page 23333]]


    Authority: 15 U.S.C. 78a et seq., 7202, 7233, 7241, 7262, 7264, 
and 7265; and 18 U.S.C. 1350, unless otherwise noted.
* * * * *

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

0
2. 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
3. Form N-SAR (referenced in Sec. Sec.  249.330 and 274.101) is amended 
by:
0
a. Revising the reference ``132'' in Item 6 to read ``133'';
0
b. Adding new Item 133;
0
c. Revising the reference ``132'' in the fifth paragraph of General 
Instruction A to read ``133''; and

0
d. Adding an instruction to new Item 133.
    The additions read as follows:

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

Form N-SAR

* * * * *
    133. If the Registrant has divested itself of securities in 
accordance with Section 13(c) of the Investment Company Act of 1940 
following the filing of its last report on Form N-SAR and before filing 
of the current report, disclose the following information for each such 
divested security:
    A. Name of the issuer;
    B. Exchange ticker symbol;
    C. CUSIP number;
    D. Total number of shares or, for debt securities, principal amount 
divested;
    E. Date(s) that the securities were divested; and
    F. If the Registrant holds any securities of the issuer on the date 
of filing, the exchange ticker symbol; CUSIP number; and the total 
number of shares or, for debt securities, principal amount held on the 
date of filing.
    This item 133 shall terminate one year after the date on which the 
provisions of Section 4 of the Sudan Accountability and Divestment Act 
of 2007 terminate pursuant to Section 12 of that Act.
* * * * *

Instructions to Specific Items

* * * * *

Item 133: Divestment of Securities in Accordance With the Sudan 
Accountability and Divestment Act of 2007

    This item may be used by a Registrant that divested itself of 
securities in accordance with Section 13(c) of the Investment Company 
Act, which was added by the Sudan Accountability and Divestment Act of 
2007. A Registrant is not required to include disclosure under this 
item; however, the limitation on civil, criminal, and administrative 
actions under Section 13(c) of the Investment Company Act does not 
apply with respect to a divestment that is not disclosed under this 
item.
    If a Registrant divests itself of securities in accordance with 
Section 13(c) of the Act during the period that begins on the fifth 
business day before the date of filing a Form N-SAR and ends on the 
date of filing, it may disclose the divestment in either the Form N-SAR 
or an amendment thereto that is filed not later than five business days 
after the date of filing the Form N-SAR.
    For purposes of determining when a divestment should be reported 
under this item, if a Registrant divests its holdings in a particular 
security in a related series of transactions, the Registrant may deem 
the divestment to occur at the time of the final transaction in the 
series. In that case, the Registrant should report each transaction in 
the series on a single Form N-SAR, but should separately state each 
date on which securities were divested and the total number of shares 
or, for debt securities, principal amount divested, on each such date.
* * * * *
0
4. Form N-CSR (referenced in Sec. Sec.  249.331 and 274.128) is amended 
by:
0
a. Revising the reference ``Schedule of Investments.'' in the caption 
to Item 6 to read ``Investments.'';
0
b. Designating the undesignated paragraph in Item 6 as paragraph (a);
0
c. Revising the reference ``Instruction.'' in Item 6 to read 
``Instruction to paragraph (a).''; and
0
d. Adding new paragraph (b) and new Instructions 1, 2, and 3 to 
paragraph (b) to Item 6.
    The additions 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 6. Investments

    (a) * * *
    (b) If the registrant has divested itself of securities in 
accordance with Section 13(c) of the Investment Company Act of 1940 
following the filing of its last report on Form N-CSR and before filing 
of the current report, disclose the following information for each such 
divested security:
    (1) Name of the issuer;
    (2) Exchange ticker symbol;
    (3) Committee on Uniform Securities Identification Procedures 
(``CUSIP'') number;
    (4) Total number of shares or, for debt securities, principal 
amount divested;
    (5) Date(s) that the securities were divested; and
    (6) If the registrant holds any securities of the issuer on the 
date of filing, the exchange ticker symbol; CUSIP number; and the total 
number of shares or, for debt securities, principal amount held on the 
date of filing.
    This Item 6(b) shall terminate one year after the date on which the 
provisions of Section 4 of the Sudan Accountability and Divestment Act 
of 2007 terminate pursuant to Section 12 of that Act.
    Instructions to paragraph (b).
    1. This Item may be used by a registrant that divested itself of 
securities in accordance with Section 13(c) of the Investment Company 
Act, which was added by the Sudan Accountability and Divestment Act of 
2007. A registrant is not required to include disclosure under this 
Item; however, the limitation on civil, criminal, and administrative 
actions under Section 13(c) of the Investment Company Act does not 
apply with respect to a divestment that is not disclosed under this 
Item.
    2. If a registrant divests itself of securities in accordance with 
Section 13(c) of the Act during the period that begins on the fifth 
business day before the date of filing a Form N-CSR and ends on the 
date of filing, it may disclose the divestment in either the Form N-CSR 
or an amendment thereto that is filed not later than five business days 
after the date of filing the Form N-CSR.
    3. For purposes of determining when a divestment should be reported 
under this Item, if a registrant divests its holdings in a particular 
security in a related series of transactions, the registrant may deem 
the divestment to occur at the time of the final transaction in the 
series. In that case, the registrant should report each transaction in 
the series on a single Form N-CSR, but should separately state each 
date on which securities were divested and the total number of shares 
or, for debt securities, principal amount divested, on each such date.

    Dated: April 24, 2008.

    By the Commission.
Nancy M. Morris,
Secretary.
 [FR Doc. E8-9410 Filed 4-29-08; 8:45 am]
BILLING CODE 8010-01-P