publicly available on a website if a summary prospectus is used.\347\
---------------------------------------------------------------------------

    \347\ See infra note 474 and accompanying text.
---------------------------------------------------------------------------

    Under existing Commission guidance, funds can transmit shareholder
reports or other documents electronically in lieu of paper delivery if
they satisfy certain conditions relating to investor notice, access,
and evidence of delivery. The Commission's guidance indicates that one
way evidence of delivery can be demonstrated as to an investor is if an
investor has agreed to electronic transmission on an affirmative ``opt-
in'' basis.
    Some shareholder reports are currently transmitted electronically
under this guidance. One commenter estimated that 43% of reports to
street name holders are delivered electronically and projected that 59%
of reports to street name holders will be delivered electronically in
2018.\348\ By one estimate, approximately 75% of accounts are currently
held through brokers and other intermediaries.\349\
---------------------------------------------------------------------------

    \348\ See Broadridge Comment Letter I. The commenter also
estimated that the rate of electronic delivery of reports held in
street name would reach 54% by June 2017 and 59% by June 2018.
However, the commenter noted that ``e-delivery rates for direct-sold
accounts lag those of the street.'' See Broadridge Meeting Memo I.
    Another commenter stated that for accounts held directly, ``an
informal sampling of some of our members with direct-at-fund
business showed an average e-delivery rate of about 40 percent.''
See ICI Comment Letter I.
    \349\ See supra note 275.
---------------------------------------------------------------------------

    While these figures demonstrate that electronic delivery is used
for a significant proportion of shareholder reports (which affects the
baseline printing and mailing costs across funds under the existing
requirements), because a fund is not required to report to the
Commission the extent to which it relies on Commission guidance, we
lack information to estimate the percentage of funds that solely or
predominantly rely on electronic delivery under existing Commission
guidance. We recognize, consistent with the comments we have received,
that electronic delivery of reports to some investors under existing
Commission guidance may continue to reduce printing and mailing costs
in the future, regardless of whether rule 30e-3 is adopted.\350\
---------------------------------------------------------------------------

    \350\ See, e.g., Broadridge Comment Letter I.
---------------------------------------------------------------------------

    In the Proposing Release, we estimated aggregate annual printing
and mailing costs under the existing requirements to be approximately
$116.4 million.\351\ Based on the estimates provided by
commenters,\352\

we recognize that printing and mailing costs under the existing
requirements estimated in the proposal may have been understated and we
are doubling our estimated share of printing and mailing costs under
existing requirements in the external costs of rules 30e-1 and 30e-2.
Based on this change to the assumptions in our estimate and the use of
updated industry figures on the number of funds, our revised estimate
of aggregate annual printing and mailing costs under the existing
requirements is approximately $256.2 million.\353\ The revised estimate
is close to the average of the estimate in the proposal and the average
of aggregate cost estimates based on commenter estimates.\354\
---------------------------------------------------------------------------

    \351\ $116,368,583. See Proposing Release, supra note 14, at
n.707. Printing and mailing costs (inclusive of processing fees)
were estimated to be approximately $10,354 ($31,061 / 3) per fund,
and approximately $6,667 ($20,000 / 3) per UIT. See Proposing
Release, supra note 14, nn.777, 790.
    \352\ One commenter estimated aggregate industry printing and
mailing costs under the existing requirements, providing an estimate
of $344 million. See supra note 70 and accompanying text. Another
commenter provided an estimate of $354 million (projected to be $382
million in 2018) for fund positions held in street name, which the
commenter estimated comprised approximately 75% of all fund
positions. See supra note 74 and accompanying text. If printing and
mailing costs for fund positions held directly are similar to those
for funds held in street name, aggregate printing and mailing costs
would be $354 million / 0.75 = $472 million. We recognize that
average printing and mailing costs for fund positions held directly
could be higher if such funds rely less on electronic delivery. See
supra note 348. The average of the estimate of aggregate costs
provided by the first commenter and the estimate of aggregate costs
based on the information provided by the second commenter is ($344
million + $472 million) / 2 = $408 million. Several other commenters
provided estimates of their own costs of printing and mailing
shareholder reports but did not provide sufficient information to
estimate aggregate industry costs. See, e.g., T. Rowe Price Comment
Letter I (indicating that its fund group spends approximately $3.8
million annually to print and mail shareholder reports to direct
fund investors); Schwab Comment Letter (stating that annual printing
and mailing costs to deliver the annual and semi-annual shareholder
reports to shareholders of all of its funds are approximately $4
million); MFS Comment Letter (stating that its annual printing and
mailing costs were $7.2 million); Capital Research Comment Letter I
(stating that its annual printing and mailing costs for semi-annual
shareholder reports were approximately $17.7 million and for annual
reports--approximately $28 million but clarifying that, since the
summary prospectus is included with its annual shareholder reports,
the amount attributable to annual shareholder reports is
approximately $14.8 million); Capital Research Comment Letter II
(estimating the cost for mailing production expense, postage
expense, freight expense and print and design expense for semi-
annual and annual shareholder reports for the period from July 2016
to June 2017 at approximately $28 million); Blackrock Comment Letter
(estimating its printing and distribution costs to be approximately
$30 million per year).
    \353\ See infra note 544 and accompanying text. Printing and
mailing costs (inclusive of processing fees) were estimated to be
approximately $10,354 ($31,061 / 3) per fund, and approximately
$6,667 ($20,000 / 3) per UIT. See Proposing Release, supra note 14,
nn.777, 790. Doubling those estimates results in printing and
mailing costs of approximately $20,707.33 ($31,061 x \2/3\) per fund
and approximately $13,333.33 ($20,000 x \2/3\) per UIT.
    Using 2017 industry figures, we estimate that there are 11,906
funds and 724 UITs. See infra note 476. Thus, aggregate annual
printing and mailing costs under the existing requirements (($31,061
x \2/3\) x 11,906 + ($20,000 x \2/3\) x 724) = $256,194,844.
    \354\ ($116.4 million + $408 million) / 2 = $262.2 million. See
supra notes 351-352.
    We are unable to determine how likely it is that the costs would
be close to the lower or upper bound of the range, thus, we present
the midpoint of the range for reference.
---------------------------------------------------------------------------

C. Benefits

    Rule 30e-3, to the extent that it is relied upon by funds, will
likely provide benefits to both current and prospective investors.
First, the rule is expected to benefit funds and their investors by
reducing aggregate expenses related to the delivery of paper
shareholder reports. Second, we believe that the rule may facilitate
investor review of periodic information by increasing its overall
accessibility. We discuss these benefits in greater detail below.
    The expected benefits described below will not necessarily be
distributed uniformly across all funds that choose to rely on rule 30e-
3. First, funds that currently have low printing and mailing costs--for
example, because they have shorter shareholder reports or lower per-
page printing costs--will realize smaller net cost savings from rule
30e-3. Similarly, funds that deliver many of their shareholder reports
electronically in reliance on existing Commission guidance will realize
smaller net cost savings from rule 30e-3, although they may still
realize net cost savings associated with those investors who do not opt
into electronic delivery. Further, even if the net cost savings from
rule 30e-3 are small, investors and funds may still realize some
benefits from website accessibility of first- and third-quarter
portfolio holdings information that currently may be found only on
EDGAR.
    Second, when funds presently rely on rule 498, which among its
requirements includes website posting of shareholder reports when using
a summary prospectus, the potential benefits to investors of having the
shareholder report available in an electronic format alongside other
fund information will likely be smaller. However, funds that presently
rely on rule 498 may still realize net cost savings from no longer
printing and mailing as many shareholder reports. The use of rule 30e-3
by funds that presently rely on rule 498 will also result in the
benefits to investors of website accessibility of fund portfolio
holdings information for the first and third fiscal quarters.
    Funds that choose to rely on rule 30e-3 could be at a competitive
advantage if investors choose funds based on their preference for
website availability, either because investors prefer to view
shareholder reports electronically or because funds that rely on rule
30e-3 could have lower expense ratios due to savings of printing and
mailing costs. Additionally, as discussed above, some commenters
discussed potential benefits of rule 30e-3 for the environment.\355\
---------------------------------------------------------------------------

    \355\ See supra Section II.A.5.
---------------------------------------------------------------------------

    As discussed in Section II.E above, in a change from the proposal,
we are adopting an extended transition period with staggered effective
dates for new rule 30e-3 and the other amendments adopted today. This
extended transition period would defer the realization of the benefits
discussed above. However, it would provide the separate benefit of
enabling investors more time to become informed of the potential
forthcoming change in the delivery manner of their shareholder reports
and also provide funds, financial intermediaries, and service providers
with a period of time to modify systems and operations to accommodate
the new shareholder report delivery framework.
    As discussed in Section II.B.3 above, in a change from the
proposal, we are also amending rule 498 to permit a summary prospectus
to include a description of how a shareholder can elect to receive
prospectuses or other documents and communications by electronic
delivery.\356\ This provision is expected to enhance investor awareness
of how to request shareholder reports and related fund materials in the
investor's preferred format while enabling additional efficiencies in
shareholder report delivery for funds. To the extent that the option to
include with a summary prospectus instructions describing how investors
may elect electronic delivery will increase the likelihood that
investors with a preference for electronic delivery communicate their
preference to the fund, this amendment to rule 498 is expected to
contribute to increased reliance on electronic delivery under the
existing Commission guidance. Consistent with the printing and mailing
cost savings, this would result in benefits to funds, and in turn,
investors, from the final rules. Further, if electronic delivery
facilitates increased investor access to, and review of, fund
information, this amendment to rule 498 may result in better informed
investor decisions and more efficient allocation of investor capital.
If investors increasingly elect electronic delivery as a result of this
amendment to rule 498, the magnitude of the benefits incremental to
reliance on rule 30e-3 from printing and mailing cost savings and
increased investor review will decrease. We lack the information to
quantify the increase in electronic delivery use that would be
incremental

to this amendment to rule 498 and thus how the magnitude of the
benefits expected from this amendment to rule 498 will compare to the
reduction in the benefits incremental to the reliance of funds on rule
30e-3.
---------------------------------------------------------------------------

    \356\ See supra note 265 and accompanying text.
---------------------------------------------------------------------------

1. Cost Savings
    We anticipate that funds relying on rule 30e-3, and their
investors, will benefit from gains in the efficiency and a reduction in
the expenses related to the distribution of paper shareholder reports.
Although the rule will have minimal effect, if any, on the expenses
associated with the preparation of reports, we expect that the expenses
associated with printing and mailing of shareholder reports will be
substantially reduced. By reducing fund expenses, printing and mailing
cost savings are expected to increase the portion of investor money
that is retained in the fund rather than used to cover expenses,
resulting, over time, in a net positive effect on the level of capital
invested in funds. Furthermore, to the extent that reductions in fund
expenses due to printing and mailing cost savings have a positive
effect on fund performance and attract new investors or additional
capital from existing investors, the rule may result in further capital
formation benefits. We are unable to precisely estimate the magnitude
of capital formation effects that may result from our projected cost
savings under the rule because the magnitude of such effects may be
affected by the extent of pass-through of cost savings and by other
factors that affect the flow of investor capital into mutual funds,
including other components of fund returns, overall market returns, and
returns on investments other than funds.
    Specifically, because the new rule provides a structure for making
website accessibility of shareholder reports and other materials the
default delivery method, funds relying on rule 30e-3 will only incur
printing and mailing costs as necessary to accommodate those investors
opting for paper, and printing and mailing costs associated with
Notices delivered to investors who have not made such an election.
    As we have recognized in the past, affirmative shareholder consent
can be difficult to obtain even for practices that many shareholders
may prefer,\357\ resulting, under the existing regime, in more
investors receiving paper copies than may be truly reflective of
preferences and thus higher shared costs associated with that excess
paper distribution. While it is still possible under the new rule that
some investors may not take the affirmative steps necessary to express
their transmission preference--in this case, to request paper
delivery--investors in the fund will not share any unnecessary printing
and mailing costs for those investors, as the default is website
accessibility. Under the new rule, funds relying on rule 30e-3 will
only incur costs of distribution of paper reports and other materials
for those investors who request delivery in that format.
---------------------------------------------------------------------------

    \357\ See Investment Company Act Release No. 22884 (Nov. 13,
1997) [62 FR 61933, 61935 (Nov. 20, 1997)] (concerning implied
consent to delivery of disclosure documents to households); see also
supra note 332.
---------------------------------------------------------------------------

    In the Proposing Release, we estimated approximately $105 million
in annual (gross) cost savings if the proposed rule were adopted.\358\
Net of annual costs of compliance with rule 30e-3, which we estimated
to be approximately $32 million after the first year,\359\ annual net
savings were estimated to be approximately $73 million in the
aggregate, or approximately 63% of printing and mailing costs under the
existing requirements, as estimated in the Proposing Release.\360\
---------------------------------------------------------------------------

    \358\ $104,731,725. See Proposing Release, supra note 14, at
n.815.
    \359\ $31,531,880. See Proposing Release, supra note 14, at
n.717.
    \360\ $104,731,725 - $31,531,880 = $73,199,845. $73,199,845 /
$116,368,583 = 63%. See supra note 351.
---------------------------------------------------------------------------

    Several commenters provided alternative estimates of potential cost
savings associated with the printing and mailing of shareholder reports
under the proposed rule.\361\ For example, one commenter asserted that
electronic delivery is already common and thus concluded that fund
companies would only save about $18 million \362\ in 2018, which would
represent approximately a 4.7% net reduction in ongoing printing and
mailing costs projected by the commenter under the existing rules.\363\
Another commenter estimated savings over the first three years after
implementation, netting out initial costs, of $140 million.\364\ This
commenter also projected ongoing annual savings after the first year of
$89 million, which would represent approximately a 25.9% reduction in
existing costs as estimated by the commenter.\365\ This commenter also
suggested that, should the Commission remove the postage-paid reply
form requirement, net savings could reach $465 million over the first
three years and ongoing annual savings could reach $182 million after
the first year, or approximately a 53% reduction in existing costs as
estimated by the commenter.\366\
---------------------------------------------------------------------------

    \361\ See also supra note 352 for a discussion of printing and
mailing expenses provided by commenters.
    \362\ See Broadridge I Comment Letter. This dollar estimate of
cost savings, however, likely understates potential cost savings
since it was calculated using processing fees expected to be charged
by intermediaries prior to the Commission approval of the NYSE rule
that modifies processing fees.
    \363\ Id. The commenter projected costs to be $382 million in
fiscal year 2018 under the baseline. $18 million / $382 million =
4.7%.
    \364\ See ICI Comment Letter I; Fidelity Comment Letter II
(citing the ICI estimate).
    \365\ ICI Comment Letter I. The commenter estimated current
costs at $344 million. $89 million / $344 million = 25.9%.
    \366\ ICI Comment Letter I. The commenter estimated current
costs at $344 million. $182 million / $344 million = 52.9%.
---------------------------------------------------------------------------

    Another commenter estimated that the proposed rule would result in
savings of up to 50%.\367\ Another commenter stated that the
commenter's annual printing and mailing costs to deliver the annual and
semi-annual shareholder reports to shareholders of all of its funds are
approximately $4 million and projected annual cost savings under the
proposed rule to be $1.7 million,\368\ which would amount to a
reduction of approximately 43%. We note that commenter methodologies
with regard to projected cost savings varied, and thus, commenter
estimates may not be directly comparable to each other or to our
estimates.
---------------------------------------------------------------------------

    \367\ See T. Rowe Price Comment Letter I.
    \368\ See Schwab Comment Letter.
---------------------------------------------------------------------------

    After considering the estimates and information provided by
commenters about the potential factors that may affect net cost savings
on an ongoing basis, and after considering the changes made in the
final rule from the proposal, we have revised the estimates of annual
gross cost savings and annual costs of relying on rule 30e-3.
    First, we have revised our estimate of gross annual cost savings
for the funds that rely on rule 30e-3, estimated to be $105 million in
the proposal.\369\ We continue to estimate, as we did in the proposal,
that 90% of funds will rely on rule 30e-3,\370\ resulting in gross
annual cost savings of 90% of the annual printing and mailing costs
under the existing requirements. However, as discussed in greater
detail in Section III.B above, after considering commenters' estimates
and updated industry figures on the number of funds, we have revised
our estimate of printing and mailing costs under the existing
requirements to approximately $256.2 million.\371\ As a result, we now
estimate

gross annual cost savings to be approximately $230.6 million.\372\
---------------------------------------------------------------------------

    \369\ See supra note 358 and accompanying text.
    \370\ See supra Section III.B and supra note 353 and
accompanying and following text.
    \371\ See supra note 353 and accompanying text.
    \372\ We continue to estimate, as we did in the proposal, that
the number of affected funds that will rely on rule 30e-3 comprises
90% of the number of all funds. See supra note 343 and accompanying
text. As discussed above, we estimate aggregate annual printing and
mailing costs under the existing requirements to be approximately
$256.2 million. See supra note 353 and accompanying text. Thus, we
estimate gross aggregate annual savings of printing and mailing
costs as the aggregate annual printing and mailing costs multiplied
by the percentage of funds expected to rely on rule 30e-3: 90% x
$256,194,844 = $230,575,360. We recognize that these cost savings
represent a small fraction of assets under management of registered
management companies. See supra note 340 and accompanying text.
---------------------------------------------------------------------------

    Second, after considering comments regarding printing and mailing
costs for funds that rely on rule 30e-3, and after considering
modifications to the final rule from the proposal, we have revised the
estimated costs of relying on rule 30e-3. As we discuss in greater
detail in Section III.D.1 below, we now estimate that, after the first
year of reliance on rule 30e-3, aggregate annual costs of relying on
the rule will be approximately $89.2 million, yielding aggregate annual
net cost savings of approximately $141.4 million, or approximately 55%
of the annual printing and mailing costs under the existing
requirements.\373\ In addition, prior to the effectiveness of rule 30e-
3, we expect funds to incur aggregate costs of compliance with the
disclosure amendments of the final rule of approximately $8.2 million
in the first year and $4.8 million in the second year.\374\
---------------------------------------------------------------------------

    \373\ Annual printing and mailing costs under the existing
requirements were estimated to be $256,194,844. See supra note 353.
We estimated that 90% of funds will rely on rule 30e-3, which would
result in an estimated annual gross savings of $230,575,360. See
supra note 372.
    After the first year of reliance on rule 30e-3, the aggregate
annual compliance cost of rule 30e-3 is estimated to be $89,202,128.
See infra note 393.
    Annual savings from rule 30e-3, net of compliance costs, as a
share of annual printing and mailing costs under the existing
requirements are estimated to be: $230,575,360 - $89,202,128 =
$141,373,232. $141,373,232 / $256,194,844 = 55%.
    The revised estimates also reflect revised estimates of the
number of funds updated to reflect industry figures and revised
requirements of the final rule.
    \374\ See infra notes 419-420.

                          Potential Aggregate Cost Savings From Reliance on Rule 30e-3
----------------------------------------------------------------------------------------------------------------
                                                                    Transition       Year 1 ($      Year 2 + ($
                   Source of cost/cost savings                       period ($      million per     million per
                                                                     million)          year)           year)
----------------------------------------------------------------------------------------------------------------
Gross savings from rule 30e-3 \375\.............................  ..............           230.6           230.6
Costs of complying with rule 30e-3 \376\........................           -13.0           -93.9           -89.2
Prominent disclosures \377\.....................................           -13.0  ..............  ..............
Website accessibility requirements \378\........................  ..............            -3.2            -2.7
Notice preparation \379\........................................  ..............           -14.3           -10.2
Printing and mailing costs (Notices and paper requests) \380\...  ..............           -76.3           -76.3
Net savings from rule 30e-3 \381\...............................           -13.0           136.7           141.4
----------------------------------------------------------------------------------------------------------------

    If a smaller percentage of funds than the 90% we estimate
ultimately rely on rule 30e-3, the aggregate net cost savings from rule
30e-3 will accordingly be lower. Further, as discussed above, some
commenters have indicated that funds can presently rely on electronic
delivery of shareholder reports pursuant to Commission guidance.\382\
We note that funds that choose to rely on rule 30e-3 may continue to
use electronic delivery pursuant to Commission guidance for some of
their shareholder reports. We estimate cost savings relative to the
baseline of the average printing and mailing costs under the
requirements that exist today, which factors in the current use of
electronic delivery under Commission guidance for reports to some
investors. If aggregate printing and mailing costs incurred by funds
that do not rely on rule 30e-3 continue to decrease over time, for
instance as a result of growth of electronic delivery, either as part
of broad industry trends or as a result of the amendments to rule 498
permitting funds to include electronic delivery instructions with a
summary prospectus, annual printing and mailing cost savings under rule
30e-3 in future years may be lower than estimated.
---------------------------------------------------------------------------

    \375\ See supra note 372.
    \376\ See infra notes 392 and 393.
    \377\ $13.0 million = $8.2 million + $4.8 million. See infra
notes 419-420 and infra Section III.D.1.d.
    \378\ See infra note 396 and infra Section III.D.1.a.
    \379\ See infra note 402 and infra Section III.D.1.b.
    \380\ See infra note 408 and infra Section III.D.1.c
    \381\ $136.7 million = $230.6 million - $93.9 million. $141.4
million = $230.6 million - $89.2 million. Rounding may affect
totals.
    \382\ See supra note 348 and accompanying and following text.
---------------------------------------------------------------------------

    There likely is variation across individual funds both in existing
printing and mailing costs and in cost savings and compliance costs
that are expected on an initial or ongoing basis from rule 30e-3,
depending on the extent of reliance on electronic delivery under
Commission guidance. Although we cannot comprehensively quantify such
differences, for instance, because of uncertainty about the future rate
of growth in the use of electronic delivery under Commission guidance
by funds that choose to rely on rule 30e-3, we recognize that funds
that rely on rule 30e-3 may realize smaller net cost savings if they
rely to a greater extent on electronic delivery of shareholder reports
under existing Commission guidance.
2. Increased Access to and Review of Portfolio Information and
Shareholder Reports
    To the extent that funds elect to rely on rule 30e-3, the rule will
also increase the electronic accessibility to investors of portfolio
investment information from the first and third fiscal quarters (or
from the second and fourth fiscal quarters if a shareholder report
contained a summary schedule of portfolio holdings) that might
otherwise be only available on EDGAR, which in turn may result in
greater investor review of that information. In addition, because the
portfolio information must be publicly available on a website in the
same location as the shareholder reports required to be posted on the
website, the rule could further increase the likelihood that both
existing investors and potential future fund investors review the
portfolio information for the first and third quarters when they review
the shareholder reports. To the extent that investors seeking
information about an individual fund are likely to visit the specified
website, having many of a fund's important shareholder documents in a
single location on the fund's website could increase the visibility of,
and facilitate access to, that information for current and future
investors.
    Importantly, the rule will increase website accessibility of
shareholder

reports to investors. Although among the funds expected to rely on rule
30e-3, approximately 90% of funds are estimated to make their
shareholder reports publicly available online (consistent with the
proportion of funds estimated to rely on rule 498, which requires the
posting of shareholder reports on the fund's website), for the
remaining funds that do not currently rely on rule 498, relying on rule
30e-3 may make shareholder reports more accessible to the public, to
the extent that they do not already post shareholder reports on their
websites, which may result in greater investor review of the
information contained therein.\383\ Funds that presently rely on rule
498 will likely experience smaller benefits of increased access and
review of fund information by investors. However, such funds may still
experience net cost savings from no longer printing and mailing
shareholder reports, as well as the benefits of website accessibility
of fund portfolio holdings information.
---------------------------------------------------------------------------

    \383\ See infra note 557 and accompanying text. 11,367 funds
estimated to rely on rule 30e-3 - 9,057 funds estimated to rely on
rule 498 = 2,310 funds estimated to rely on rule 30e-3 and do not
rely on rule 498.
---------------------------------------------------------------------------

    Greater use of shareholder reports and portfolio information by
current and potential future investors could result in more informed
investment decisions and an increase in competition among funds for
investor capital. A better understanding of fund investment strategies,
portfolio composition, and investment risks could also result in a more
efficient allocation of capital across funds and other investments. An
increase in the ability of investors to access and review information
about different funds also could increase the competition among funds
for investor capital.
    Furthermore, during the extended transition period, funds intending
to rely on rule 30e-3 will be required to include prominent disclosures
on the cover page or beginning of their summary, and cover pages of
their statutory prospectuses, and annual and semi-annual shareholder
reports for up to two years before beginning to deliver Notices under
the rule.\384\ These prominent disclosures during the extended
transition period are expected to enhance investors' overall awareness
of the upcoming changes in the shareholder report delivery format
options under rule 30e-3, including the fact that investors will be
able to retain delivery of their reports in paper if they should so
desire. The prominent disclosures are also expected to notify investors
if their fund intends to rely on the rule and provide investors wishing
to continue to receive paper shareholder reports additional
opportunities to make that election. Some funds that intend to rely on
the rule may decide not to include these temporary prominent
disclosures. For example, for existing funds that delay to make the
election to rely on rule 30e-3 until 2021, the earliest these funds
would be able to rely on the rule would be January 1, 2022. Although
such funds would not be required to include prominent disclosures
during the last year of the extended transition period as a condition
of reliance on the rule, their investors may realize some of the
benefit of increased awareness of the changes in the shareholder report
delivery regime under rule 30e-3 to the extent that these investors
hold positions in other funds, including funds with the same sponsor,
that had made such prominent disclosures during the extended transition
period.
---------------------------------------------------------------------------

    \384\ See supra Section II.B.2.d.
---------------------------------------------------------------------------

    Further, as discussed in Section II.B.3 above, in a change from the
proposal, we are permitting funds that elect to rely on rule 30e-3 to
incorporate in the Notice, in addition to a website address, other
equivalent methods or means to facilitate shareholder access to the
website address. Such methods or means could include, for example, a
Quick Response Code (QR code) or similar information that leads to the
required website address. This change is expected to provide additional
optional methods by which investors can access shareholder reports on
the website, which, depending on the method, could result in a
reduction in the effort and time required for investors to access the
shareholder report.
    Finally, as discussed in Section II.B.3 above, in a change from the
proposal, the final rule permits a Notice to include pictures, logos,
or similar design elements so long as the design is not misleading and
the information is clear, as well as additional information about the
fund, so long as it is limited to information contained in the
shareholder report for which Notice is being given.\385\ This provision
could facilitate the addition of content by funds that attracts
additional investor attention to the Notice, yet by its terms does not
obscure important information contained in the Notice. Further, the
flexibility provided to funds to include content from the shareholder
report in the Notice may result in investors who may otherwise not
review the shareholder report seeing useful information from such
reports.
---------------------------------------------------------------------------

    \385\ See rule 30e-3(c)(3).
---------------------------------------------------------------------------

D. Costs

    Funds that rely on rule 30e-3 will incur costs to comply with the
rule's conditions. These and other costs are discussed below. Because
reliance on rule 30e-3 will be optional, a particular fund is not
expected to rely on the rule if the costs to the fund to rely on the
rule exceed its benefits. Funds that deem the costs of meeting the
conditions of rule 30e-3 to exceed the benefits of this optional rule
are expected to elect not to rely on the rule and therefore not incur
any compliance costs associated with rule 30e-3. Among investors in
funds that elect to rely on the rule, investors with a preference for
paper delivery that fail to express it may be less likely to review the
information in the reports because it is not presented in their
preferred format.
    As we discussed in Section II.E above, we are adopting an extended
transition period with staged effective dates. This will defer the time
when the costs of compliance with rule 30e-3 discussed in Sections
III.D.1.a through III.D.1.c below will be incurred.
1. Compliance Costs
    Relative to the baseline, funds relying on the new rule will incur
compliance costs associated with satisfying the conditions of the rule,
as discussed below. To the extent possible, we have attempted to
quantify these costs.
    We have made various modifications to the requirements of the final
rule from the proposal, as described in Section II above, in part to
address issues raised by commenters. To increase investor awareness of
a fund's intention to rely on rule 30e-3 and to inform investors of the
upcoming changes in the transmission method, in a change from the
proposal, we are adopting an extended transition period with staged
effective dates and a temporary condition requiring funds to include
during the extended transition period certain disclosures on summary
prospectuses, statutory prospectuses and shareholder reports for up to
two years prior to the date a fund would begin sending Notices in
reliance on the rule. As a result of this provision, the compliance
costs for funds that rely on rule 30e-3 will be higher than the
compliance costs that would have been incurred under the proposal, as
discussed in Sections III.D.1.c and III.D.1.d below.
    However, we have also made modifications from the proposal as a
result of which the compliance costs will be lower than the compliance
costs

that would have been incurred under the proposal. In particular, in a
change from the proposal, we are no longer requiring funds to provide
the Initial Statement. Therefore, the cost estimates are revised from
the proposal to reflect the elimination of the burden of preparing the
Initial Statement.\386\ Further, we are permitting the combination of
Notices with other Notices, expanding documents that may accompany
Notices, and eliminating reply cards with respect to Notices.
Permitting Notices to be bundled with additional types of materials
under the final rules may result in lower postage costs, compared to
the postage costs that would have been incurred under the proposal, by
reducing the need for a separate mailing, although other costs
associated with the Notice would still be incurred.\387\ Eliminating
reply cards for Notices is also expected to result in lower costs
compared to the costs that would have been incurred under the
proposal.\388\
---------------------------------------------------------------------------

    \386\ We estimate that requiring an Initial Statement would have
resulted in additional preparation, printing, mailing, and
processing costs of approximately $41.5 million in the aggregate in
the first year and $13.8 million in the aggregate in each subsequent
year.
    In the Proposing Release, preparing one Initial Statement was
estimated to require 1.5 burden hours in the first year and 0.5
burden hours in each subsequent year, with 25% of that burden
carried by outside counsel. See Proposing Release, supra note 14, at
33679. We retain this estimate. Using updated salary figures, we
monetize internal personnel time at $353 per hour and outside
counsel time at $401 per hour. See infra notes 404, 509. Using
updated salary figures, preparing the Initial Statement would have
cost approximately $548 (1.5 x (0.75 x $353 + 0.25 x $401)) in the
first year and $183 (0.5 x (0.75 x $353 + 0.25 x $401)) in each
subsequent year.
    In the Proposing Release, we estimated printing and mailing
costs for one Notice or Initial Statement to be $1,000. See
Proposing Release, supra note 14, at 33680. In light of the comments
on the proposal, we have revised our estimate of the printing and
mailing costs for one Notice to $3,106. See infra note 525. Thus, we
are similarly revising the estimated printing and mailing cost for
the first Initial Statement to $3,106. In the Proposing Release, we
estimated that the cost in each subsequent year would be one-third
of the cost for the first year because Initial Statements would only
be sent to new shareholders. See Proposing Release, supra note 14,
33680. We retain this estimate.
    Based on updated industry figures, we now estimate that 11,367
funds will elect to rely on rule 30e-3. See infra note 478. Thus,
the aggregate cost is estimated to be $41,535,018 (11,367 x ($548 +
$3,106)) in the first year and $13,848,795 (11,367 x ($183 + $3,106
x \1/3\)) in each subsequent year.
    One commenter estimated cost savings from the elimination of the
Initial Statement to be approximately $60 million. See Broadridge
Meeting Memo II, at 6.
    \387\ Similar to the proposal, the Notice is permitted to
accompany a current summary prospectus, statutory prospectus,
statement of additional information, or Notice of internet
Availability of Proxy Materials under rule 14a-16. As proposed, rule
14a-16 is amended to permit the bundling of Notices with Notices of
internet Availability of Proxy Materials. In addition, the final
rule also permits the Notice to accompany one or more Notices for
other funds; the investor's account statement; and in the case of a
fund that is available as an investment option in a variable annuity
or variable life insurance contract, the contract, the contract's
statutory prospectus, or the contract's statement of additional
information.
    \388\ See supra note 173 and accompanying text.
---------------------------------------------------------------------------

    As we discuss in Section II.B.3 above, in a modification from the
proposal, we are permitting funds to incorporate content from the
shareholder report in Notices relating to shareholder reports required
to be transmitted under rule 30e-1. However, funds may incur additional
costs for incorporating content from the shareholder report into the
Notice and filing such Notices with reports on Form N-CSR, as well as
potentially increase their printing and mailing costs, depending on the
length of the Notice. We expect that funds will only elect to include
content from shareholder reports in Notices if they believe the
benefits to funds and investors outweigh the increase in their costs of
preparing and distributing Notices with additional content. Likewise,
funds may choose to deploy certain additional optional methods to
facilitate access of shareholder reports (e.g., QR codes) if they
believe the benefits to funds and investors outweigh the additional
costs to do so.
    As discussed in Section IV.C below, we have reflected these
modifications, as well as commenter input, in the revised burden
estimates for the Notice for purposes of the Paperwork Reduction Act of
1995, which we incorporate in the cost analysis below.
    We have also specified that the schedule of portfolio investment
information as of the end of the first and third fiscal quarters must
be presented in a manner consistent with the reporting requirements of
Regulation S-X. As most funds have established procedures in place to
prepare and review such disclosures and familiarity with the disclosure
requirements, this provision should not result in significant
compliance costs.
    As we discuss below, we have also revised certain assumptions
underlying our estimates. First, we have revised our estimate of the
number of funds that will rely on rule 30e-3 upward to 11,367 to
reflect updates to the industry data figures that were utilized in the
Proposing Release.\389\ We note that, similar to our discussion of the
benefits in Section III.C.1, if a smaller number of funds choose to
rely on rule 30e-3 than we estimate, the above estimates would
overstate the actual costs incurred in the aggregate by the funds that
rely on rule 30e-3.
---------------------------------------------------------------------------

    \389\ See supra note 344 and accompanying text; infra note 478.
---------------------------------------------------------------------------

    Second, where applicable, we have attempted to address comments
related to our estimates. Two commenters stated that the proposal
underestimated the costs under rule 30e-3 (for instance, processing
fees for broker-held accounts) and thus overestimated the net cost
savings expected under rule 30e-3.\390\ However, to be conservative in
our estimates, we have revised upward our estimate of the printing and
mailing costs that funds will incur under rule 30e-3, as discussed in
Sections III.D.1.c and IV.B below.
---------------------------------------------------------------------------

    \390\ See ICI Comment Letter III; Broadridge Comment Letter I.
As noted above, we approved amendments to NYSE rules that clarify
the application of certain processing fees paid to financial
intermediaries. See supra notes 32 to 36 and accompanying text.
---------------------------------------------------------------------------

    In the Proposing Release, we estimated that compliance costs of
rule 30e-3 would be, in the aggregate, approximately $32 million each
year, with approximately $16 million in additional one-time costs being
incurred in the first year following the effective date (resulting in
aggregate compliance costs of approximately $48 million in the first
year).\391\ We now estimate that these compliance costs will be, in the
aggregate, approximately $93.9 million in the first year following the
effective date \392\ and approximately $89.2 million each following
year on an ongoing basis.\393\ Individual components of these aggregate
estimated costs are analyzed in Sections III.D.1.a through III.D.1.c
below. In addition, as discussed in Section III.D.1.d below, during the
approximately two years before the effective date of rule 30e-3, we
estimate that the disclosure requirements related to rule 498 and
amendments to registration statements will result in aggregate costs to
funds that intend to rely upon rule 30e-3 of approximately $8.2 million
in the first year \394\ and $4.8 million in the second year.\395\
---------------------------------------------------------------------------

    \391\ See Proposing Release, supra note 14, at nn.717-718.
    \392\ The estimate of $93,867,993 is based upon the following
calculations: $3,231,520 associated with website accessibility
requirements + $14,341,169 associated with Notice preparation +
$76,295,304 in printing, mailing, and processing costs. See infra
notes 396, 402, 408.
    \393\ The estimate of $89,202,128 is based upon the following
calculations: $2,711,680 associated with website accessibility
requirements + $10,195,144 associated with Notice preparation +
$76,295,304 in printing, mailing, and processing costs. See infra
notes 396, 402, 408.
    \394\ See infra note 419.
    \395\ See infra note 420.

---------------------------------------------------------------------------

a. Website Accessibility of Shareholder Reports and Other Materials
    Funds that rely on rule 30e-3 in the aggregate are expected to
incur costs of approximately $3.2 million in the first year of relying
on rule 30e-3 and $2.7 million in each subsequent year to make the
shareholder reports and portfolio information publicly accessible at a
specified website.\396\
---------------------------------------------------------------------------

    \396\ See infra notes 399, 400. In the first year: $3,003,520 +
$228,000 = $3,231,520. In each subsequent year: $2,711,680.
---------------------------------------------------------------------------

    We estimate that funds that elect to rely on rule 30e-3 will incur,
in the aggregate, approximately 9,386 burden hours during the first
year of relying on rule 30e-3 and 8,476 burden hours each following
year to comply with the website posting requirements of the rule.\397\
Based on an estimated wage rate of about $320 per hour,\398\ we
estimate the aggregate paperwork related expenses for funds associated
with the internal hour burden imposed by the website accessibility
conditions of rule 30e-3 to be approximately $3.0 million during the
first year and $2.7 million each following year.\399\
---------------------------------------------------------------------------

    \397\ See infra notes 488-489.
    \398\ The Commission estimates the wage rate associated with
these burden hours based on salary information for the securities
industry compiled by the Securities Industry and Financial Markets
Association. The estimated wage figure is based on published rates
for senior programmers, modified to account for an 1,800-hour work-
year and multiplied by 5.35 to account for bonuses, firm size,
employee benefits, and overhead, and adjusted to account for the
effects of inflation, yielding an effective hourly rate of $320. See
Securities Industry and Financial Markets Association, Report on
Management & Professional Earnings in the Securities Industry 2013.
    \399\ $3,003,520 = 9,386 burden hours x $320 per hour.
$2,711,680 = 8,476 burden hours x $320 per hour.
---------------------------------------------------------------------------

    In the aggregate, we estimate that the total external cost for
funds to comply with the website posting requirements of the rule will
be approximately $228,000 during the first year, with the external cost
in subsequent years likely to be negligible.\400\ With respect to those
funds that currently have websites, we estimate that the website
posting requirements of the rule will not result in incremental
external costs.\401\ If funds that do not currently have websites incur
ongoing external website development costs, aggregate costs of website
accessibility will be higher than we estimate.
---------------------------------------------------------------------------

    \400\ $228,000 = 114 funds x $2,000 per fund. See infra note 492
(estimating, as we did in the Proposing Release, that each fund that
does not currently have a website will incur a one-time external
cost of $2,000 to develop a website) and infra note 495 (estimating
114 funds do not currently have websites). In the Proposing Release
we also estimated that no cost would be incurred in subsequent years
by funds that do not currently have a website. See Proposing
Release, supra note 14, at 33678, nn.811-812 and accompanying text.
We did not receive comments on these estimates and are therefore
retaining these assumptions.
    \401\ See infra note 494 and accompanying text.
---------------------------------------------------------------------------

b. Notice Preparation
    We estimate that funds will incur, in the aggregate, approximately
$14.3 million in the first year of relying on rule 30e-3 and
approximately $10.2 million in each subsequent year in costs to prepare
and review Notices and to file Notices with additional content with
reports on Form N-CSR.\402\
---------------------------------------------------------------------------

    \402\ See infra notes 405-407. In the first year: $14,341,169
($9,028,328 + $3,421,467 + $1,891,374). In each following year:
$10,195,144 ($6,019,003 + $2,284,767 + $1,891,374).
---------------------------------------------------------------------------

    We estimate that funds that elect to rely on rule 30e-3 will incur,
in the aggregate, an internal hour burden of approximately 25,576 hours
in the first year and 17,051 hours each following year in connection
with the Notice conditions of the rule.\403\ Based on an estimated wage
rate of about $353 per hour for compliance attorneys,\404\ we estimate
the total paperwork related expenses for funds associated with the
internal hour burden imposed by the Notice conditions of rule 30e-3
will be approximately $9.0 million in the first year of relying on rule
30e-3 and $6.0 million each following year.\405\ These estimates
reflect the changes we are making to the Notice requirements relative
to the proposal, including eliminating the requirement of including a
direct URL to the shareholder report, eliminating the reply card
requirement, permitting Notices to be incorporated into or combined
with other Notices, expanding the ability to combine Notices with other
mailings, as well as removing the filing requirement, except for
Notices that contain content from the shareholder report, and allowing
funds to include optional content from the shareholder report in the
Notice.
---------------------------------------------------------------------------

    \403\ See infra notes 504 (estimating 2.25 hours in the first
year) and 505 (estimating 1.5 hours for each following year). 2.25
hours in the first year x 11,367 funds = 25,576 hours. 1.5 hours
each following year x 11,367 funds = 17,051 hours.
    \404\ In the Proposing Release, we estimated that the internal
hour burden required to comply with the requirements concerning
preparation of the Initial Statement and Notice would be incurred at
the rate of $334 per hour. This estimate was based on the rate for
compliance attorneys in SIFMA's Management and Professional Earnings
in the Securities Industry 2013, modified by Commission staff to
account for an 1,800-hour work year and multiplied by 5.35 to
account for bonuses, firm size, employee benefits, and overhead. See
Proposing Release, supra note 14, at n.717.
    We did not receive any comments on our proposed estimate of the
proportion of the time required to prepare Initial Statements and
Notices that would be carried out by outside counsel, and we are
maintaining that estimate today. We are, however, updating our
estimate of the hourly rate for the work carried out by compliance
attorneys based on updated salary estimates to $353 per hour.
    \405\ 25,576 hours x $353 per hour = $9,028,328. 17,051 hours x
$353 per hour = $6,019,003.
---------------------------------------------------------------------------

    The incremental annual costs of filing Notices with additional
content with reports on Form N-CSR are estimated to be approximately
$1.9 million, using burden estimates for purposes of the PRA.\406\
---------------------------------------------------------------------------

    \406\ The aggregate internal burden is estimated as 5,358 hours.
See infra note 579. We monetize it at the rate of $353 for
compliance attorneys. See supra note 404. The aggregate cost is
estimated to be $1,891,374 (5,358 hours x $353).
---------------------------------------------------------------------------

    Finally, we estimate that external costs related to the Notice
requirements of rule 30e-3 will be, in the aggregate, approximately
$3.4 million in the first year and $2.3 million each following
year.\407\
---------------------------------------------------------------------------

    \407\ See infra note 512 (estimating outside counsel costs
associated with the Notice of about $301 in the first year and about
$201 in subsequent years). $301 in the first year for the Notice x
11,367 funds = $3,421,467 in the first year. $201 each following
year for the Notice x 11,367 funds = $2,284,767 each following year.
---------------------------------------------------------------------------

c. Printing and Mailing Costs
    We estimate that funds that rely on rule 30e-3 will incur, in the
aggregate, approximately $76.3 million per year in printing and mailing
costs for Notices and costs of delivery of shareholder reports in paper
form upon shareholder request.\408\ These estimates are inclusive of
processing fee costs, and have been adjusted in response to comments
received on these estimates and other considerations.\409\
---------------------------------------------------------------------------

    \408\ See infra notes 414 and 530. $70,611,804 + $5,683,500 =
$76,295,304.
    \409\ See infra Section IV.C.
---------------------------------------------------------------------------

    In a change from the proposal, funds will not be required to
prepare and mail the Initial Statement. Therefore, the cost estimates
are revised from the proposal to reflect the elimination of the Initial
Statement printing, mailing and processing costs. The cost estimates
are further revised to reflect changes we are making to the Notice
requirements relative to the proposal, including eliminating the reply
card requirement, permitting Notices to be incorporated into or
combined with other Notices, as well as expanding the ability to
combine Notices with other mailings. The estimates further incorporate
certain revisions to the assumptions, relative to the proposal, based
on the input we have received from commenters. In particular, we have
revised the baseline assumption about the magnitude of printing and
mailing costs as a share of the total external cost of compliance with
rules 30e-1 and 30e-2, from one-third in the proposal, to two-thirds,
as explained below.\410\
---------------------------------------------------------------------------

    \410\ See infra note 544 and accompanying text.

---------------------------------------------------------------------------

    Further, in light of the above comments on the estimates in the
Proposing Release and the modifications we are making today (including
eliminating the reply card requirement for Notices, permitting Notices
to accompany other Notices and other types of documents, and permitting
funds to include optional content from the shareholder report in the
Notice),\411\ we have determined to increase our estimate of the
percentage of annual printing and mailing costs (including processing
fees) associated with shareholder reports that will be associated with
the printing and mailing of each Notice from 10% in the proposal to
15%, as explained below.\412\
---------------------------------------------------------------------------

    \411\ See supra notes 32-36 and accompanying text; infra note
521.
    \412\ See infra note 517 and accompanying and following text and
infra Section IV.B.
---------------------------------------------------------------------------

    We now estimate that each fund that relies upon rule 30e-3 will
incur an external cost of approximately $6,212 per year for printing
and mailing Notices.\413\ In the aggregate, funds are estimated to
incur approximately $70.6 million per year to print and mail
Notices.\414\
---------------------------------------------------------------------------

    \413\ See infra notes 525-526 and accompanying text.
    \414\ Id. $3,106 x 2 Notices per year x 11,367 funds =
$70,611,804.
---------------------------------------------------------------------------

    In addition, under rule 30e-3, investors will have the option to
request shareholder reports and other materials to be delivered in
paper form and also to request paper copies for individual documents
even if they do not request paper delivery for all documents. Funds
that rely on rule 30e-3 will therefore incur expenses related to
printing and mailing shareholder reports and other materials for those
shareholders. We estimate that funds that elect to rely on rule 30e-3
will incur, in the aggregate, annual external costs of approximately
$5.7 million to comply with the rule's requirements to print and mail
shareholder reports upon request.\415\
---------------------------------------------------------------------------

    \415\ See infra note 530.
---------------------------------------------------------------------------

    In connection with tracking shareholder requests for paper under
rule 30e-3, funds and intermediaries may incur costs to implement and
maintain systems to record shareholder preferences for paper delivery
and requests for paper copies of shareholder reports under rule 30e-
3.\416\ As discussed above, we believe that existing systems for
electronic delivery could generally be leveraged in order to establish
new processes and procedures for delivery of shareholder reports under
rule 30e-3.\417\ The costs associated with implementing these systems
may depend on funds' and intermediaries' existing systems for tracking
investor preferences for electronic delivery. Given this variation, we
do not have data on the extent of potential system updates that funds
and intermediaries would need to implement.
---------------------------------------------------------------------------

    \416\ See supra note 239 and accompanying text.
    \417\ See supra Section II.C.2. We note that the rule's approach
to provide shareholders the option to request paper copies is
generally similar to the operational approach currently used by many
funds and intermediaries for the delivery of other fund materials.
For example, paper copies of disclosure documents (including
shareholder reports) may currently be requested when some
shareholders have elected electronic delivery for some, but not all
communications.
---------------------------------------------------------------------------

    The modifications made from the proposal, including the elimination
of the Initial Statement, the tracking of delivery preferences at the
account rather than position level, and the permanent nature of the
opt-in to paper delivery, are expected to reduce operational
complexities and make it easier for existing systems to be leveraged
for purposes of tracking investor preferences for paper delivery under
rule 30e-3. Further, the extended transition period, added in a change
from the proposal, is expected to provide funds and intermediaries
additional time to implement the necessary system changes.
    We recognize that certain changes from the proposal, such as
eliminating the requirement to mail the Initial Statement, eliminating
the reply card, and adding required prominent disclosures on summary
and statutory prospectuses and shareholder reports, may affect the
number of investors who elect paper delivery due to changes to investor
awareness regarding the option to request paper delivery under rule
30e-3, resulting in different printing and mailing costs under rule
30e-3 than estimated above. However, we are not able to quantify these
effects due to uncertainty about the number of investors who may elect
paper delivery as a result of these changes.
d. Disclosure Amendments to Rule 498 and Registration Forms
    In a modification from the proposal, we are amending rule 498 and
certain fund registration forms setting forth a temporary condition
requiring funds to include during the extended transition period
certain disclosures on summary prospectuses, statutory prospectuses,
and shareholder reports for up to two years prior to the date a fund
would begin sending Notices in reliance on the rule. During the
extended transition period, funds intending to rely on rule 30e-3 as
early as permitted will include prominent disclosures on the cover page
or beginning of their summary prospectuses, and cover pages of their
statutory prospectuses and shareholder reports for a period of up to
two years.\418\ We estimate that these disclosures will result in
aggregate incremental costs prior to the effective date of rule 30e-3
of approximately $8.2 million in the first year \419\ and approximately
$4.8 million in the second year.\420\
---------------------------------------------------------------------------

    \418\ See new paragraph (b)(1)(vii) of rule 498; new paragraph
(a)(5) to Item 1 of Form N-1A; new paragraph (d)(8) to Item 27 of
Form N-1A; new paragraph 1.l to Item 1 of Form N-2; new instruction
6.g to Item 24 of Form N-2; new paragraph (a)(xi) to Item 1 of Form
N-3; new instruction 6(vii) to Item 28(a) of Form N-3; new paragraph
(a)(x) to Item 1 of Form N-4; new paragraph (a)(6) to Item 1 of Form
N-6.
    \419\ $8,151,936 = $7,144,872 associated with amendments to rule
498 and Form N-1A + $454,400 associated with amendments to Form N-2
+ $9,372 associated with amendments to Form N-3 + $422,592
associated with amendments to Form N-4 + $120,700 associated with
amendments to Form N-6. See infra notes 430, 437, 442, 445, and 448.
    \420\ $4,837,088 = $4,286,980 associated with amendments to rule
498 and Form N-1A + $272,640 associated with amendments to Form N-2
+ $5,680 associated with amendments to Form N-3 + $211,296
associated with amendments to Form N-4 + $60,492 associated with
amendments to Form N-6. See infra notes 430, 437, 442, 445, and 448.
---------------------------------------------------------------------------

    As described above, the condition will take effect on January, 1,
2019 and expire on January 1, 2022.\421\ Depending on when existing
funds make the election to rely on rule 30e-3 and begin incorporating
prominent disclosures in their summary and statutory prospectuses and
shareholder reports, the number of fund documents on which individual
funds will be required to include prominent disclosures, the time when
funds are required to begin tracking investor opt-outs, and the
associated cost, as well as the time that will elapse before the fund
is allowed to begin delivering Notices in reliance on rule 30e-3, will
vary, as detailed above.\422\ Differences in the timing of when funds
may begin to realize cost savings under rule 30e-3 may potentially have
competitive effects during the extended transition period.
---------------------------------------------------------------------------

    \421\ See supra Sections II.B.2.f and II.B.3.
    \422\ Id.
---------------------------------------------------------------------------

    However, for existing funds, the application of these provisions
during the extended transition period and the associated costs and
benefits will be determined by the timing of the fund's own decision to
rely on rule 30e-3 and to begin informing investors of the fund's
intent to rely on rule 30e-3 by including prominent disclosures on fund
documents during the extended transition period (e.g., whether to begin
informing investors of the fund's intent to rely on rule 30e-3
immediately after

the rule becomes effective on January 1, 2019, or for new funds from
the date the fund first publicly offers its shares; or whether to
postpone relying on rule 30e-3 and informing investors of the fund's
intent to rely on rule 30e-3 through prominent disclosures on fund
documents). Similarly, an existing fund's decision to postpone relying
on rule 30e-3 during the extended transition period will reduce the
number of prominent disclosures that the fund will need to include on
fund documents during the extended transition period before being able
to rely on rule 30e-3, thus potentially reducing the cost of related
disclosure amendments to the fund. For existing funds, the incremental
reduction in the cost of compliance with the requirement to include
prominent disclosures on an additional fund document mailing is
expected to be small relative to the opportunity cost of delaying the
realization of cost savings from reliance on rule 30e-3. Overall, we
anticipate that existing funds that are considering whether to rely on
rule 30e-3 will weigh the costs and benefits of doing so early versus
late during the extended transition period and will select the option
that provides the most benefit.
    The final rule provides funds the flexibility to make the election
to rely on rule 30e-3 at the time that is most appropriate for the
fund's specific circumstances while including prominent disclosure
requirements during the extended transition period to enhance investor
awareness of the upcoming changes in the shareholder report delivery
framework. Such flexibility is expected to enable funds to select the
most efficient manner of shareholder report delivery and for funds that
elect to rely on the rule, the most efficient approach to transition to
rule 30e-3.
    The final rule allows new funds that enter the industry in January
2021 or later to begin relying on rule 30e-3 immediately from the date
the fund first publicly offers its shares without having to provide
prominent disclosures, which is different from the application of the
rule to funds in existence during 2019-2020 that will have had to
provide up to two years of prominent disclosures, and incur the
associated cost, as a condition of relying on rule 30e-3 beginning on
January 1, 2021. In this respect, existing funds wishing to rely on the
rule beginning on January 1, 2021 will incur a cost that funds newly
formed on or after that date will not. Moreover, those existing funds
that delay their decision to rely on the rule (that is, those that
decide after January 1, 2019) may incur the opportunity cost due to not
being able to begin relying on the rule starting January 1, 2021.
Although in that respect, existing and new funds are treated
differently, we note that all funds that decide to rely on the rule as
early as possible--either before January 1, 2019 or at their
inception--will be treated similarly.
Rule 498 and Form N-1A Estimates
    We estimate that there are 11,181 funds that file Form N-1A,\423\
including 10,063 funds that will rely on rule 30e-3, of which 9,057
funds also rely on rule 498.\424\ We estimate that the remaining 1,006
funds do not rely on rule 498.\425\
---------------------------------------------------------------------------

    \423\ See infra note 556.
    \424\ See infra note 557 and accompanying text.
    \425\ See infra note 559 and accompanying text.
---------------------------------------------------------------------------

    We estimate that funds will incur, in the aggregate, 9,057 hours in
the first year and 4,529 hours in the second year to satisfy the
disclosure requirements associated with the amendments to rule
498.\426\ We further estimate that the funds that rely on rule 30e-3
but not rule 498 will incur, in the aggregate, 1,006 hours in the first
year and 503 hours in the second year to comply with the amendments to
Form N-1A relating to prospectuses.\427\ In addition, we estimate that
funds that will rely on rule 30e-3 and that file Form N-1A will incur,
in the aggregate, 15,095 hours in the first year and 10,063 in the
second year to comply with the amendments to Form N-1A relating to
annual and semi-annual reports.\428\
---------------------------------------------------------------------------

    \426\ See infra note 558.
    \427\ See infra note 559.
    \428\ See infra note 560.
---------------------------------------------------------------------------

    Based on an estimated wage rate of about $284 per hour,\429\ we
estimate the total paperwork related expenses for funds relying upon
rule 30e-3 and associated with the amendments to rule 498 and Form N-1A
will be approximately $7.1 million in the first year and approximately
$4.3 million in the second year.\430\
---------------------------------------------------------------------------

    \429\ The estimated wage figure is based on published rates for
intermediate accountants and attorneys, modified to account for an
1,800-hour work-year and multiplied by 5.35 to account for bonuses,
firm size, employee benefits, and overhead, and adjusted to account
for the effects of inflation. See supra note 398. Based on adjusted
industry data, we estimate a rate of $166 per hour for intermediate
accountants and $401 per hour for attorneys. We further estimate
that work would be divided equally between intermediate accountants
and attorneys, yielding a rate of $284 per hour (($166 + $401) / 2).
    \430\ (9,057 + 1,006 + 15,095) hours x $284 per hour =
$7,144,872. (4,529 + 503 + 10,063) hours x $284 per hour =
$4,286,980.
---------------------------------------------------------------------------

Form N-2 Estimates
    We estimate that there are 711 closed-end funds that file Form N-
2,\431\ including 640 funds that will rely on rule 30e-3.\432\ We
estimate that these funds will incur, in the aggregate, 640 hours in
the first year and 320 hours in the second year to satisfy the
disclosure requirements associated with the amendments to Form N-2
relating to statutory prospectuses.\433\ In addition, we estimate these
funds will incur, in the aggregate, 960 hours in the first year and 640
hours in the second year to comply with the amendments to Form N-2
relating to annual and semi-annual reports.\434\ Based on an estimated
wage rate of about $284 per hour,\435\ we estimate the total paperwork
related expenses for funds relying upon rule 30e-3 and associated with
the amendments to Form N-2 will be approximately $0.5 million in the
first year and approximately $0.3 million in the second year.\436\
---------------------------------------------------------------------------

    \431\ See infra note 562 and accompanying text.
    \432\ See infra note 563.
    \433\ See infra note 564.
    \434\ See infra note 565.
    \435\ See supra note 429.
    \436\ (640 + 960 hours) x $284 per hour = $454,400. (320 + 640
hours) x $284 per hour = $272,640.
---------------------------------------------------------------------------

Form N-3 Estimates
    We estimate that there are 14 funds that file Form N-3,\437\
including 13 funds that will rely on rule 30e-3.\438\ We estimate that
these funds will incur, in the aggregate, 13 hours in the first year
and 7 hours in the second year to satisfy the disclosure requirements
associated with the amendments to Form N-3 relating to statutory
prospectuses.\439\ In addition, we estimate that these funds will
incur, in the aggregate, 20 hours in the first year and 13 hours in the
second year to comply with the amendments to Form N-3 relating to
annual and semi-annual reports.\440\ Based on an estimated wage rate of
about $284 per hour,\441\ we estimate the total paperwork related
expenses for these funds will be approximately $9,372 in the first year
and $5,680 in the second year.\442\
---------------------------------------------------------------------------

    \437\ See infra note 567 and accompanying text.
    \438\ See infra note 568.
    \439\ See infra note 569.
    \440\ See infra note 570.
    \441\ See supra note 429.
    \442\ (13 + 20 hours) x $284 per hour = $9,372. (7 + 13 hours) x
$284 per hour = $5,680.
---------------------------------------------------------------------------

Form N-4 Estimates
    As we discuss below, we estimate funds that will rely on rule 30e-3
will make 1,488 filings of Form N-4, with the total annual hour burden
associated with the amendments to Form N-4 of 1,488 hours in the first
year and 744 hours in the second year.\443\ Based on an estimated wage
rate of about $284 per

hour,\444\ we estimate the total paperwork related expenses for these
funds will be approximately $422,592 in the first year and $211,296 in
the second year.\445\
---------------------------------------------------------------------------

    \443\ See infra notes 572-573 and accompanying and following
text.
    \444\ See supra note 429.
    \445\ 1,488 x $284 = $422,592. 744 x $284 = $211,296.
---------------------------------------------------------------------------

Form N-6 Estimates
    As we discuss below, we estimate funds that will rely on rule 30e-3
will make 425 filings of Form N-6, with the total annual hour burden
associated with the amendments to Form N-6 of 425 hours in the first
year and 213 hours in the second year.\446\ Based on an estimated wage
rate of about $284 per hour,\447\ we estimate the total paperwork
related expenses for these funds will be approximately $120,700 in the
first year and $60,492 in the second year.\448\
---------------------------------------------------------------------------

    \446\ See infra notes 574-575 and accompanying and following
text.
    \447\ See supra note 429.
    \448\ 425 x $284 = $120,700. 213 x $284 = $60,492.
---------------------------------------------------------------------------

2. Other Costs
    Although we believe that the provisions of the final rule enable
investors to receive shareholders reports in the format they prefer,
that website availability of shareholder reports and portfolio
information is consistent with many investors' preferences,\449\ and
that the final rule may promote improved access to and consumption of
portfolio information, as discussed above,\450\ we acknowledge that
there may be some investors who would prefer to receive paper copies
but may not notify their fund of that preference.\451\ To this end,
several commenters pointed out that internet access and use among
Americans was not universal.\452\ Those investors without home internet
access, depending on their ability and preference to access shareholder
reports and portfolio investment information electronically, might
experience a reduction in their ability to access shareholder reports
and portfolio investment information if they do not elect to receive
paper reports. Further, some commenters have asserted that some
investors with internet access may be less likely to review their
shareholder reports made available online than shareholder reports
delivered in paper form.\453\
---------------------------------------------------------------------------

    \449\ See, e.g., supra notes 43, 96, and 97, and accompanying
text.
    \450\ See supra Section III.C.2.
    \451\ See supra note 98; supra Section II.A.2.
    \452\ See supra note 49. But see supra notes 41-42 and
accompanying text (discussing increasing internet usage, including
among previously underserved demographic groups).
    \453\ Commission staff lacks data to assess the extent to which
investors review information provided in either paper or electronic
format. One commenter provided survey evidence, suggesting that,
less than half of the respondents read all of the disclosure but a
significant portion of respondents read or skim some of the
disclosure. See Broadridge Meeting Memo I, at 9 (citing the 2016
True North Market Insights Study, according to which (1) 21% of
respondents reported reading paper reports thoroughly and 53%
reported skimming the reports, and (2) 36% of respondents reported
always looking at the annual and semi-annual reports received in the
mail, 31% of respondents reported doing so most of the time, and 26%
of respondents reported doing so some of the time; the 2015 FINRA
National Financial Capability Study, according to which 28% of
respondents reported reading disclosure documents regarding
investments and 58% of respondents reported skimming the disclosure
documents; the 2015 Forrester Research and Broadridge Custom Survey,
according to which 24% of respondents reported looking at
shareholder reports always, 26% of respondents most of the time, and
37% of respondents sometimes; and the 2006 ICI Study: Understanding
Investor Preferences for Mutual Fund Information, according to which
10% of respondents reported reading all shareholder reports, 17% of
respondents reported reading most, 24% of respondents reported
reading some, and 26% of respondents reported reading very little of
the shareholder reports they receive).
     However, another commenter suggested that surveys about
readership may be unreliable because respondents may misstate their
readership, because surveys did not ask respondents specifically
about whether they read the reports, and because surveys often have
methodological problems that lead to a likely overstatement of the
baseline readership. The commenter also expressed skepticism that
``large number[s] of individual investors are avid readers of their
paper shareholder reports'' due to the length and technical nature
of the reports, especially when published on a consolidated basis,
and argued that it is thus not possible to conclude that fewer
investors would read reports online. See ICI Comment Letter III. In
another letter, this commenter stated that, based on an investor
survey, ``fewer than half of mutual fund shareholders still review
some printed materials for information about their fund investments,
and over two-thirds of these individuals likewise access online
materials to gather information on their fund investments.'' See
Comment Letter of Investment Company Institute (Jul. 8, 2016) (``ICI
Comment Letter IV'').
---------------------------------------------------------------------------

    To the extent that a reduction in the review of shareholder reports
by such investors decreases how informed they are about funds, it could
potentially decrease their ability to efficiently allocate capital
across funds and other investments. A decrease in the ability of
investors to access and review information about different funds could
also decrease the competition among funds for investor capital.
However, these potential effects will be attenuated to the extent that
investors rely on other sources of information and disclosures, in
addition to shareholder reports, to obtain information about funds.
    In a change from the proposal, after considering the input from
commenters, we are not requiring pre-paid reply cards to be sent
together with Notices,\454\ nor are we requiring funds to mail an
Initial Statement.\455\ These changes may reduce the likelihood,
compared to the proposal, that investors who prefer to access reports
in paper form will elect to receive reports in that form, which in turn
would potentially reduce the likelihood that investors will review the
information in reports, and similarly may result in less well-informed
investment decisions and potential adverse effects on the efficiency of
capital allocation across funds.
---------------------------------------------------------------------------

    \454\ See supra note 174.
    \455\ See supra Section II.B.2.b.
---------------------------------------------------------------------------

    However, we have sought to mitigate such potential adverse effects
in the final rule.\456\ For example, the final rule contains a Notice
requirement and permits the Notice to include multiple means through
which an investor can elect paper reports.\457\ To help ensure that
current investors that may be accustomed to receiving shareholder
reports in paper through the mail have advance notice of a fund's
intent to rely on rule 30e-3, the final rule also includes an extended
transition period with a temporary condition that requires funds to
include prominent disclosures during the extended transition period in
various fund documents prior to sending Notices pursuant to the
rule.\458\ In addition, to further simplify the process for investors
with a preference for paper delivery to make such an election, under
the final rule, an investor's election for paper reports is required to
be applied at the investor account level, rather than the fund position
level.\459\
---------------------------------------------------------------------------

    \456\ See supra Section II.B.2.
    \457\ See supra Section II.B.2.b.
    \458\ See supra Sections II.B.2.f and II.B.3.
    \459\ See supra Section II.B.2.d.
---------------------------------------------------------------------------

    In a change from the proposal, the final rule permits a Notice to
include additional information about the fund, so long as it is limited
to information contained in the shareholder report for which Notice is
being given.\460\ To the extent that investors only review Notices and
to the extent that investors do not find the additional content from
the report included in the Notice to be a sufficient description of
fund operations, it may result in a less complete investor review of
information about the fund. However, the requirement that the Notice
describe means by which investors may access the complete shareholder
report and the requirement that additional content included in the
Notice be limited to information from the shareholder report

are expected to partly mitigate this concern.
---------------------------------------------------------------------------

    \460\ See supra Section II.B.2.b.ii.
---------------------------------------------------------------------------

    In addition, although we expect investors to benefit from a
reduction in printing and mailing costs borne by their funds, we
recognize that some investors may incur printing costs due to manually
printing specific documents of their choosing.\461\ Investors that
print out their own materials would likely incur greater costs than
they would otherwise indirectly bear if the printing and mailing costs
of those materials were borne collectively by all investors of the
fund. We note, however, that investors have the option to request paper
copies directly instead of manually printing materials, and we expect
investors who regularly print out their own copies of shareholder
reports and for whom such printing is burdensome or costly to elect
paper delivery.
---------------------------------------------------------------------------

    \461\ See Shareholder Choice Regarding Proxy Materials Release,
supra note 18, at 42231, 42234. The Shareholder Choice Regarding
Proxy Materials Release estimated that approximately 10% of all
shareholders print out proxy materials at home at a unit cost that
was approximately 25% higher than the average cost of printing and
mailing each copy under the paper delivery regime ($7.05 / $5.64 =
1.25). Printing costs for shareholder reports and proxy materials
may differ and printing costs in absolute terms have decreased over
time. According to one commenter, the cost to the fund of printing
and mailing a shareholder report under the existing requirements is
$0.70 per report. See ICI Comment Letter I. However, it remains
likely that individual shareholders who manually print reports will
incur a higher cost per report relative to the cost incurred by a
fund due to the economies of scale. It is not clear how many
shareholders will manually print shareholder reports, and thus, what
the aggregate incremental cost impact on shareholders will be.
---------------------------------------------------------------------------

    It is possible that funds that choose to rely on rule 30e-3 could
be at a competitive disadvantage if investors choose funds based on
their preference for the default of paper delivery. Funds for which
such competitive effects outweigh the cost savings from reliance on
rule 30e-3 can choose not to rely on rule 30e-3.
    Rule 30e-3 and related rule and form amendments could also
potentially have costs extending beyond the asset management industry.
Some commenters expressed concern about the long-term effects of rule
30e-3 on other industries, including the paper industry.\462\ The
commenters, however, did not provide specific data on or estimates of
the rule's potential impact on those industries. Even in the absence of
rule 30e-3 and related amendments to rule 498 and registration forms,
continued future growth of electronic delivery in reliance on existing
Commission guidance might result in a continued decrease in the number
of shareholder reports being delivered in paper form, so the potential
future effects on the paper industry may be influenced by factors
outside of rule 30e-3 and related rule and form amendments.
Furthermore, notwithstanding these potential impacts, we continue to
believe that rule 30e-3 will modernize and enhance the manner in which
shareholder reports are made available to investors, resulting in
savings in printing and mailing costs that are borne by funds, and
ultimately, by fund shareholders, and overall greater accessibility of
shareholder reports and other related information. Moreover, under rule
30e-3 investors will have the ability to request delivery of
shareholder reports and other materials in paper form.
---------------------------------------------------------------------------

    \462\ See, e.g., Baesman Comment Letter; Sandstrom Comment
Letter; Gherman Comment Letter; Snader Comment Letter; Jaffe Comment
Letter.
---------------------------------------------------------------------------

E. Alternatives

    Commission staff has also examined different ways in which the
information that funds provide to investors could be made more
accessible while still promoting the ability of investors to receive
these important documents via their preferred method. Some of these
alternatives are discussed throughout the release to explain why the
Commission ultimately chose to adopt the rule in its current state. We
discuss below several additional alternatives that the Commission
considered.
    As an alternative, we considered whether we should eliminate the
Notice requirement, as suggested by one commenter.\463\ Eliminating the
Notice would provide greater cost savings to funds and their investors
than the final rule we are adopting today. We estimate that this
alternative would result in additional aggregate savings of Notice
preparation, printing, and mailing costs of approximately $86.8 million
in the first year and approximately $83.8 million in each subsequent
year.\464\ However, we believe that doing so would reduce investor
awareness of the online shareholder reports, which would run counter to
our objective of promoting the accessibility of these important fund
documents. While funds will necessarily incur costs to distribute
Notices, as discussed above,\465\ we continue to believe that it is
important for investors to receive the Notice, as it will alert them to
the availability of a shareholder report online and will provide them
with information on how to obtain a paper copy of the report.
---------------------------------------------------------------------------

    \463\ See supra Section II.B.2.b.
    \464\ See supra notes 402 and 408: $86,767,898 ($75,993,264 +
$10,774,634) in the first year and $83,797,114 ($75,993,264 +
$7,803,850) in each following year.
    \465\ See supra Section III.D.1.
---------------------------------------------------------------------------

    As another alternative, we could have required or permitted the
Notice, which meets the content requirements in the final rule, or
alternatively, additional content requirements as described below, to
be sent via email, as suggested by some commenters.\466\ This
alternative would result in savings of printing and mailing costs for
funds of up to approximately $76.0 million per year if all Notices are
sent by email instead of in paper form.\467\ The email manner of
delivery of the Notice under this alternative would not be expected to
affect the costs of preparing the Notice content. However, for
investors that have not opted into electronic delivery, information on
email addresses that a fund can use to deliver Notices may be missing
or out of date, and we are unable to estimate the costs to an average
fund of updating and compiling email lists under the alternative of
email distribution of Notices to all shareholders. We lack data on the
percent of fund investors that have not opted into electronic delivery
for whom funds have up-to-date email contact information because funds
are not required to disclose such information and it is not available
to us from other sources.
---------------------------------------------------------------------------

    \466\ See supra notes 141-144.
    \467\ See supra 408.
---------------------------------------------------------------------------

    Nevertheless, as discussed above, we continue to believe that it is
important for investors to receive the Notice, as it will
contemporaneously alert them to the availability of a shareholder
report online. A Notice will also provide investors with information on
how to obtain a paper copy of the report, which makes it easier for
investors with a preference for paper to request shareholder reports in
paper. The benefits from requiring the Notice to be in paper form
include, for example, that there may be instances where an investor
provided his or her email for certain limited purposes without
necessarily intending to receive shareholder reports or notices of
reports through email.\468\
---------------------------------------------------------------------------

    \468\ See supra note 145 and accompanying paragraph.
---------------------------------------------------------------------------

    In a modification from the proposal, we are permitting funds to
incorporate content from their shareholder reports into Notices
relating to shareholder reports required to be transmitted under rule
30e-1, as discussed in greater detail in Section II.B.2.b.ii above. As
alternatives, we considered, as a condition of reliance on rule 30e-3,
either (1) limiting the types of content from the shareholder report
that is

permitted to be incorporated into the Notice, or (2) specifying
additional types of content from the shareholder report that are
required to be incorporated into the Notice.\469\ Relative to the final
rule, both alternatives could result in greater standardization of
additional Notice content, potentially facilitating investor review and
comparison of information in such Notices across funds and thus
potentially enabling better informed investment decisions, to the
extent that investors rely on information from shareholder reports
relative to other sources of information and disclosures. The second
alternative also could make information from shareholder reports more
accessible to those investors that may otherwise not review shareholder
reports.
---------------------------------------------------------------------------

    \469\ For an additional discussion of the reasons for the
approach chosen for the Notice, see supra Section II.B.2.b.ii.
---------------------------------------------------------------------------

    However, both alternatives would limit the flexibility of funds to
tailor Notice content to include the types of information from
shareholder reports that may be more relevant and valuable for
investors in the specific fund, potentially affecting how useful the
Notice content is to those investors.
    Further, if the additional information required to be included in
Notices under the second alternative is more extensive than the
information that funds would otherwise elect to include in Notices
under the final rule, the second alternative could increase Notice
preparation, printing, and mailing costs, which would be passed on to
fund investors, relative to the final rule.
    We also recognize that the number of funds that rely on rule 30e-3
may decrease under this alternative in the event that funds find rule
30e-3 to be less advantageous as a result of increased Notice
preparation, printing, and mailing costs. Overall, we believe that the
Notice provisions of the final rule permit sufficient flexibility for
funds to present additional information from the shareholder report in
Notices sent to investors without imposing additional burdens and costs
on those funds that would not expect their investors to find such
information to be of added value.
    We are adopting a temporary condition of reliance on rule 30e-3
that requires funds intending to rely on rule 30e-3 to provide
prominent disclosures on certain fund documents for up to two years
during the extended transition period. As an alternative, we could
require all funds, including funds that elect to rely on rule 30e-3
after the temporary condition expires, to provide two years of
prominent disclosures on certain fund documents prior to being able to
rely on rule 30e-3. This alternative may benefit some investors in
funds that elect to rely on rule 30e-3 in the future by increasing
their awareness of the fund's intent to rely on rule 30e-3. However,
this benefit is likely to decrease as time elapses since the rule's
effective date and an increasing number of investors becomes aware of
the industry-wide changes in the shareholder report delivery framework
under rule 30e-3, including as a result of receiving prominent
disclosures on fund documents and Notices under rule 30e-3 sent by
other funds in which investors hold positions. This alternative likely
would reduce the benefits to funds, and in turn, to fund investors,
relative to the final rule, by retaining on an indefinite basis a two-
year delay in the ability of funds to realize printing and mailing cost
savings from rule 30e-3. This alternative also would result in higher
costs of prominent disclosures being incurred by funds, and in turn,
fund investors, beyond the end of the extended transition period.

IV. Paperwork Reduction Act

    New rule 30e-3 contains a ``collection of information'' within the
meaning of the Paperwork Reduction Act of 1995 (the ``PRA'').\470\ In
addition, the new rule and other amendments will impact the collections
of information under rules 30e-1 and 30e-2, rule 498 under the
Securities Act, and Forms N-1A, N-2, N-3, N-4, N-6, and N-CSR.
---------------------------------------------------------------------------

    \470\ 44 U.S.C. 3501-3521.
---------------------------------------------------------------------------

    The titles for the existing collections of information are: ``Rule
30e-1 under the Investment Company Act of 1940, Reports to Stockholders
of Management Companies'' (OMB Control No. 3235-0025); ``Rule 30e-2 (17
CFR 270.30e-2) pursuant to Section 30(e) of the Investment Company Act
of 1940 (15 U.S.C. 80a-29(e)), Reports to Shareholders of Unit
Investment Trusts'' (OMB Control No. 3235-0494); ``Rule 498 under the
Securities Act of 1933, Summary Prospectuses for Open-End Management
Investment Companies'' (OMB Control No. 3235-0648); ``Form N-1A under
the Securities Act of 1933 and under the Investment Company Act of
1940, Registration Statement of Open-End Management Investment
Companies'' (OMB Control No. 3235-0307); ``Form N-2 under the
Investment Company Act of 1940 and Securities Act of 1933, Registration
Statement of Closed-End Management Investment Companies'' (OMB Control
No. 3235-0026); ``Form N-3 under the Securities Act of 1933 and under
the Investment Company Act of 1940, Registration Statement of Separate
Accounts Organized as Management Investment Companies'' (OMB Control
No. 3235-0316); ``Form N-4 under the Securities Act of 1933 and under
the Investment Company Act of 1940, Registration Statement of Separate
Accounts Organized as Unit Investment Trust'' (OMB Control No. 3235-
0318); ``Form N-6 under the Securities Act of 1933 and under the
Investment Company Act of 1940, Registration Statement of Separate
Accounts Organized as Unit Investment Trust'' (OMB Control No. 3235-
0503); and ``Form N-CSR under the Securities Exchange Act of 1934 and
under the Investment Company Act of 1940, Certified Shareholder Report
of Registered Management Investment Companies'' (OMB Control No. 3235-
0570). The title for the new collection of information is: ``Rule 30e-3
under the Investment Company Act of 1940, internet Availability of
Reports to Shareholders'' (OMB Control No. 3235-0758).
    We published notice soliciting comments on the collection of
information requirements in the Proposing Release and submitted the
proposed collection 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. An agency may not conduct or sponsor, and a person is not
required to respond to, a collection of information unless it displays
a currently valid control number.
    The Commission is adopting new rule 30e-3 under the Investment
Company Act and certain related amendments. This reform is designed to
modernize the manner in which periodic information is transmitted to
investors, which we believe will improve investors' experience while
reducing expenses associated with printing and mailing shareholder
reports that are borne by investment companies and ultimately their
investors. We discuss below the collection of information burdens
associated with this reform.
    New rule 30e-3 will provide certain funds with an optional method
to satisfy requirements to transmit shareholder reports by making such
reports and certain other materials publicly accessible on a website,
provided that certain other conditions are satisfied.\471\ Reliance on
the rule is voluntary; however, compliance with the rule's conditions
is mandatory for funds relying on the rule. Responses to the

information collections will not be kept confidential.
---------------------------------------------------------------------------

    \471\ See rule 30e-3.
---------------------------------------------------------------------------

A. Availability of Shareholder Report and Other Materials

    Rule 30e-3 provides that a fund may satisfy its obligations to
transmit a report to shareholders if certain conditions set forth in
the rule are satisfied. Among these conditions are the requirements
that the fund's shareholder report, any report with respect to the fund
for the prior reporting period that was transmitted to shareholders of
record pursuant to rule 30e-1 or rule 30e-2, and in the case of a
report relating to a fund other than a money market fund or an SBIC,
the fund's complete portfolio holdings as of the close of its most
recent first and third fiscal quarters, be publicly accessible, free of
charge, at a specified website address.\472\
---------------------------------------------------------------------------

    \472\ Rule 30e-3(b)(1)(i)-(iii). While we are modifying Exchange
Act rule 14a-16 to include the Notice with respect to fund documents
that may accompany the Notice of Internet Availability of Proxy
Materials, the incidental burden that this may impose is covered
under the existing Paperwork Reduction Act for ``Proxy Statements--
Regulation 14(A) (Commission Rules 14a-1 through 14a-21 and Schedule
14A)'' (OMB Control No. 3235-0059). Accordingly, we are not
modifying those estimates at this time.
---------------------------------------------------------------------------

Internal Hours Burden
    In the Proposing Release, we estimated that 11,957 funds could rely
on proposed new rule 30e-3.\473\ Of these funds, we estimated that 90%
of these entities (or 10,761 funds) would rely on proposed rule 30e-
3.\474\ Of these 10,761, we estimated that approximately 90% of these
entities (or 9,634 funds) are currently posting shareholder reports on
their websites (similar to the approximate proportion of funds expected
to rely on rule 30e-3 that rely on the summary prospectus rules and
thus already post shareholder reports on their websites). With respect
to these entities, we estimated that annual compliance with the posting
requirements of proposed rule 30e-3 would require a half hour burden
per entity.\475\
---------------------------------------------------------------------------

    \473\ Proposing Release, supra note 14, at 33678. This estimate
included 9,259 mutual funds (including money market funds), 1,403
ETFs (1,411 ETFs less 8 UIT ETFs), 568 closed-end funds, and 727
UITs (including UIT ETFs) based on Investment Company Institute
(``ICI'') statistics, Form N-SAR filings, and internal SEC data as
of December 31, 2014. See ICI statistics available at http://www.ici.org/research/stats.
    \474\ Proposing Release, supra note 14, at 33678. Open-end funds
relying on the summary prospectus rule, rule 498 under the
Securities Act, are required to post their annual and semi-annual
reports online. See rule 498(e)(1) [17 CFR 230.498(e)(1)].
    \475\ Because each of these funds was already required to have a
website and to post its annual and semi-annual shareholder reports
on this website, we estimated that proposed rule 30e-3 would only
result in each of these funds incurring a half hour burden per year
to post their first and third quarter portfolio holdings on their
websites, including in the first year of compliance with the rule.
---------------------------------------------------------------------------

    We have revised our estimate of the number of funds that may rely
on rule 30e-3 upward from 11,957 to 12,630 to reflect updates to the
industry data figures that were utilized in the Proposing Release.\476\
We did not receive any comments on our proposed estimate of the
proportion of funds that would rely on the new rule, or on our proposed
estimate of the burden hours associated with the posting requirements
of rule 30e-3 for funds that already post shareholder reports on their
websites. We received one comment consistent with our proposed estimate
that 90% of funds currently post shareholder reports on their
websites.\477\ Therefore, we are maintaining those estimates today,
with adjustments to reflect the updated industry data figures since the
Proposing Release. Thus, we estimate that 11,367 funds will rely on
rule 30e-3,\478\ and, of those, 10,230 are funds that already post
shareholder reports on their websites.\479\ Accordingly, with respect
to these 10,230 funds, we estimate that annual compliance with the
posting requirements of rule 30e-3 will require a half hour burden per
fund.
---------------------------------------------------------------------------

    \476\ We estimate that there are 9,360 mutual funds, 1,821
exchange-traded funds (1,829 ETFs less 8 UIT ETFs), 711 closed-end
funds, 14 funds that could file registration statements or
amendments to registration statements on Form N-3, and 724 UITs.
This estimate is based on data reported on Form N-SAR filed with the
Commission as well as Investment Company Institute statistics as of
December 31, 2017, available at http://www.ici.org/research/stats.
9,360 + 1,821 + 711 + 14 + 724 = 12,630.
    \477\ Generally consistent with this estimate, one commenter
stated that Summary Prospectuses were used in 2014 by over 82% of
the fund CUSIPs for distributions comprising over 90% of the mailed
volume. See Broadridge Comment Letter I.
    \478\ See supra note 476. We continue to estimate, similar to
the proposal, that 90% of funds will rely on the final rule. 12,630
funds that could rely x 0.90 proportion estimated to rely = 11,367
funds estimated to rely.
    \479\ 11,367 funds relying on the rule x 0.90 = 10,230 funds
that are estimated to rely on rule 30e-3 and already post
shareholder reports on their websites.
---------------------------------------------------------------------------

    In the Proposing Release, of the remaining funds estimated to rely
on proposed rule 30e-3, we further estimated that approximately 90% of
those funds (or 1,014 funds) already had a website.\480\ With respect
to these funds, we estimated that the posting requirements of proposed
rule 30e-3 would require a burden of one and a half hours per fund to
post the required documents online, both in the first year and annually
thereafter.\481\ For the remaining 10% of funds (or 113 funds) that we
estimated would rely on the proposed rule but that do not have a
website,\482\ we estimated initial compliance with the posting
requirements would require approximately 24 hours per fund of internal
staff time to develop a web page and post the required documents on the
web page.\483\ In addition, we estimated that each of these funds would
spend approximately four hours of professional time to maintain and
update a web page with the required information on a quarterly
basis.\484\
---------------------------------------------------------------------------

    \480\ Proposing Release, supra note 14, at 33678.
    \481\ Id.
    \482\ This estimate is based on the following calculation:
(10,761 funds and - 9,634 open-end funds relying on the summary
prospectus rule) x 10% = 113 funds.
    \483\ Id.
    \484\ Id.
---------------------------------------------------------------------------

    We did not receive any comments on our estimates in the Proposing
Release of the proportion of those funds that would rely on the
proposed rule and already have a website but that do not rely on the
summary prospectus rule today, the burden of the website posting
requirements for funds not relying on the summary prospectus rule that
have a website, and the burden of the website posting requirements for
funds that do not have a website, and we are maintaining those
estimates today, with adjustments to reflect the updated industry
figures since the Proposing Release. Thus, we estimate that, of the
1,137 funds estimated to rely on the new rule but that do not rely on
the summary prospectus rule,\485\ 1,023 funds already have a website
and each such fund will incur 1.5 burden hours per year as a result of
the posting requirement,\486\ and that 114 do not have a website and
each such fund will incur 24 burden hours as a result of the posting
requirement.\487\
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    \485\ 11,367 funds relying on the rule - 10,230 funds using a
summary prospectus that are estimated to rely on rule 30e-3 = 1,137
funds.
    \486\ (11,367 funds estimated to rely - 10,230 funds relying on
summary prospectus rule) x 0.90 proportion estimated to have a
website = 1,023 funds.
    \487\ 11,367 funds estimated to rely - 10,230 funds relying on
summary prospectus rule - 1,023 funds with a website = 114 funds.
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    Accordingly, we estimate that the posting requirements will result
in an average annual hour burden of about 0.83 hours per fund in the
first year of compliance \488\ and about 0.75 hours per

fund for each of the next two years.\489\ Amortized over three years,
the average annual hour burden will be about 0. 78 hours per fund.\490\
In sum, we estimate that the posting requirements of rule 30e-3 will
impose an average total annual hour burden of about 8,866 hours on
applicable funds.\491\
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    \488\ ((10,230 funds relying on the summary prospectus rule x
0.5 hours per fund per year) + (1,023 funds with a website but not
relying on the summary prospectus rule x 1.5 hours per fund or UIT
per year) + (114 funds without a website x 24 hours in the first
year)) / (11,367 funds estimated to rely) = (5,115 hours for funds
relying on the summary prospectus rule + 1,535 hours for funds with
a website but not relying on the summary prospectus rule + 2,728
hours for funds without a website) / (11,367 funds estimated to
rely) = 9,378 total hours / 11,367 funds estimated to rely = 0.83
hours per fund.
    \489\ ((10,230 funds relying on the summary prospectus rule x
0.5 hours per fund per year) + (1,023 funds with a website but not
relying on the summary prospectus rule x 1.5 hours per fund or UIT
per year) + (114 funds without a website x 4 hours per fund per
quarter x 4 quarters per year)) / (11,367 funds estimated to rely) =
(5,115 hours for funds relying on the summary prospectus rule +
1,534 hours for funds with a website but not relying on the summary
prospectus rule + 1,818 hours for funds without a website) / (11,367
funds estimated to rely) = 8,468 total hours / 11,367 funds
estimated to rely = 0.75 hours per fund.
    \490\ (0.83 hours per fund in the first year + (0.75 hours per
fund each year thereafter x 2 years)) / 3 years = 0.78 hours per
fund per year.
    \491\ 0.78 hours per fund per year x 11,367 funds estimated to
rely = 8,866 hours.
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External Cost Burden
    In the Proposing Release, we estimated that certain funds would
bear an external cost burden in complying with the rule. The external
cost burden is the cost of goods and services purchased in connection
with complying with the rule, which, with respect to the posting
requirements, will include costs associated with development of a
website. With respect to those funds that would rely on proposed rule
30e-3 but that do not currently have a website, we estimated that the
posting requirements of the proposed rule would result in an external
cost burden of $2,000 per fund in the first year to develop a website
but no cost burden in subsequent years.\492\ We further estimated that
the amortized annual external cost burden associated with developing a
website would be $667.\493\ With respect to those funds that currently
have websites, we estimated that the posting requirements of the
proposed rule would not result in any external costs.\494\ We did not
receive any comments on these proposed estimates, and we are
maintaining them today, with adjustments to reflect the updated
industry data figures since the Proposing Release. Accordingly, in the
aggregate, we estimate that the annual total external cost burden with
respect to these funds will be $76,038.\495\
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    \492\ Proposing Release, supra note 14, at 33678.
    \493\ Id.
    \494\ Id.
    \495\ 114 funds without a website x $667 per fund = $76,038.
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B. Proposed Initial Statement

    As proposed, rule 30e-3 would have permitted an optional method to
satisfy requirements to transmit shareholder reports by posting reports
online with respect to a particular investor only if either the
investor previously consented to this optional method of website
availability or the investor's consent could be inferred under certain
conditions specified in the rule.\496\ One of the proposed conditions
for inferring consent would have provided that an Initial Statement be
transmitted to an investor at least 60 days before reliance on the rule
with respect to that investor informing the investor that future
shareholder reports available on a website until the investor provides
notification that he or she wished to receive paper copies of reports
in the future. As discussed above, we have modified the proposed rule
to eliminate the Initial Statement requirement, which will affect the
aggregate estimated burdens associated with rule 30e-3. In the
Proposing Release, we estimated that the Initial Statement would result
in 0.69 average annual burden hours per fund and $555 in average annual
cost burden per fund,\497\ which is eliminated by the modification in
the final rule to not adopt the proposed Initial Statement requirement.
---------------------------------------------------------------------------

    \496\ See proposed rule 30e-3(c).
    \497\ Proposing Release, supra note 14, at 33679-80.
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C. Notice

    Proposed rule 30e-3 would have required a Notice be sent to
investors within 60 days of the close of the reporting period covered
by the related report. Under the final rule, a Notice is required to be
sent to investors within 70 days of the close of the reporting period
to which the report relates.\498\ The proposed rule would have also
required that the form of the Notice be filed with the Commission not
later than 10 days after the Notice is sent to investors.\499\ However,
the final rule will require that only if a fund's Notice includes any
content from the report to which it relates, a copy of the Notice must
be filed as part of the fund's report on Form N-CSR.\500\
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    \498\ See proposed rule 30e-3(d); rule 30e-3(c).
    \499\ See proposed rule 30e-3(d)(7).
    \500\ Item 1(b) of Form N-CSR; see also infra Section IV.G.
---------------------------------------------------------------------------

    As discussed in Section IV.A above and as we estimated in the
proposal, we estimate that 90% of all eligible funds (or 11,367 funds)
will choose to rely on new rule 30e-3.\501\
---------------------------------------------------------------------------

    \501\ See supra note 478 and accompanying text.
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Internal Hours Burden
    For those funds relying on the rule, in the Proposing Release we
estimated that each fund will require two hours to prepare and file the
first Notice in the first year and an hour for each subsequent
notice.\502\ Of this time, we estimated that 75% of the preparation
time required would be incurred by the fund internally and that 25% of
the burden would be carried out by outside counsel retained by the
fund.\503\
---------------------------------------------------------------------------

    \502\ Proposing Release, supra note 14, at 33679.
    \503\ Id.
---------------------------------------------------------------------------

    We did not receive any comments on our proposed estimates of the
time required to prepare Notices, or on the estimated proportion of the
preparation time required to prepare Notices that would be carried out
internally or by outside counsel. As discussed above, the requirements
regarding the Notice in the final rule, including removing the direct
URL to the shareholder report and the reply card requirement,
permitting Notices to be incorporated into or combined with other
Notices, expanding the ability to combine Notices with other mailings,
as well as removing the filing requirement (other than for Notices that
include content from the report to which it relates as discussed in
Section IV.F below), will collectively affect the estimated burden
associated with the preparation of Notices. We are maintaining our
estimate of the 75% preparation time that would be incurred by the fund
internally, the first Notice in the first year required hours of two
hours, and our estimate of subsequent Notice required hours of one hour
to account for an increase in some funds that may include content from
the shareholder report in the Notice.
    Accordingly, we estimate that the Notice will result in an average
annual hour burden of about 2.25 hours per fund in the first year \504\
and about 1.5 hours per fund in each subsequent year.\505\ Amortized
over three years, the average annual hour burden associated with the
Notice would be about 1.75 hours per fund.\506\ We have also made
adjustments to these estimates to reflect the updated industry data
figures since

the Proposing Release. In sum, we estimate that the Notice requirements
of rule 30e-3 will impose an average total annual hour burden of about
19,892 hours on applicable funds.\507\
---------------------------------------------------------------------------

    \504\ (2 hours per first Notice + 1 hour per subsequent Notice x
1 subsequent Notice in the first year) x 0.75 proportion internal
hour burden = 2.25 hours per fund.
    \505\ (1 hour per subsequent Notice x 2 subsequent Notices in
subsequent years) x 0.75 proportion internal hour burden = 1.5 hours
per fund.
    \506\ (2.25 hours per fund in the first year + (1.5 hours each
year thereafter x 2 years)) / 3 years = 1.75 hours per fund.
    \507\ 1.75 hours per fund per year for the Notice x 11,367 funds
estimated to rely = 19,892 hours per year.
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External Cost Burden
    In addition, we estimate that funds will incur external costs if
they rely on rule 30e-3. The external cost burden is the cost of goods
and services purchased in connection with complying with the rule,
which, with respect to the Notice, we have estimated would include the
costs associated with outside counsel and printing and mailing costs.
    In the Proposing Release, we estimated that 25% of the time
required to comply with the requirements concerning preparation of the
Notice would be carried out by outside counsel retained by the fund at
a rate of $380 per hour.\508\ We did not receive any comments on our
proposed estimate of the proportion of the time required to prepare
Notices that would be carried out by outside counsel, and we are
maintaining that estimate today. We are, however, updating our estimate
of the hourly rate for the work carried out by outside counsel based on
updated industry data to $401 per hour.\509\ Accordingly, we estimate
that outside counsel costs associated with the Notice will result in an
average cost burden per fund of about $301 in the first year,\510\
about $201 in subsequent years,\511\ and amortized over three years,
about $234.\512\ In sum, we estimate that the outside counsel costs
related to the Notice requirements of rule 30e-3 will impose an annual
average total cost burden of about $2,659,878 on applicable funds.\513\
---------------------------------------------------------------------------

    \508\ Proposing Release, supra note 14, at 33679. This estimate
was based on the rate for attorneys in SIFMA's Management and
Professional Earnings in the Securities Industry 2013, modified by
Commission staff to account for an 1,800-hour work year and
multiplied by 5.35 to account for bonuses, firm size, employee
benefits, and overhead. We note that, in the Proposing Release, we
considered the external cost burden of the notice and initial
statement requirements jointly. See Proposing Release, supra note
14, at 33679-80. In this release, we have discussed the effect of
the eliminated initial statement requirement on the burden estimates
separately above. See supra Part IV.B.
    \509\ This estimate is from SIFMA's Management & Professional
Earnings in the Securities Industry 2013, modified by the Commission
staff to account for an 1,800-hour work-year and inflation, and
multiplied by 5.35 to account for bonuses, firm size, employee
benefits, and overhead.
    \510\ (2 hours per first Notice + 1 hour per subsequent Notice x
1 subsequent Notice in the first year) x 0.25 proportion external
cost x $401 per hour = $301 per fund in the first year.
    \511\ (1 hour per subsequent Notice x 2 subsequent Notices in
subsequent years) x 0.25 proportion external cost x $401 per hour =
$201 per fund in subsequent years.
    \512\ ($301 per fund in the first year + ($201 per fund in
subsequent years x 2 years)) / 3 years = $234 per fund.
    \513\ $234 per fund per year for the Notice x 11,367 funds
estimated to rely = $2,659,878 per year.
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    We estimated in the Proposing Release that the external costs
associated with rules 30e-1 and 30e-2 (the rules relating to
shareholder reports) would be $31,061 and $20,000, respectively.\514\
These costs account for preparation and transmission of shareholder
reports twice a year in paper to investors. We also estimated that one-
third of these external costs would be attributed to printing and
mailing shareholder reports.\515\ Although commenters did not opine on
the estimated proportion of total external costs associated with rules
30e-1 and 30e-2 associated with printing and mailing expenses, as
discussed below, some did provide estimates of the total costs of print
and mail delivery that suggest that our estimated proportion of those
costs may have been understated. Therefore, we have determined to
revise our estimate upwards to two-thirds, which yields overall
printing and mailing expenses that are more similar to those estimated
by commenters compared to the estimates in the Proposing Release.\516\
---------------------------------------------------------------------------

    \514\ Proposing Release, supra note 14, at 33680.
    \515\ Id.
    \516\ See infra note 544 and accompanying text.
---------------------------------------------------------------------------

    We estimated in the Proposing Release that the Notice would require
lower printing and mailing costs given the significantly smaller size
of the documents. Specifically, we estimated that each Notice would
require 10% of the annual printing and mailing costs associated with
paper shareholder reports.\517\
---------------------------------------------------------------------------

    \517\ Proposing Release, supra note 14, at 33680.
---------------------------------------------------------------------------

    We note that some commenters specifically discussed the processing
fees for broker-held accounts separately from other printing and
mailing costs, while, in the Proposing Release, our estimates for
printing and mailing were meant to encompass all of those costs more
broadly.\518\ Some commenters indicated that the total reduction in
external cost burden may depend on the amount of processing fees
incurred by funds in connection with the print and mail delivery costs
associated with the conditions of rule 30e-3. As discussed above, NYSE
rule amendments clarify the processing fees applicable to transmission
of Notices under rule 30e-3.\519\
---------------------------------------------------------------------------

    \518\ See, e.g., ICI Comment Letter II.
    \519\ See supra notes 32-36 and accompanying text.
---------------------------------------------------------------------------

    Some commenters also suggested that the costs associated with the
proposed reply card requirements may have been understated.\520\ The
final rule reflects modifications from the proposed rule to eliminate
the reply card requirement for Notices and have made other
modifications in light of public comments--such as permitting Notices
to accompany other Notices and other types of documents--that we
believe will reduce the printing and mailing costs of the final rule's
conditions relative to the proposal. The final rule also reflects
modifications from the proposal to permit the inclusion of content from
the shareholder report in the Notice and eliminated the Notice filing
requirement except when the Notice includes such content.\521\
---------------------------------------------------------------------------

    \520\ See, e.g., ICI Comment Letter II.
    \521\ See supra notes 221-222 and accompanying text. If the
Notice includes content from the report to which it relates, a copy
of the Notice must be filed as an exhibit to Form N-CSR, as
discussed below. See infra Section IV.F.
---------------------------------------------------------------------------

    In light of the above comments on the estimates in the Proposing
Release and the modifications we are making today, we have determined
to increase our estimate of the percentage of annual printing and
mailing costs (including processing fees) associated with shareholder
reports that will be associated with the printing and mailing of each
Notice from the 10% that we had originally proposed to 15%.