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

    \330\ See Securities Act Release No. 8591 (Jul. 19, 2005) [70 FR
44722, 44766 (Aug. 3, 2005)].
    \331\ These include a prospectus or oral statement in the case
of Section 12(a)(2), or a statement to which Section 17(a)(2) is
applicable.
    \332\ Or, in the case of Section 17(a)(2), any omission to state
a material fact necessary in order to make the statements made, in
light of the circumstances under which they were made, not
misleading.
---------------------------------------------------------------------------

    Rule 498 provides that, for purposes of rule 159 (and therefore for
purposes of sections 12(a)(2) and 17(a)(2)), information is conveyed to
a person not later than the time that a Summary Prospectus is received
by the person if the information is incorporated by reference into the
Summary Prospectus in accordance with the rule.\333\ For purposes of
sections 12(a)(2) and 17(a)(2), whether or not information has been
conveyed to an investor at or prior to the time of the contract of sale
is a facts and circumstances determination.\334\ We have designed the
requirements of rule 498 specifically so that the facts and
circumstances surrounding receipt by a person of the Summary Prospectus
will, in fact, result in the effective conveyance to that person of any
information that is incorporated by reference into the Summary
Prospectus in compliance with the conditions of the rule. For that
reason, rule 498 expressly states that, for purposes of rule 159,
information incorporated into a Summary Prospectus is conveyed not
later than the time that the Summary Prospectus is received.\335\ The
relevant facts and circumstances required by rule 498 include actual
receipt of the Summary Prospectus; incorporation by reference of the
information into the Summary Prospectus and clear disclosure of how the
incorporated information may be obtained free of charge; and continuous
Internet availability of the incorporated information in formats that
permit permanent retention, are human-readable and capable of being
printed on paper in human-readable format, and meet the document
linking requirements of the rule.\336\
---------------------------------------------------------------------------

    \333\ Rule 498(b)(3)(iii).
    \334\ See Securities Act Release No. 8591, supra note 330, 70 FR
at 44766. Such information could include information in the issuer's
registration statement and prospectuses for the offering in
question, the issuer's Exchange Act reports incorporated by
reference therein, or information otherwise disseminated by means
reasonably designed to convey such information to investors. Such
information also could include information directly communicated to
investors.
    \335\ Whether or not any or all of the incorporated information
was conveyed to an investor prior to the time that the Summary
Prospectus was received will be a facts and circumstances
determination.
    \336\ Cf. Investment Company Act Release No. 13436 (Aug. 12,
1983) [48 FR 37928, 37930 (Aug. 22, 1983)] (discussing incorporation
by reference of the SAI into the statutory prospectus); see also
White v. Melton, 757 F. Supp. 267, 272 (S.D.N.Y. 1991) (addressing
effect of incorporation by reference of the SAI into the statutory
prospectus).
---------------------------------------------------------------------------

    We are not adopting the suggestion of two commenters that rule 498
state that information is conveyed to a person not later than the time
that the Summary Prospectus is conveyed to the person, rather than
received by the person.\337\ We are unable to conclude that, in all
circumstances, information incorporated into a Summary Prospectus has
been conveyed to an investor before the investor has received the
Summary Prospectus.
---------------------------------------------------------------------------

    \337\ See ICI Letter, supra note 34; Schnase Letter, supra note
35.
---------------------------------------------------------------------------

    Rule 498 addresses one particular set of facts and circumstances
under rule 159 and does not address any other situations. For purposes
of sections 12(a)(2) and 17(a)(2), whether or not information has been
conveyed to an investor at or prior to the time of the contract of sale
remains a facts and circumstances determination. Rule 498 does not
address any facts and circumstances relating to operating companies or
any other issuers that are not mutual funds, nor does it address any
information other than information incorporated by reference into a
mutual fund Summary Prospectus in accordance with the new rule.
    The Commission believes that a person that provides investors with
a mutual fund Summary Prospectus in good faith compliance with rule 498
will be able to rely on section 19(a) of the Securities Act \338\
against a claim that the Summary Prospectus did not include information
that is disclosed in the fund's statutory prospectus, whether or not
the fund incorporates the statutory prospectus by reference into the
Summary Prospectus.\339\ Section 19(a) protects a defendant from
liability for actions taken in good faith in conformity with any rule
of the Commission.\340\
---------------------------------------------------------------------------

    \338\ 15 U.S.C. 77s(a).
    \339\ Cf. Investment Company Act Release No. 23065, supra note
194, 63 FR at 13972 (similar Commission statement in context of
profile).
    \340\ See also Section 38(c) of the Investment Company Act [15
U.S.C. 80a-37(c)] (similar provision under Investment Company Act).
---------------------------------------------------------------------------

5. Filing Requirements for the Summary Prospectus
    We are requiring each Summary Prospectus to be filed with the
Commission on EDGAR no later than the date that it is first used,
rather than, as proposed, the fifth business day after the date that it
is first used.\341\ We agree with commenters who suggested that the
Summary Prospectus should be filed with the Commission and be available
on the Commission's Web site earlier than the fifth business day after
it is first used.\342\ In addition, we do not believe that the proposed
five-day lag between first use of a Summary Prospectus and filing is
necessary, given that we are requiring that the Summary Prospectus be
updated only once a year, at the same time that a fund files its
updated statutory prospectus. A Summary Prospectus that is filed on
EDGAR will be publicly available; however, a fund may not rely on this
availability to satisfy the requirements to post the document online
discussed in Part III.B.3. above.
---------------------------------------------------------------------------

    \341\ Rule 497(k). As proposed, we are deleting the reference to
the profile from rule 497(a) [17 CFR 230.497(a)].
    \342\ See Bo Li Letter, supra note 35; NewRiver Letter, supra
note 228. Two commenters supported the Commission's proposal to
require each Summary Prospectus to be filed with the Commission no
later than the fifth business day after first use. See ICI Letter,
supra note 34; Schnase Letter, supra note 35.
---------------------------------------------------------------------------

    Section 10(b) of the Securities Act provides that a prospectus
permitted under that section shall, unless provided otherwise by
Commission rule, be filed as part of the registration statement but
shall not be deemed part of the registration statement for the purposes
of section 11 of the Securities Act.\343\ In accordance with Section
10(b), a Summary Prospectus will be filed as part of the registration
statement, but will not be deemed a part of the registration statement
for purposes of section 11 of the Securities Act.
---------------------------------------------------------------------------

    \343\ 15 U.S.C. 77j(b) and 77k.
---------------------------------------------------------------------------

    A joint comment letter from three consumer and investor groups
expressed concerns that the Summary Prospectus would not be subject to
section 11 liability, suggesting that this would result in a diminution
of funds' liability under that section.\344\ We emphasize that the
registration statement of a fund that uses the Summary Prospectus will
remain subject to liability under section 11, as is the case today. All
of the information that may be included in, or incorporated by
reference into, a fund's Summary Prospectus is also required to be
included in the fund's registration statement. Thus, as described more
fully in the following paragraph, all information included in, or
incorporated by reference into, the Summary Prospectus will be subject
to

liability under section 11 of the Securities Act.
---------------------------------------------------------------------------

    \344\ See Fund Democracy et al. Letter, supra note 34. Under
Section 11 of the Securities Act [15 U.S.C. 77k], purchasers of an
issuer's securities have private rights of action for untrue
statements of material facts or omissions of material facts required
to be included in the registration statement or necessary to make
the statements in the registration statement not misleading.
---------------------------------------------------------------------------

    As described in Part III.B.2.a., we are adopting a new requirement
to clarify that the information contained in a Summary Prospectus that
is used to satisfy prospectus delivery obligations must be the same as
the information contained in the summary section of the fund's
statutory prospectus. This information is, and will remain, subject to
section 11 liability because the fund's prospectus, in its entirety, is
subject to Section 11 liability. In addition, information may be
incorporated by reference into a Summary Prospectus only if it is
contained in the fund's statutory prospectus, SAI, or has been
incorporated into the statutory prospectus from the shareholder
reports. That is, information that may be incorporated by reference
into the Summary Prospectus is already a part of the fund's
registration statement and, as a result, is subject in its entirety to
liability under section 11. Thus, while section 10(b) of the Securities
Act prescribes that the Summary Prospectus will not itself be deemed a
part of the registration statement for purposes of section 11, all of
the information in the Summary Prospectus will be subject to liability
under section 11, either because the information is the same as
information contained in the statutory prospectus or because the
information is incorporated by reference from the registration
statement.
    We also note that a Summary Prospectus is subject to the stop order
and other administrative provisions of section 8 of the Securities
Act.\345\ This is in addition to the Commission's power under section
10(b) of the Securities Act to prevent or suspend the use of the
Summary Prospectus, regardless of whether or not it has been
filed.\346\
---------------------------------------------------------------------------

    \345\ 15 U.S.C. 77h; H.R. Rep. 1542, 83d Cong., 2d Sess., 1954
U.S.C.C.A.N. 2973, 2982 (1954) (noting that the Commission's
authority to suspend the use of a defective summary prospectus under
Section 10(b) ``is intended to supplement the stop-order powers of
the Commission under [S]ection 8'').
    \346\ 15 U.S.C. 77j(b).
---------------------------------------------------------------------------

C. Technical and Conforming Amendments

    We are adopting the following conforming amendments to rule 482
under the Securities Act, the investment company advertising rule, to
reflect the Summary Prospectus and the elimination of the voluntary
profile.
     The scope section of rule 482 is revised to clarify that
the rule does not apply to a Summary Prospectus or to a communication
that, pursuant to rule 498, is not deemed a ``prospectus'' under
section 2(a)(10) of the Securities Act.\347\
---------------------------------------------------------------------------

    \347\ Rule 482(a).
---------------------------------------------------------------------------

     For funds using the Summary Prospectus, the legend
required in a rule 482 advertisement regarding the availability of the
statutory prospectus will be required to include references to the
Summary Prospectus.\348\
---------------------------------------------------------------------------

    \348\ Rule 482(b)(1).
---------------------------------------------------------------------------

     The provision addressing the use of rule 482
advertisements together with a profile that includes an application to
purchase shares is deleted as unnecessary.\349\
---------------------------------------------------------------------------

    \349\ Rule 482(c).
---------------------------------------------------------------------------

    We are also adopting amendments to various cross-references to Form
N-1A in our rules and forms to reflect changes that we are adopting to
Form N-1A. These include cross-references in rule 485 under the
Securities Act, rules 304 and 401 of Regulation S-T, Form N-4 under the
Securities Act and the Investment Company Act, and Form N-14 under the
Securities Act. We are also revising rule 159A under the Securities Act
to refer to a Summary Prospectus rather than a profile.

D. Compliance Date

    As discussed in the proposing release, the Commission is providing
for a transition period after the effective date of the amendments to
Form N-1A that gives funds sufficient time to update their prospectuses
or to prepare new registration statements under the revised Form N-1A
requirements. The effective date of the amendments is March 31, 2009.
    All initial registration statements on Form N-1A, and all post-
effective amendments that are annual updates to effective registration
statements on this form, filed on or after January 1, 2010, must comply
with the amendments to Form N-1A. All post-effective amendments that
add a new series, filed on or after January 1, 2010, must comply with
the amendments with respect to the new series. The final compliance
date for filing amendments to effective registration statements to
comply with the new Form N-1A requirements is January 1, 2011. Based on
the comments, we believe that this will provide adequate time for funds
to compile and review the information that must be disclosed.\350\ A
fund may, at its option, prepare documents in accordance with the
requirements of Form N-1A, as amended, at any time after the effective
date of the amendments. A person may not rely on rule 498 to satisfy
its obligations to deliver a mutual fund's statutory prospectus unless
the fund is also in compliance with the amendments to Form N-1A.
---------------------------------------------------------------------------

    \350\ A number of commenters expressed the view that a one-year
transition period was needed to make the required disclosure changes
and implement the business process changes associated with use of
the Summary Prospectus. See e.g., ICI Letter, supra note 34; Janus
Letter, supra note 63; Oppenheimer Letter, supra note 44.
---------------------------------------------------------------------------

    Post-effective amendments to existing registration statements filed
to comply with the amendments to Form N-1A should be filed under
Securities Act rule 485(a).\351\ However, in appropriate circumstances,
we will consider requests by existing funds to file these post-
effective amendments pursuant to Securities Act rule
485(b)(1)(vii).\352\ Appropriate circumstances may include, for
example, situations where a fund complex has previously filed under
rule 485(a) post-effective amendments for a number of funds that
implement the new requirements, and the staff determines not to review
additional such filings by the fund complex in light of the staff's
experience with the previously filed amendments.
---------------------------------------------------------------------------

    \351\ A post-effective amendment filed under rule 485(a) [17 CFR
230.485(a)] generally becomes effective either 60 days or 75 days
after filing, unless the effective date is accelerated by the
Commission. A post-effective amendment filed under rule 485(b) may
become effective immediately upon filing. A post-effective amendment
may be filed under rule 485(b) if it is filed for one or more
specified purposes, including to make non-material changes to the
registration statement. A post-effective amendment filed for any
purpose not specified in rule 485(b) generally must be filed
pursuant to rule 485(a).
    \352\ Under rule 485(b)(1)(vii), the Commission may approve the
filing of a post-effective amendment to a registration statement
under rule 485(b) for a purpose other than those specifically
enumerated in the rule. The Commission's staff has been delegated
the authority to approve registrants' requests under rule
485(b)(1)(vii). 17 CFR 200.30-5(b-3)(1).
---------------------------------------------------------------------------

IV. Paperwork Reduction Act

    Certain provisions of the amendments contain ``collection of
information'' requirements within the meaning of the Paperwork
Reduction Act of 1995 (``PRA'').\353\ The titles for the collections of
information are: (1) ``Form N-1A under the Investment Company Act of
1940 and Securities Act of 1933, Registration Statement of Open-End
Management Investment Companies'' (OMB Control No. 3235-0307) and (2)
``Summary Prospectus for Open-End Management Investment Companies''
(OMB Control No. 3235-0637). We published notice soliciting comments on
the collection of information requirements in the release proposing the
amendments \354\ and submitted the proposed collections of information
to the Office of Management and Budget

(``OMB'') for review and approval in accordance with 44 U.S.C. 3507(d)
and 5 CFR 1320.11. Four commenters specifically addressed the
collection of information requirements and we have revised the proposed
rule amendments in response to those comments.\355\ We have also
revised the estimated reporting and cost burdens of the rule amendments
to address these comments, as discussed below.
---------------------------------------------------------------------------

    \353\ 44 U.S.C. 3501 et seq.
    \354\ See Proposing Release, supra note 12, 72 FR at 67809.
    \355\ See American Century Letter, supra note 48; Capital
Research Letter, supra note 34; Janus Letter, supra note 63; ICI
Letter, supra note 34.
---------------------------------------------------------------------------

    Form N-1A under the Securities Act and the Investment Company Act
\356\ is used by mutual funds to register under the Investment Company
Act and to offer their securities under the Securities Act. Rule 498
under the Securities Act will be used by mutual funds that choose to
send or give a Summary Prospectus to investors.\357\ An agency may not
conduct or sponsor, and a person is not required to respond to a
collection of information, unless it displays a currently valid OMB
control number. Because we have modified our proposals as described
above, we are revising the burden estimate for Form N-1A and rule 498.
We have submitted a revised request for both to OMB.
---------------------------------------------------------------------------

    \356\ 17 CFR 239.15A; 17 CFR 274.11A.
    \357\ A request has been submitted to OMB to remove the
collection of information for the fund profile, which is being
eliminated, under current rule 498.
---------------------------------------------------------------------------

    We are adopting an improved mutual fund disclosure framework that
we originally proposed in November 2007.\358\ This improved disclosure
framework is intended to provide investors with information that is
easier to use and more readily accessible, while retaining the
comprehensive quality of the information that is available today. The
foundation of the improved disclosure framework is the provision to all
investors of streamlined and user-friendly information that is key to
an investment decision.
---------------------------------------------------------------------------

    \358\ See Proposing Release, supra note 12, 72 FR at 67990.
---------------------------------------------------------------------------

    To implement the new disclosure framework, we are adopting
amendments to Form N-1A that will require every prospectus to include a
summary section at the front of the prospectus, consisting of key
information about the fund, including investment objectives and
strategies, risks, costs, and performance. We are also adopting a new
option for satisfying prospectus delivery obligations with respect to
mutual fund securities under the Securities Act. Under the option, key
information will be sent or given to investors in the form of a Summary
Prospectus, and the statutory prospectus will be provided on an
Internet Web site. Funds that select this option will also be required
to send the statutory prospectus to the investor upon request.
    We are also adopting technical and conforming amendments to rules
159A and 482 under the Securities Act that reflect the Summary
Prospectus and the elimination of the voluntary profile, along with
amendments that update the cross references to Form N-1A contained in
rule 485 under the Securities Act, rules 304 and 401 of Regulation S-T,
Form N-4 under the Securities Act and the Investment Company Act, and
Form N-14 under the Securities Act. These technical and conforming
amendments do not constitute a collection of information because we are
not altering the legal requirements of these rules and forms.
    Finally, amendments to rule 497 provide the requirements for filing
Summary Prospectuses with the Commission. These amendments do not
constitute a separate collection of information under rule 497 because
the burden required by these amendments is part of the collection of
information under rule 498.

A. Form N-1A

    Form N-1A, including the amendments, contains collection of
information requirements. The likely respondents to this information
collection are open-end management investment companies registered or
registering with the Commission. Compliance with the disclosure
requirements of Form N-1A is mandatory. Responses to the disclosure
requirements are not confidential.
    Much of the information that is required in the summary section of
the prospectus under the amendments has previously been required in a
fund's prospectus. However, the amendments require new information
regarding the exchange ticker symbol and the compensation received by
financial intermediaries. In addition, except for some information
common to multiple funds, the summary section must be presented
separately for each fund covered by a multiple fund prospectus. As a
result, the amendments to Form N-1A may require additional burden hours
to compile, review, and present the required information in a separate
summary section for each fund. We estimate that the amendments will
increase the hour burden per portfolio per filing of an initial
registration statement or the initial creation of a post-effective
amendment to a registration statement by approximately 17 hours.
    In the proposing release, we estimated that the proposed amendments
would increase the hour burden per portfolio per filing of an initial
registration statement or the initial creation of a post-effective
amendment to a registration statement by approximately 16 hours.\359\
We received two comments on this estimate.\360\ One commenter
anticipated approximately 19,000 hours for its 75 funds, or over 253
hours per portfolio, to initially comply with the proposed
amendments.\361\ Another commenter, who conducted a survey of mutual
fund complexes, estimated that the amendments would increase the hour
burden per portfolio by 17 hours.\362\ Recognizing that the commenter
surveyed a broad cross-section of the mutual fund industry, and having
reviewed the specific questions it asked respondents, we have
incorporated this estimate in our analysis.\363\
---------------------------------------------------------------------------

    \359\ Proposing Release, supra note 12, 72 FR at 67808.
    \360\ See Janus Letter, supra note 63; ICI Letter, supra note
34.
    \361\ Janus Letter, supra note 63. The commenter did not,
however, indicate what percentage of the 19,000 hours it would
dedicate to compliance with the proposed amendments to Form N-1A and
what percentage it would dedicate to compliance with proposed rule
498.
    \362\ ICI Letter, supra note 34. The commenter estimated that
the 42 fund complexes it surveyed offer 3,122 funds, accounting for
nearly 60 percent of total mutual fund industry assets as of
December 2007.
    \363\ Although the final rule eliminates disclosure of portfolio
holdings in the summary section, we believe that the 17 hours
estimated by the commenter based on its survey remains reasonable.
---------------------------------------------------------------------------

    We estimate, as we did in the proposing release, that subsequent
post-effective amendments to a registration statement will require, on
average, approximately 4 burden hours per portfolio to update and
review the information.\364\ We received one comment, which estimated
that ongoing compliance with the proposed amendments to Form N-1A would
require an average of 9 hours per fund.\365\ However, we believe that
the commenter based this estimate on responses to an ambiguous survey
question.\366\ We believe that respondents may have interpreted this
question to ask how many hours it would take them to update and review
all information each year to comply with Form N-1A rather than only how
many additional hours it would take

them each year to update and review information to comply with the
amended items in Form N-1A.\367\ For this reason, we are not adjusting
our original burden hour estimate.
---------------------------------------------------------------------------

    \364\ See Proposing Release, supra note 12, 72 FR at 67808.
    \365\ See ICI Letter, supra note 34.
    \366\ See id. (asking survey respondents, ``How much time (in
hours) would you estimate that it would take to update and review
the information each year for Form N-1A on an on-going basis for all
of your funds?'' (bold in original)).
    \367\ The respondents estimated that initial compliance with the
Form N-1A amendments, including the creation of separate summaries
for funds in a multiple fund prospectus, would require an average of
17 hours per fund, whereas ongoing compliance would average 9 hours
per fund. See ICI Letter, supra note 34. Once such summary sections
have been created, we do not believe that an update of such
information on an annual basis should require more than half the
time it takes to initially compile, review, and present that
information in the summary section.
---------------------------------------------------------------------------

    Because the PRA estimates represent the average burden over a
three-year period, we estimate the average hour burden for one
portfolio to comply with the amendments to be approximately 8
hours.\368\ We estimate that 8,752 portfolios file initial registration
statements and post-effective amendments on Form N-1A.\369\ Thus, the
incremental hour burden resulting from the amendments relating to the
summary section disclosure would be 70,016 hours.\370\ The total annual
hour burden for all funds for preparation and filing of registration
statements and post-effective amendments to Form N-1A would be
approximately 1,645,200 hours.\371\
---------------------------------------------------------------------------

    \368\ (17 hours in the first year + 4 hours in the second year +
4 hours in the third year) / 3 years = approximately 8 hours.
    \369\ See 2008 ICI Fact Book, supra note 16, at 15. In the
Proposing Release, based on information in the 2007 version of the
ICI Fact Book, we assumed that there were 8,726 portfolios. See
Proposing Release, supra note 12, 72 FR at 67990 n. 14.
    \370\ 8 hours x 8,752 portfolios.
    \371\ 70,016 hours + 1,575,184 hours. Currently, the approved
annual hour burden for preparing and filing registration statements
on Form N-1A is 1,575,184 hours.
---------------------------------------------------------------------------

B. Rule 498

    Rule 498 contains collection of information requirements. The
likely respondents to this information collection are open-end
management investment companies registered or registering with the
Commission. Under rule 498, use of the Summary Prospectus is voluntary,
but the rule's requirements regarding provision of the statutory
prospectus are mandatory for funds that elect to send or give a Summary
Prospectus in reliance upon rule 498. The information provided under
rule 498 will not be kept confidential.
    We estimate that for those funds that choose to use the Summary
Prospectus, initial compliance with the requirements for the Summary
Prospectus will require approximately 23 burden hours per portfolio. We
originally assumed in the proposing release that rule 498 would not
impose any substantial new information collection requirements with
respect to the initial preparation of a Summary Prospectus beyond those
discussed above in connection with the collection of information for
Form N-1A.\372\ One commenter suggested that initial compliance with
requirements for the Summary Prospectus and the other provisions of
rule 498 would require approximately 23 burden hours per
portfolio.\373\ The commenter pointed out that initial compliance with
the requirements for the Summary Prospectus would include, among other
things, a document design process to create the Summary Prospectus;
technology requirements for posting documents on funds' Web sites and
providing hyperlinks within and between certain documents; and
communication with distribution channels regarding the use of the
Summary Prospectus.\374\ Recognizing that we may have underestimated
the costs associated with initial compliance with rule 498 and that the
commenter based its estimate on a survey of a broad cross-section of
the mutual fund industry, we have added an estimate of 23 burden hours
necessary for initial compliance with rule 498.
---------------------------------------------------------------------------

    \372\ See Proposing Release, supra note 12, 72 FR at 67809.
    \373\ See ICI Letter, supra note 34.
    \374\ See id.
---------------------------------------------------------------------------

    In addition to initial compliance, we estimate, as we did in the
proposing release, that rule 498 will impose a \1/2\ hour burden per
portfolio annually associated with the compilation of the additional
information required on a cover page or at the beginning of the Summary
Prospectus.\375\ Rule 498 also imposes annual hour burdens associated
with the posting of a fund's Summary Prospectus, statutory prospectus,
SAI, and most recent report to shareholders on an Internet Web
site.\376\ We estimate that the average hour burden for one portfolio
to comply with the Internet Web site posting requirements will be
approximately one hour annually.\377\
---------------------------------------------------------------------------

    \375\ See Proposing Release, supra note 12, 72 FR at 67809.
    \376\ Rule 498, as proposed, also would have imposed an annual
hour burden associated with updating the Summary Prospectus every
quarter. In the Proposing Release, we estimated that quarterly
updating would impose approximately 3 burden hours per quarter per
portfolio, or 9 hours annually for each of the three subsequent
quarters. See Proposing Release, supra note 12, 72 FR at 67809.
However, we are not including quarterly updating requirements in the
final rule.
    \377\ See Proposing Release, supra note 12, 72 FR at 67809. We
have reduced this figure from the 4 hour estimate we made in the
Proposing Release because we have not included quarterly updating
requirements in the final rule. We originally estimated that
Internet Web site posting would require approximately 1 hour per
quarter, but without quarterly updating, we estimate that it will
require 1 hour annually.
    We received four comments on our original estimates of the
burden of ongoing compliance. See American Century Letter, supra
note 48; Capital Research Letter, supra note 34; Janus Letter, supra
note 63; ICI Letter, supra note 34. One commenter estimated that
filing Summary Prospectuses for its funds would require
approximately 1150 hours per quarter, or 11 hours per fund. See
American Century Letter, supra note 48. The second commenter
estimated that the proposed quarterly updating requirement would
require its 75 funds to spend approximately 5,300 burden hours. See
Janus Letter, supra note 63. The third commenter estimated that it
would spend an additional 4,400 hours per year to comply with the
proposed quarterly updating requirements. See Capital Research
Letter, supra note 34. Based on a survey of mutual funds, the fourth
commenter stated that ongoing compliance with rule 498, as proposed,
would require approximately 10 hours per fund per update. See ICI
Letter, supra note 34. All three commenters, however, based their
estimates on the proposal's requirement of quarterly updating of top
10 portfolio holdings and performance information. Because we are
not requiring quarterly updating of performance information and we
are not requiring any disclosure of top 10 portfolio holdings, we
are not making further adjustments to our estimates.
---------------------------------------------------------------------------

    Because the PRA estimates represent the average burden over a
three-year period, we estimate the average hour burden for one
portfolio to comply with the amendments to be approximately 9
hours.\378\ The Summary Prospectus is voluntary, so the percentage of
funds that will choose to provide it is uncertain. Given the potential
benefits of the amendments to funds, we assume that 80% of all funds
will choose to send or give the Summary Prospectus.\379\ Assuming 80%
of all funds file a Summary Prospectus, the total annual hour burden
for filing and updating Summary Prospectuses and posting the required
disclosure documents to an Internet Web site pursuant to rule 498 would
be approximately 63,014 hours.\380\
---------------------------------------------------------------------------

    \378\ (23 hours in the first year + 1.5 hours in the second year
+ 1.5 hours in the third year) / 3 years = approximately 9 hours.
    \379\ See Proposing Release, supra note 12, 72 FR at 67809. In
the Proposing Release, we assumed that 75% of all funds would choose
to send or give a Summary Prospectus. However, one commenter
estimated that 80% of funds would elect to use the Summary
Prospectus if the Commission eliminated quarterly updating
requirements from the final rule. See ICI Letter, supra note 34.
Having eliminated quarterly updating from the final rule and
recognizing that the commenter had surveyed a major cross-section of
the mutual fund industry, we have adopted the commenter's estimate
that 80% of funds will likely choose to send or give a Summary
Prospectus.
    \380\ 9 hours x 8,752 portfolios x .80.
---------------------------------------------------------------------------

C. ETF-Related Amendments

    We are amending Form N-1A to provide more useful information to
investors who purchase and sell ETF shares on national securities
exchanges.
    The amendments permit an ETF to exclude certain information from
its

prospectus that is not pertinent to investors purchasing individual ETF
shares on secondary markets. Specifically, an ETF that has creation
units of 25,000 shares or more may exclude from its prospectus: (i)
Information on how to purchase and redeem shares of the ETF; \381\ and
(ii) fee table fees and expenses for purchases and redemptions of
creation units.\382\ Based on conversations with industry
representatives, Commission staff estimated in the ETF proposing
release that these amendments would decrease the information collection
burdens of an ETF that has creation units of 25,000 shares or more by
an average of 1.4 hours per fund per filing of an initial registration
statement or post-effective amendment to a registration statement. We
requested comment on this estimate in the ETF proposing release. No
commenters addressed this estimate and we continue to believe that it
is appropriate.
---------------------------------------------------------------------------

    \381\ Item 6(c)(2) of Form N-1A.
    \382\ Instruction 1(e)(ii) to Item 3 of Form N-1A.
---------------------------------------------------------------------------

    The amendments also require disclosures designed to include
important information for purchasers of individual ETF shares, as
described below. An ETF will have to modify the narrative explanation
preceding the example in the fee table in its prospectus and periodic
reports to state that fund shares are sold on the secondary market
rather than redeemed at the end of the periods indicated, and that
investors in ETF shares may be required to pay brokerage commissions
that are not reflected in the fee table.\383\ We believe that the added
information collection burdens associated with this statement, if any,
would be negligible.
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    \383\ Instruction 1(e)(i) to Item 3 of Form N-1A; Instruction
1(e)(i) to Item 27(d) of Form N-1A. The amendments also require each
ETF to identify the principal U.S. market on which its shares are
traded and include a statement to the effect that ETF shares are
bought and sold on national securities exchanges. We believe that
the added information collection burdens associated with these very
brief and specific statements, if any, would be negligible.
---------------------------------------------------------------------------

    The proposed amendments would have required each ETF to include a
separate line item for returns based on the market price of ETF shares
in the average annual total returns table in Item 2 of the Form,\384\
and to calculate total return at market prices in addition to returns
at NAV for their financial highlights tables.\385\ At the suggestion of
commenters, we have not adopted these requirements.
---------------------------------------------------------------------------

    \384\ Proposed Instruction 5(a) to Item 2(c)(2) of Form N-1A.
    \385\ Proposed Instruction 3(f) to Item 8(a) of Form N-1A.
---------------------------------------------------------------------------

    The proposed amendments would have required ETFs to include
premium/discount information in both the prospectus and annual report
of each ETF. Based on commenters' suggestions, the final amendments
permit ETFs to omit the historical premium/discount disclosure in those
documents if the ETF includes premium/discount information on its
Internet Web site and discloses in the prospectus and annual report an
Internet address where investors can locate the information.\386\
Commission staff estimated in the ETF proposing release that each ETF
currently spends an average of 0.5 hours per filing of an initial
registration statement or a post-effective amendment to a registration
statement to include this disclosure.\387\ The staff further estimated
that each ETF also would spend 0.5 hours per annual report to include
this disclosure. We requested comment on these estimates in the ETF
proposing release. No commenters addressed these estimates and we
continue to believe that they are appropriate for ETFs that choose to
include the information in the prospectus and annual report.
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    \386\ Item 11(g)(2) of Form N-1A; Item 27(b)(7)(iv) of Form N-
1A. Although the time period required in the disclosure is different
in the prospectus and annual report, ETFs will be able to omit both
disclosures by providing on their Internet Web site only the
premium/discount information required by Item 11(g)(2) (the most
recently completed fiscal year and quarters since that year). Id.
    \387\ This estimate is based on discussions with representatives
of ETFs, which include premium/discount information as required by
their exemptive orders.
---------------------------------------------------------------------------

    Based on Commission filings, Commission staff estimates that on an
annual basis, ETFs file initial registration statements covering 98 ETF
portfolios, and post-effective amendments covering 1,441 ETF portfolios
on Form N-1A. Based on staff estimates, we estimate that the amendments
will not increase the hour burden per ETF per filing on an initial
registration or post-effective amendment to a registration statement.
We estimate that the amendments will add approximately 0.5 hours, which
staff estimates will be offset by a reduction of 1.4 hours (elimination
of description of creation units and associated fees). Although the
total annual hour burden for ETFs to prepare and file initial
registration statements and post-effective amendments may decrease
slightly, we are not decreasing our overall estimates to reflect the
incremental decrease in order to be conservative in our estimates of
the collection of information burdens.

V. Cost/Benefit Analysis

    The Commission is sensitive to the costs and benefits imposed by
its rules. We are adopting amendments to Form N-1A that will require
every prospectus to include a summary section at the front of the
prospectus, consisting of key information about the fund, including
investment objectives and strategies, risks, costs, and performance.
The key information is required to be presented in plain English in a
standardized order. Our intent is that this information will be
presented succinctly, in three or four pages, at the front of the
prospectus.
    We are also adopting a new option for satisfying prospectus
delivery obligations with respect to mutual fund securities under the
Securities Act. Under the option, key information will be sent or given
to investors in the form of a Summary Prospectus, and the statutory
prospectus will be provided on an Internet Web site. Upon an investor's
request, funds will also be required to send the statutory prospectus
to the investor. Our intent in providing this option is that funds take
full advantage of the Internet's search and retrieval capabilities in
order to enhance the provision of information to mutual fund investors.
    The disclosure framework that we are adopting has the potential to
revolutionize the provision of information to the millions of investors
who rely on mutual funds for their most basic financial needs. It is
intended to help investors who are overwhelmed by the choices among
thousands of available funds described in lengthy and legalistic
documents to readily access key information that is important to an
informed investment decision. At the same time, by harnessing the power
of technology to deliver information in better, more useable formats,
the disclosure framework can help those investors, their
intermediaries, third-party analysts, the financial press, and others
to locate and compare facts and data from the wealth of more detailed
disclosures that are available.
    In the proposing release, we requested public comment and specific
data regarding the costs and benefits of the amendments. As discussed
below, we received five comments directly addressing our quantitative
cost/benefit analysis.\388\ We also received numerous comments
pertinent to qualitative aspects of our analysis.\389\
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    \388\ See Data Communiqu[eacute] Letter, supra note 35; ICI
Letter, supra note 34; MFS Letter, supra note 150; NewRiver Letter,
supra note 228; Memorandum from the Division of Investment
Management regarding August 25, 2008 meeting with representatives of
RR Donnelley & Sons Co. and Prospectus Central, LLC (Aug. 26, 2008)
(``RR Donnelley Memorandum'').
    \389\ See, e.g., AARP Letter, supra note 34; CFA Institute
Letter, supra note 37; CMFI Letter, supra note 44; Fund Democracy et
al. Letter, supra note 34; ICI Letter, supra note 34; MFDF Letter,
supra note 34; NAPFA Letter, supra note 44.

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A. Benefits

1. Form N-1A
    Possible benefits of the amendments include enhanced disclosure of
information needed to make informed investment decisions about mutual
funds, more rapid dissemination of information over the Internet, and
reduced printing and mailing costs.
    Millions of individual Americans invest in shares of mutual funds,
relying on mutual funds for their retirements, their children's
educations, and their other basic financial needs.\390\ These investors
face a difficult task in choosing among the more than 8,000 available
mutual funds.\391\ Fund prospectuses, which have been criticized by
investor advocates, representatives of the fund industry, and others as
long and complicated, often prove difficult for investors to use
efficiently in comparing their many choices. Current Commission rules
require mutual fund prospectuses to contain key information about
investment objectives, risks, and expenses that, while important to
investors, can be difficult for investors to extract. Prospectuses are
often long, both because they contain a wealth of detailed information
and because prospectuses for multiple funds are often combined in a
single document. Too frequently, the language of prospectuses is
complex and legalistic, and the presentation formats make little use of
graphic design techniques that would contribute to readability.
---------------------------------------------------------------------------

    \390\ See supra note 16.
    \391\ See 2008 ICI Fact Book, supra note 16, at 15.
---------------------------------------------------------------------------

    The amendments require investment information that is key to an
investment decision to be provided in a streamlined document with other
more detailed information provided elsewhere. The provision of this
information to investors in concise, user-friendly formats will allow
investors to compare information across funds and may assist them in
making better informed portfolio allocation decisions in line with
their investment goals.
    The amendments also will provide the additional benefits of
increased Internet availability of fund information, by providing
layered disclosure that allows investors to move back and forth between
the information within the Summary Prospectus and more detailed
information within other disclosure documents. These benefits include,
among other things, facilitating comparisons among funds and replacing
one-size-fits-all disclosure with disclosure that each investor can
tailor to his or her own needs. In recent years, access to the Internet
has greatly expanded, \392\ and significant strides have been made in
the speed and quality of Internet connections.\393\ Advances in
technology offer a promising means to address the length and complexity
of mutual fund prospectuses by streamlining the key information that is
provided to investors, ensuring that access to the full wealth of
information about a fund is immediately and easily accessible, and
providing the means to present all information about a fund online in a
format that facilitates comparisons of key information, such as
expenses, across different funds and different share classes of the
same fund. Technology has the potential to replace the current one-
size-fits-all mutual fund prospectus with an approach that allows
investors, their financial intermediaries, third-party analysts, and
others to tailor the wealth of available information to their
particular needs and circumstances.
---------------------------------------------------------------------------

    \392\ See supra note 25.
    \393\ See supra note 26.
---------------------------------------------------------------------------

    Significant technological advances have increased both the market's
demand for more timely disclosure and the ability of funds to capture,
process, and disseminate information. The amendments will enable funds
to take greater advantage of the Internet to more rapidly communicate
and deliver information to investors. Accordingly, investor demand for
information could be satisfied through relatively inexpensive mass
dissemination of the information through electronic means. We
anticipate that demand for the information in the statutory prospectus
and SAI will increase as access to that information becomes easier
through the use of layered disclosure that allows investors, their
financial intermediaries, third-party analysts, and others to tailor
the wealth of available information to their particular needs and
circumstances.
    Nearly all of the comments we received, including comments from
consumer groups and industry representatives, agreed with our
conclusion that investors will benefit greatly from receiving the
Summary Prospectus containing key information that investors will be
more likely to read and understand, with the ability to access more
detailed information either immediately in a user-friendly format
online or, within a matter of days, in paper.\394\ This conclusion is
also supported by our recent telephone survey of investors, which found
that many mutual fund investors do not read statutory prospectuses
because they are long, complicated, and hard to understand.\395\ In
addition, the views expressed by investors in our focus groups also
support our conclusion that investors will derive significant benefits
from the Summary Prospectus, coupled with ready access to more detailed
information in whatever format they choose.\396\
---------------------------------------------------------------------------

    \394\ See, e.g., Fund Democracy et al. Letter, supra note 34;
ICI Letter, supra note 34; see also supra notes 315-317 and
accompanying text (discussing the qualitative benefits of the
amendments).
    \395\ Telephone Survey Report, supra note 32, at 56, 58.
    \396\ See Focus Group Report, supra note 32, at 5-6. See also
Focus Group Transcripts, supra note 32, at 63 (``It's a two-minute
read. If I want more information, I can ask for it.''); Id. at 38
(``I think both [the long-form prospectus and short-form prospectus]
have their place. I think it would be foolish to give up the long-
form for `this' and I think it would be foolish not to have the
short-form and insist on a long-form. They both have their
place.'').
---------------------------------------------------------------------------

    In addition to benefiting investors, the Summary Prospectus also
will provide quantifiable cost savings to funds. We believe that funds
will benefit from being able to send or give a Summary Prospectus
rather than having to print and send statutory prospectuses to all
investors and prospective investors. We expect that funds will
experience cost savings with respect to both annual mailings to their
current shareholders and mailings made in connection with a purchase of
fund shares. We estimate that funds distribute approximately
300,000,000 statutory prospectuses annually to their current
shareholders \397\ and another 64,500,000 in connection with fund
purchases.\398\

We received two comments related to the estimated number of statutory
prospectuses that are distributed.\399\
---------------------------------------------------------------------------

    \397\ See 2008 ICI Fact Book, supra note 16, at 110 (estimating
298,966,000 shareholder accounts at the end of 2007). In the
Proposing Release, we used an estimate of 290,000,000 statutory
prospectuses, which was based on the 2007 version of the ICI Fact
Book estimate of the number of shareholder accounts at the end of
2006. See Proposing Release, supra note 12, 72 FR at 67810.
    Often, a fund will mail a statutory prospectus to each of its
shareholders annually in addition to mailing a statutory prospectus
in connection with a purchase of fund shares. We recognize that:
some shareholders may currently receive their fund documents
electronically; some households where more than one fund investor
resides will only receive one copy of the statutory prospectus per
household; some accounts may hold more than one fund; and not all
funds send out statutory prospectuses annually. Therefore, the
actual number of prospectuses mailed annually may be higher or lower
than our estimate.
    \398\ Our estimate of the number of statutory prospectuses sent
out to fulfill a fund's prospectus delivery obligation upon purchase
is based on information provided by Broadridge Financial Solutions,
Inc. (``Broadridge'') prior to issuing the Proposing Release. See
Memorandum from the Division of Investment Management regarding
October 25, 2007 meeting with Broadridge representatives (Nov. 28,
2007) (``Broadridge Memorandum'').
    \399\ One commenter stated that our estimates of the numbers of
statutory prospectuses distributed to existing shareholders and
investors purchasing shares in the Proposing Release are reasonable
because they fall within the range between the commenter's lowest
possible estimates (230,000,000 for annual fulfillment and
58,000,000 for purchase fulfillment) and the commenter's highest
possible estimates (373,000,000 for annual fulfillment and
95,000,000 for purchase fulfillment). See ICI Letter, supra note 34.
A second commenter estimated that the number of statutory
prospectuses distributed to existing shareholders is 231,981,600 and
the number distributed to investors purchasing fund shares is
72,494,250, based on its experience preparing distributions of
statutory prospectuses and shareholder reports for mutual funds. See
Data Communiqu[eacute] Letter, supra note 35.
---------------------------------------------------------------------------

    We estimate that the cost savings for annual mailings will be
approximately $126,000,000 \400\ and that the cost savings for purchase
mailings will be approximately $80,496,000.\401\ These cost savings
would be reduced by the costs of sending the statutory prospectus to
those investors who request it. We estimate that approximately 2% of
the investors who own shares in the 80% of funds that likely will
choose to send or give the Summary Prospectus will request that a
statutory prospectus be mailed to them.\402\ We estimate that the cost
of mailing statutory prospectuses to existing investors would be
$12,288,000.\403\ We further estimate that approximately 3% investors
purchasing shares in the 80% of funds that likely will choose to send
or give the Summary Prospectus will request that a statutory prospectus
be sent to them.\404\ We estimate that the cost of sending statutory
prospectuses requested by investors making purchases of fund shares
would be approximately $3,962,880.\405\ Therefore, we estimate the
annual cost savings will be approximately $190,245,120,\406\ or
approximately $21,737 per portfolio.\407\
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    \400\ Our annual estimates are derived from information we
received from Broadridge. See Broadridge Memorandum, supra note 398.
Broadridge estimated that the average cost of a statutory prospectus
printed in a full production run is $0.27 and that the average cost
to mail a statutory prospectus by bulk mail is $0.255. Id. The cost
savings with respect to annual mailings were calculated by
multiplying the costs of printing and mailing a statutory prospectus
by the 300,000,000 statutory prospectuses mailed annually reduced to
reflect our estimate that 80% of funds will elect to send Summary
Prospectuses (($0.27 for the printing of a statutory prospectus +
$0.255 for the mailing of a statutory prospectus) x 300,000,000
statutory prospectuses x 80% of funds).
    \401\ For purposes of our estimate, we used Broadridge's
printing cost estimate of $0.35 that is blended to reflect full
production printing runs and digital print on demand documents. Id.
This blended rate reflects the fact that a fund may run out of
statutory prospectuses produced in a full production run and may
have to print additional statutory prospectuses on demand.
Broadridge also estimated that the average cost to mail a statutory
prospectus by first class mail is $1.21. Id. The cost savings with
respect to purchase mailings were calculated by multiplying the
costs of printing and mailing a statutory prospectus by 64,500,000
statutory prospectuses mailed in connection with a fund purchase
reduced to reflect our estimate that 80% of funds will elect to send
Summary Prospectuses (($0.35 for the printing of a statutory
prospectus + $1.21 for the mailing of a statutory prospectus) x
64,500,000 statutory prospectuses x 80% of funds).
    \402\ We originally did not project that existing investors
would request hard copies of the statutory prospectus. However, one
commenter stated that at most 2% of existing investors would likely
request hard copies, based on information from Broadridge indicating
investor requests for written materials under the Commission's
notice and access e-proxy model have averaged around 2%. See ICI
Letter, supra note 34. We believe that it is reasonable to estimate
a similar percentage of existing investors will request hard copies
of the statutory prospectus.
    \403\ For purposes of this estimate, we used the digital print
on demand rate of $1.35 and the average first class mail rate of
$1.21. See Broadridge Memorandum, supra note 398 (estimating postage
costs of $1.21); ICI Letter, supra note 34 (estimating a digital
print on demand rate of $1.35). In the Proposing Release, we
estimated a blended print rate of $0.35 for prospectuses sent to
requesting investors. See Proposing Release, supra note 12, 72 FR at
67810 n. 162. However, one commenter stated that this estimate is
too low because it largely reflects economies of scale from high
volume offset printing that are not realistic given the likely low
number of investor requests for hard copies of the statutory
prospectus. See ICI Letter, supra note 34. Therefore, we have
adopted the commenter's digital print rate estimate of $1.35.
    The costs were calculated by multiplying the costs of printing
and mailing a statutory prospectus by the 300,000,000 prospectuses
sent out annually to existing shareholders reduced to reflect our
estimate that 80% of funds will elect to adopt the new disclosure
option and 2% of investors will request a statutory prospectus be
mailed to them (($1.35 for the printing of a statutory prospectus +
$1.21 for the mailing of a statutory prospectus) x 300,000,000
statutory prospectuses x 80% of funds x 2% of investors).
    \404\ In the Proposing Release, we originally estimated that 10%
of such investors would likely request hard copies of the statutory
prospectus. However, one commenter stated that 2% of both existing
investors and investors purchasing fund shares would request hard
copies of the statutory prospectus. See ICI Letter, supra note 34.
While we agree with the commenter that we may have initially
underestimated the percentage of existing investors and
overestimated the percentage of purchasing investors that would
request hard copies, we do not believe that the same percentage of
both groups would request hard copies. Investors making initial fund
purchases would potentially have a greater interest in receiving
hard copies of statutory prospectuses than investors that have owned
fund shares for some time. For this reason, we have lowered our
original estimate that 10% of investors purchasing fund shares would
request hard copies, but have lowered it less than the commenter
suggested.
    \405\ For purposes of this estimate, we used the digital print
on demand rate of $1.35 and the average first class mail rate of
$1.21. See supra note 403. The costs were calculated by multiplying
the costs of printing and mailing a statutory prospectus by the
64,500,000 prospectuses sent out in response to fund purchases
reduced to reflect our estimate that 80% of funds will elect to send
Summary Prospectuses and 3% of investors will request a statutory
prospectus be mailed to them (($1.35 for the printing of a statutory
prospectus + $1.21 for the mailing of a statutory prospectus) x
64,500,000 statutory prospectuses x 80% of funds x 3% of investors).
    \406\ ($126,000,000 cost savings for annual mailings +
$80,496,000 cost savings for purchase mailings) - ($12,288,000 cost
of sending requested statutory prospectuses to existing investors +
$3,962,880 cost of sending requested statutory prospectuses to
investors purchasing funds).
    A study of industry participants estimated cost savings of
approximately $300,000,000 per year. See Forrester Consulting Study
commissioned on behalf of NewRiver, Inc., The Short-Form Prospectus,
at 6 (Oct. 2007), available at http://www1.newriver.com/upload_
files/ForresterConsulting_NewRiver_ShortForm_Prospectus_10_25_
2007.pdf.
    \407\ $190,245,120 / 8,752 portfolios.
    Although we believe that not all funds will choose to use the
Summary Prospectus, we believe it is appropriate to estimate the
amendments' effect across the entire mutual fund industry.
Therefore, we have estimated the average cost savings per portfolio
industry-wide rather than estimate the cost savings per portfolio
only for those portfolios using the Summary Prospectus.
---------------------------------------------------------------------------

    We received four comments bearing on the cost savings of the new
delivery option.\408\ Of those, only two commenters provided actual
estimates of the total savings that would be generated by the new
delivery option.\409\ Insofar as these two commenters' total savings
estimates differed from our $190,245,120 figure, they did so largely
because the commenters assumed different per unit printing and postage
costs. However, assuming (1) that 80% of funds will choose to send or
give the Summary Prospectus, (2) that funds distribute approximately
300,000,000

statutory prospectuses to existing investors annually and distribute
approximately 64,500,000 statutory prospectuses to purchasing investors
annually, and (3) that 2% of existing investors in funds using the new
delivery option and 3% of investors purchasing shares in such funds
request hard copies of the statutory prospectus, the commenters'
differing per unit printing and postage cost estimates would not
produce total cost savings estimates that differ significantly from our
estimate.\410\
---------------------------------------------------------------------------

    \408\ See Data Communiqu[eacute] Letter, supra note 35; ICI
letter, supra note 34; MFS Letter, supra note 150; RR Donnelley
Memorandum, supra note 388.
    \409\ See Data Communiqu[eacute] Letter, supra note 35
(estimating $220,254,203 in annual cost savings) ICI Letter, supra
note 34 (estimating $236,000,000 in annual cost savings).
    The two commenters also provided the printing and postage cost
estimates they used to arrive at their total cost savings estimates.
See Data Communiqu[eacute] Letter, supra note 35 (estimating per
unit printing and postage costs for annual fulfillment of $0.25 and
$0.392 respectively, per unit printing and postage costs for
purchase fulfillment of $0.25 and $0.654 respectively, and a blended
per unit printing and postage cost for delivery of hard copies of
the statutory prospectus to requesting investors of $0.50); ICI
Letter, supra note 34 (estimating per unit printing and postage
costs for annual fulfillment of $0.26 and $0.255 respectively, per
unit printing and postage costs for purchase fulfillment of $0.26
and $1.39 respectively, and per unit printing and postage costs for
delivery of hard copies of the statutory prospectus to requesting
investors of $1.35 and $1.39 respectively).
    Of the two commenters that did not provide total cost savings
estimates, one commenter estimated that it currently pays an average
of $0.15 per piece for offset printing of a statutory prospectus.
MFS Letter, supra note 150. The other commenter estimated that a
fund with a print volume of 30,000 64-page statutory prospectuses
could save 6.3% by using a four-page Summary Prospectus and that a
fund with a print volume of 100,000 64-page statutory prospectuses
could save 22.2%, assuming that 10% of investors still request hard
copies of the statutory prospectus. RR Donnelley Memorandum, supra
note 388.
    \410\ One commenter also did not account for the fact that less
than 100% of funds would adopt the new delivery option in its
calculation of quantified benefits. See ICI Letter, supra note 34.
---------------------------------------------------------------------------

    We expect that funds will face the highest level of uncertainty
about the extent of investors' continued use of printed statutory
prospectuses in the first year after adoption of the amendments. We
expect that, as funds gain familiarity with the extent of continued use
of printed prospectuses and as shareholders increasingly turn to the
Internet for fund information, the number of requested paper copies
will decline, as will funds' tendency to print more copies than
ultimately are requested.
2. ETF-Related Disclosures
    As noted above, in March of this year, the Commission proposed
several amendments to Form N-1A to accommodate the use of the form by
ETFs, and we are adopting those amendments today, with some changes to
respond to issues raised by commenters. As noted in the ETF proposing
release, many of the exemptive orders that permit an ETF to operate
exempt broker-dealers from the obligation to deliver prospectuses in
secondary market transactions. The exemptive orders permit a broker-
dealer instead to deliver a product description containing basic
information about the ETF and its shares. We understand that many, if
not most, broker-dealers transmit a prospectus to purchasers and do not
rely on the exemption in our orders. In light of this practice, we are
adopting amendments to Form N-1A designed to meet the needs of
investors (including retail investors) who purchase ETF shares in the
secondary market rather than financial institutions that purchase
creation units directly from the ETF.
    We expect that one benefit of the amendments will be to provide ETF
investors purchasing shares in the secondary market with information on
the investment that they currently may not receive in a product
description, such as the fund's fee table and the name and length of
service of the portfolio manager. Another benefit of the amendments
will be to provide ETF investors purchasing shares in the secondary
market with prospectus disclosure that is specifically tailored to
ETFs. We expect this would provide ETF investors with information that
will allow them to understand more easily an investment in an ETF. This
information also may be helpful to investors in making portfolio
allocation decisions.
    Our amendments are designed to simplify prospectus and periodic
report disclosure in two ways. First, the amendments allow ETFs to
exclude from the prospectus information on how to purchase and redeem
creation units, including information on fees and expenses associated
with creation unit sales or purchases. Current ETF prospectuses and
periodic reports include detailed information on how to purchase and
redeem creation units. The fee table and example include information on
transaction fees payable only by creation unit purchasers. Our
amendments permit ETFs with creation units of at least 25,000 shares to
exclude this information because it is not relevant (and may be
potentially confusing) to investors purchasing in secondary market
transactions.\411\ This provision should simplify ETF prospectuses
without compromising the disclosure provided to investors who purchase
ETF shares in secondary market transactions.
---------------------------------------------------------------------------

    \411\ See supra Part III.A.4.
---------------------------------------------------------------------------

    Second, our exemptive orders require ETFs to include in their
prospectuses and annual reports premium/discount information to alert
investors of the extent and frequency with which market prices deviated
from the fund's NAV. ETFs may omit this disclosure if they provide the
information on their Internet Web sites and provide an Internet address
where investors may locate the information. ETFs have generally
included this information in a supplemental section of the prospectus
and annual report.\412\ The amendments incorporate this disclosure in
the shareholder information section (Item 11 of Form N-1A) of the
prospectus and the management's discussion of fund performance in the
annual reports (Item 27(b)(7) of Form N-1A). We anticipate that this
may benefit ETF investors by simplifying the prospectuses and annual
reports of ETFs while codifying important disclosures mandated by our
ETF exemptive orders. ETFs also may benefit because they may choose to
disclose this information in the most cost efficient way--either in the
prospectus and the annual report, or on their Web sites.
---------------------------------------------------------------------------

    \412\ See, e.g., iShares MSCI Series, Prospectus 62-65 (Jan. 1,
2007); iShares MSCI Series, 2006 Shareholders Annual Report 130-136
(Aug. 31, 2006).
---------------------------------------------------------------------------

B. Costs

1. Form N-1A
    While the amendments will result in significant cost savings for
funds, we believe that there will be costs associated with them. These
include the costs for funds to compile and review the new information
required by our amendments and to post the required disclosure
documents on an Internet Web site. These costs may include both
internal costs (for attorneys and other non-legal staff, such as
computer programmers, to prepare and review the required disclosure)
and external costs (for printing and mailing of the Summary
Prospectus). We estimate that the external costs for printing and
mailing of the Summary Prospectus will be approximately $106,200,000
\413\ or approximately $12,134 per portfolio.\414\
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    \413\ This estimate assumes printing and postage costs for
annual fulfillment of $0.08 and $0.255 per unit respectively and
printing and postage costs for purchase fulfillment of $0.08 and
$0.42 per unit respectively. We increased our estimate of postage
costs for purchase fulfillment from $0.41 in the Proposing Release
to $0.42 to reflect the current rate for first class mail. Our
estimate is derived as follows: [(($0.08 to offset print a Summary
Prospectus + $0.255 for bulk mail) x 300,000,000 prospectuses
estimated to be sent out annually) + (($0.08 to offset print a
Summary Prospectus + $0.42 for first class mail) x 64,500,000
prospectuses estimated to be sent out in response to a fund
purchase)] x 80% of funds.
    In the Proposing Release, we estimated printing costs of $0.11
per unit for on-demand printing in black and white. See Proposing
Release, supra note 12, 72 FR at 67811 n. 168. However, we have
changed our estimate of per unit printing costs based on comments we
received and based on our decision not to include a quarterly
updating requirement in the final rule. Instead of using the
original $0.11 per unit figure for on-demand printing in black and
white, we now estimate printing costs of $0.08 per unit, a figure
representing offset printing of a blend of color and black and
white. See ICI Letter, supra note 34.
    \414\ $106,200,000 / 8,752 portfolios.
    Our new cost/benefit analysis retains our original postage costs
of $0.255 per unit for annual fulfillment and $0.41 per unit for
purchase fulfillment. Two commenters assumed the same postage costs
in their cost/benefit analyses. See ICI Letter, supra note 34;
NewRiver Letter, supra note 228. Another commenter's estimates of
postage costs were close to ours ($0.233 per unit for annual
fulfillment and $0.484 per unit for purchase fulfillment). See Data
Communiqu[eacute] Letter, supra note 35. By contrast, a fourth
commenter estimated postage costs of $0.241 per Summary Prospectus,
without differentiating between annual and purchase fulfillment
costs. See RR Donnelley Memorandum, supra note 388. However, we did
not adjust our postage cost estimates based on this comment because
the other three commenters largely agreed with our original postage
cost estimates.
    Although we believe that not all funds will choose to use the
Summary Prospectus, we believe it is appropriate to estimate the
amendments' effect across the entire mutual fund industry.
Therefore, we have estimated the average external costs per
portfolio industry-wide rather than estimate the costs per portfolio
only for those portfolios using the Summary Prospectus.

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

    We received four comments regarding our estimates of per unit print
costs for the Summary Prospectus.\415\ Of the four commenters, only one
accounted for the likelihood that some funds would print Summary
Prospectuses in color.\416\ In discussing its estimates, the commenter
reported that 47% of funds it surveyed expected to use color for the
Summary Prospectus. Therefore the commenter's per unit print cost
estimates represent a blend of 47% color and 53% black and white.
Assuming that the Commission would require quarterly updating of the
Summary Prospectus, the commenter estimated a per unit printing cost of
$0.17 for annual fulfillment and $0.26 for purchase fulfillment.\417\
However, the commenter also estimated that without quarterly updating,
most funds would print Summary Prospectuses by offset methods, and
therefore estimated a per unit print cost of $0.08 per unit for both
annual and purchase fulfillment.\418\
---------------------------------------------------------------------------

    \415\ Data Communiqu[eacute] Letter, supra note 35 (estimating
$0.07 per unit for offset printing in black and white); ICI Letter,
supra note 34 (estimating $0.17 per unit for annual fulfillment and
$0.26 per unit for purchase fulfillment, with both figures
representing a blend of offset printing and print on demand as well
as a blend of color and black and white printing); MFS Letter, supra
note 150 (estimating $0.10 per unit for print on demand, but not
indicating whether that figure includes any color printing);
NewRiver Letter, supra note 228 (estimating $0.10 per unit for print
on demand, but not indicating whether that figure includes any color
printing).
    \416\ See ICI Letter, supra note 34.
    \417\ Given our assumptions that 80% of funds will adopt the
Summary Prospectus, that funds distribute 300 million prospectuses
for purposes of annual fulfillment, and that they distribute 64.5
million prospectuses for purchase fulfillment each year, the
commenter's per unit postage and mailing cost estimates would lead
to total postage and mailing costs of $136,572,000 annually [(($0.17
for a blend of offset/print on demand and color/black and white
printing + $0.255 for bulk mail) x 300,000,000 prospectuses
estimated to be sent out annually) + (($0.26 for print on demand of
a blend of color/black and white printing + $0.41 for first class
mail) x 64,500,000 prospectuses estimated to be sent out in response
to a fund purchase)] x 80% of funds.
    \418\ See Memorandum from the Division of Investment Management
regarding September 29, 2008 telephone conversation with
representatives of the Investment Company Institute (October 6,
2008).
---------------------------------------------------------------------------

    We accept the commenter's assertion that roughly half of funds will
print their Summary Prospectuses in color and half will print in black
and white because their estimate was based on a survey of a broad
cross-section of the mutual fund industry. Additionally, with the
elimination of quarterly updating requirements in the final rule, we
believe that most funds will likely print Summary Prospectuses for
annual and purchase fulfillment at the same time, giving most funds
sufficient print volume to make offset printing methods
economical.\419\ Therefore, we have revised our estimates of per unit
print costs for annual and purchase fulfillment to $0.08 per unit.
---------------------------------------------------------------------------

    \419\ We recognize that some funds may not have sufficient
numbers of investors and purchasers to warrant printing Summary
Prospectuses by offset method. ICI, however, estimated that absent a
quarterly updating requirement, nearly 90% of funds would print
Summary Prospectuses by offset methods. See id.
---------------------------------------------------------------------------

    For purposes of the PRA, we have estimated that the new disclosure
requirements, assuming 80% of funds choose to send or give a Summary
Prospectus, would add: (1) 70,016 hours to the annual burden of
preparing Form N-1A; and (2) 63,014 hours to the annual burden of
preparing and using a Summary Prospectus, including complying with
Internet posting requirements, under rule 498. We estimate that this
additional burden would equal total internal costs of $37,248,400
annually \420\ or approximately $4,256 per portfolio.\421\
---------------------------------------------------------------------------

    \420\ This cost increase is estimated by multiplying the total
annual hour burden (133,030 hours) by the rounded estimated hourly
wage rate of $280. The estimated wage figure is based on published
rates for compliance attorneys and 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,
yielding effective hourly rates of $270 and $289, respectively. See
Securities Industry and Financial Markets Association's Report on
Management & Professional Earnings in the Securities Industry 2007.
The estimated wage rate is further based on the estimate that
attorneys and programmers would divide time equally, resulting in a
rounded weighted wage rate of $280 (($270 x .50) + ($289 x .50)).
    In the Proposing Release, we estimated an hourly wage rate of
$252.50, which was based on the Report on Management & Professional
Earnings in the Securities Industry 2006. See Proposing Release,
supra note 12, 72 FR at 67811 n. 170.
    \421\ $37,248,400 / 8,752 portfolios.
    In the Proposing Release, we estimated the costs per fund
choosing to use the Summary Prospectus. See Proposing Release, supra
note 12, 72 FR 67811 n. 166. We have revised this calculation to
produce an average cost per portfolio industry-wide.
---------------------------------------------------------------------------

    The amendments also may result in costs associated with investors
printing fund documents posted online. We estimate that approximately
\1/2\% of existing investors and 3% of investors purchasing shares will
print statutory prospectuses at an estimated cost of $2.03 per
statutory prospectus.\422\ Based on these assumptions, the amendments
are estimated to produce annual investor printing costs of
$5,578,440.\423\
---------------------------------------------------------------------------

    \422\ Our estimate of potential printing costs is based on data
provided by Lexecon Inc. in response to Investment Company Act
Release No. 27182 (Dec. 8, 2005) [70 FR 74598 (Dec. 15, 2005)]. See
Lexecon Inc. Letter (Feb. 13, 2006). To calculate printing costs, we
estimate that 100% of prospectuses are printed in black and white at
a cost of $0.035 per page for ink and that the average prospectus
length is approximately 45 pages at a cost of $0.010 per page for
the paper (($0.035 for ink + $0.010 for paper) x 45 pages).
    In the Proposing Release, we estimated that approximately 5% of
investors making fund purchases would print statutory prospectuses.
See Proposing Release, supra note 12, 72 FR at 67811. However, we
received a comment estimating that 2% of both existing investors and
investors purchasing fund shares would print the statutory
prospectus. See ICI Letter, supra note 34. While we agree with the
commenter that we may have initially underestimated the percentage
of existing investors and overestimated the percentage of investors
purchasing fund shares that would print the statutory prospectus, we
do not believe that the same percentage of both groups of investors
would print statutory prospectuses. Rather, we believe that
investors making initial fund purchases would have greater interest
in printing statutory prospectuses than investors who already own
fund shares. Thus, we have lowered our original estimate of
investors purchasing shares who print the statutory prospectus to 3%
and estimate that approximately \1/2\% of existing investors will
print statutory prospectuses.
    \423\ (300,000,000 x \1/2\% of printing investors) + (64,500,000
x 3% of printing investors) x 80% of funds x $2.03.
---------------------------------------------------------------------------

    We received one comment letter arguing that the use of the Summary
Prospectus under rule 498 may impose costs on investors by relieving
funds of liability for misleading disclosure.\424\ For the reasons
discussed in Parts III.B.4.a. and III.B.5., we do not believe that the
amendments, as adopted, will entail such costs.
---------------------------------------------------------------------------

    \424\ Fund Democracy et al. Letter, supra note 34.
---------------------------------------------------------------------------

2. ETF-Related Disclosures
    The primary goal of our amendments relating to ETF disclosures is
to provide investors in ETF shares with more valuable information
regarding an investment in an ETF. We do not expect that the amendments
will result in significant additional costs to ETFs.\425\ As noted
above, the N-1A amendments generally codify disclosure requirements in
existing ETF exemptive orders.
---------------------------------------------------------------------------

    \425\ Existing ETFs would face a one-time ``learning cost'' to
determine the difference between the current Form N-1A requirements
as modified by their exemptive orders and the amendments we are
adopting today. We do not anticipate that this cost will be
significant given the similarity of the amendments to the conditions
in existing exemptive orders.
---------------------------------------------------------------------------

    In addition to codifying disclosure requirements of existing
exemptive orders, we are adopting a few new disclosure requirements in
Form N-1A. The disclosure amendments require each ETF to identify the
principal U.S. market on which its shares are traded \426\ and include
statements to the effect that (i) ETF shares are bought and sold on

national securities exchanges; \427\ (ii) because the price of shares
is based on market price, shares may trade at a premium or discount to
NAV; \428\ and (iii) ETF investors may be required to pay brokerage
commissions.\429\ Including these additional statements should present
minimal, if any, printing costs. Any additional costs incurred by an
ETF in complying with these additional disclosures should be offset by
the cost-savings of the amendments, which would allow most, if not all,
ETFs to exclude creation unit purchase and redemption information in
their prospectuses.\430\
---------------------------------------------------------------------------

    \426\ Item 1(a)(2) of Form N-1A.; rule 498(b)(1)(ii).
    \427\ Item 6(c)(i)(A) of Form N-1A.
    \428\ Item 6(c)(i)(B) of Form N-1A.
    \429\ Instruction 1(e)(i) to Item 3 of Form N-1A. We also are
adopting a conforming amendment to the expense example in ETF annual
and semi-annual reports. Instruction 1(e)(i) to Item 27(d) of Form
N-1A.
    \430\ See Instruction 1(e)(ii) to Item 3 of Form N-1A; Items
6(c)(ii); 11(g)(1) of Form N-1A. For purposes of our Paperwork
Reduction Act analysis, we have estimated that these amendments will
not change the current Form N-1A compliance costs. See supra Part
IV.C.
---------------------------------------------------------------------------

VI. Consideration of Promotion of Efficiency, Competition, and Capital
Formation

    Section 2(c) of the Investment Company Act \431\ and section 2(b)
of the Securities Act \432\ require the Commission, when engaging in
rulemaking that requires it to consider or determine whether an action
is necessary or appropriate in the public interest, to consider, in
addition to the protection of investors, whether the action will
promote efficiency, competition, and capital formation. We requested,
but did not receive, any comments directly addressing whether the
proposed amendments, if adopted, would promote efficiency, competition,
and capital formation, or comments on any anti-competitive effects of
the proposed amendments.\433\
---------------------------------------------------------------------------

    \431\ 15 U.S.C. 80a-2(c).
    \432\ 15 U.S.C. 77b(b).
    \433\ See Proposing Release, supra note 12, 72 FR at 67812.
---------------------------------------------------------------------------

    The amendments we are adopting are intended to provide enhanced
disclosure regarding mutual funds. These changes may improve
efficiency. The enhanced disclosure requirements may enable
shareholders to make more informed investment decisions by focusing
attention on key information, which could promote efficiency. We
anticipate that the amendments will increase efficiency at mutual funds
by providing an alternative to the printing and mailing of paper copies
of statutory prospectuses.
    We anticipate that improving investors' ability to make informed
investment decisions may also lead to increased competitiveness of the
U.S. capital markets. The ability of investors to directly locate the
information they seek regarding a fund or funds through the use of the
Internet may result in more investment in the U.S. capital markets. In
addition, we believe that the amendments may enhance competition and
efficiency because they will reduce fund printing and mailing costs.
Funds could, for example, use these savings to conduct additional
investment research or to pass cost savings on to investors. We also
believe that the amendments will enhance competition among funds
because they will facilitate investor comparisons of mutual fund
information, including important cost and fee disclosures.
    We anticipate that this increased market efficiency also may
promote capital formation by improving the flow of information between
funds and their investors. Specifically, we believe that the amendments
will: (1) Facilitate greater availability of information to investors
and the market with regard to all funds; (2) build upon the increased
importance of electronic dissemination of information, including the
use of the Internet; and (3) promote the capital formation process.

VII. Final Regulatory Flexibility Analysis

    This Final Regulatory Flexibility Analysis has been prepared in
accordance with the Regulatory Flexibility Act.\434\ It relates to the
Commission's amendments to Form N-1A under the Securities Act and the
Investment Company Act and to new rule 498 under the Securities Act.
---------------------------------------------------------------------------

    \434\ 5 U.S.C. 603 et seq.
---------------------------------------------------------------------------

A. Need for the Rule

    We are adopting an improved mutual fund disclosure framework that
is intended to provide investors with information that is easier to use
and more readily accessible, while retaining the comprehensive quality
of the information that is available today. The foundation of the
improved disclosure framework is the provision to all investors of
streamlined and user-friendly information that is key to an investment
decision.
    In addition, the amendments to Form N-1A that specifically apply to
ETFs are intended to accommodate the form for use by ETFs and are
designed to provide more useful information to investors who purchase
and sell ETF shares on national securities exchanges.

B. Significant Issues Raised by Public Comment

    In the proposing release, we requested comment on the number of
small entity issuers that may be affected, the existence or nature of
the potential impact and how to quantify the impact of the amendments.
Commenters generally supported the proposal.\435\ One commenter,
however, stated that the proposal would simply add another costly
burden to small fund families.\436\ While we believe there will be some
costs associated with the amendments, we have tried to minimize those
costs. Nearly all of the information that is required in the summary
section of the prospectus under the amendments has previously been
required in a fund's prospectus. We eliminated the proposed quarterly
updating requirement in response to commenters' concerns. In addition,
we have made use of the Summary Prospectus voluntary, meaning that a
fund can choose whether or not to adopt it considering its costs and
benefits to the fund and its investors.
---------------------------------------------------------------------------

    \435\ See supra note 206 and accompanying text.
    \436\ See McCormick Letter, supra note 74. The commenter made
specific suggestions for improving mutual fund disclosure, such as
consolidating the statutory prospectus and SAI and eliminating the
semi-annual reports and quarterly filings on Form N-Q, that were
beyond the scope of this particular rulemaking.
---------------------------------------------------------------------------

    In the initial regulatory flexibility analysis for the ETF
proposing release, we requested comment on any aspect of the IRFA,
including the number of small entities likely to rely on the proposed
amendments to Form N-1A, the likely impact of the proposed amendments
on small entities, and the nature of any impact on small entities. We
also requested empirical data supporting the extent of any impact on
small entities. We received no comments on that analysis.

C. Small Entities Subject to the Rule

    For purposes of the Regulatory Flexibility Act, an investment
company is a small entity if it, together with other investment
companies in the same group of related investment companies, has net
assets of $50 million or less as of the end of its most recent fiscal
year.\437\ Approximately 127 mutual funds registered on Form N-1A meet
this definition.\438\ Of the approximately 593 registered open-end
investment companies that are ETFs, only one is a small entity.\439\
---------------------------------------------------------------------------

    \437\ 17 CFR 270.0-10.
    \438\ This estimate is based on analysis by the Division of
Investment Management staff of publicly available data.
    \439\ For purposes of this analysis, any series or portfolio of
an ETF is considered a separate ETF. Therefore, there are 593
portfolios or series of registered open-end investment companies
operating as ETFs. For purposes of determining whether a fund is a
small entity under the Regulatory Flexibility Act, however, the
assets of funds (including each portfolio and series of a fund) in
the same group of related investment companies are aggregated.

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

D. Reporting, Recordkeeping, and Other Compliance Requirements

    The amendments we are adopting require all funds, including funds
that are small entities, to provide key information in a summary
section of their statutory prospectuses. In addition, the amendments
provide a new option that will permit a person to satisfy its mutual
fund prospectus delivery obligations under the Securities Act. Under
the option, key information will be sent or given to investors in the
form of a Summary Prospectus, and the statutory prospectus will be
provided on an Internet Web site. Upon an investor's request, funds are
required to send the statutory prospectus to the investor. No funds are
required to send or give a Summary Prospectus. However, for purposes of
the PRA, we estimate that 80% of all funds will choose to send or give
a Summary Prospectus pursuant to rule 498 both to enhance investor
access to information about a fund and to take advantage of the cost
savings that a fund may realize. If a fund elects the new delivery
regime for prospectuses, it is required to prepare, file, and send or
give a Summary Prospectus to investors. The required disclosure in the
Summary Prospectus is information that generally is readily available
to funds. A fund is required to post the statutory prospectus along
with other required documents to an Internet Web site and provide
either a paper or an e-mail copy of its statutory prospectus to
requesting shareholders.
    For purposes of the Paperwork Reduction Act, we have estimated that
the new disclosure requirements would increase the hour burden of
filings on Form N-1A by 70,016 hours annually and for rule 498 by
63,014 hours annually. We estimate that this additional burden would
increase total internal costs per portfolio, including those that are
small entities, by approximately $4,256 per portfolio annually.\440\ We
also estimate that the external costs for printing and mailing of the
Summary Prospectus will be approximately $12,075 per portfolio.\441\
However, we estimate that the benefit of decreased printing and other
costs will decrease total external costs per portfolio, including those
that are small entities, by approximately $21,737 per portfolio
annually.\442\
---------------------------------------------------------------------------

    \440\ These figures are based on an estimated hourly wage rate
of $280. See supra note 420. We note that this estimate includes a
one-time burden of 17 hours to create the summary section of the
statutory prospectus and a one-time burden of 23 hours to create the
Summary Prospectus.
    \441\ See supra note 414 and accompanying text.
    \442\ See supra note 407 and accompanying text.
---------------------------------------------------------------------------

    The amendments to Form N-1A that specifically apply to ETFs will
impose reporting requirements on open-end funds that operate as ETFs.
The amendments require an ETF to disclose in its prospectus and annual
reports the number of trading days on which the market price of an
ETF's shares was greater than its NAV and the number of days it was
less than its NAV (premium/discount information) unless the ETF
discloses this information on its Web site and provides an Internet
address where an investor can locate the information.\443\ The
amendments also require the ETF to disclose in its prospectus (in
addition to its exchange ticker trading symbol), the principal U.S.
market(s) on which its shares are traded.\444\
---------------------------------------------------------------------------

    \443\ Item 11(g)(2) of Form N-1A (requiring premium/discount
information in the prospectus to span the most recently completed
calendar year and quarters since that year); Item 27(b)(7)(iv) of
Form N-1A (requiring premium/discount information disclosed in
annual reports to span five fiscal years). The ETF is required to
present premiums or discounts as a percentage of NAV and to explain
that shareholders may pay more than NAV when purchasing shares and
receive less than NAV when selling, because shares are bought and
sold at market prices. Instructions 2, 3 to Item 11(g)(2) of Form N-
1A; Instructions 2, 3 to Item 27(b)(7)(iv).
    \444\ Item 1(a)(2) of Form N-1A; rule 498(b)(1)(ii).
---------------------------------------------------------------------------

    The amendments to Form N-1A also eliminate some disclosure
requirements for ETFs with creation units of 25,000 or more shares and
replace them with fewer disclosures. Under the amendments, those ETFs
do not have to: (i) Disclose information on how to buy and redeem
shares of ETF; \445\ (ii) include in its fee table in its prospectus or
annual and semi-annual reports fees and expenses for purchases or sales
of creation units; \446\ or (iii) disclose procedures for the purchase
and redemption of fund shares.\447\
---------------------------------------------------------------------------

    \445\ Item 6(c)(ii) of Form N-1A. Instead ETF prospectuses could
simply state that individual fund shares can only be bought and sold
on the secondary market through a broker-dealer. Item 6(c)(i)(A) of
Form N-1A.
    \446\ Instruction 1(e)(ii) to Item 3 of Form N-1A; Instruction
1(e)(ii) to Item 27(d) of Form N-1A. An ETF will instead modify the
narrative explanation preceding the example in the fee table to
state that investors may be required to pay brokerage commissions
that are not reflected in the fee table. Instruction 1(e)(i) to Item
3 of Form N-1A; Instruction 1(e)(i) to Item 27(d) of Form N-1A.
    \447\ Item 11(g)(1) of Form N-1A.
---------------------------------------------------------------------------

    The amendments to Form N-1A are designed to accommodate the form
for use by ETFs and to meet the needs of investors (including retail
investors) who purchase ETF shares in secondary market transactions
rather than institutional investors purchasing creation units directly
from the ETF. We anticipate that the amendments will have a negligible
impact (if any) on the disclosure burdens on ETFs while providing
necessary information to ETF investors. We do not believe that the
amendments to Form N-1A will disproportionately impact small funds.

E. Agency Action To Minimize the Effect on Small Entities

    The Regulatory Flexibility Act directs us to consider significant
alternatives that would accomplish our stated objective, while
minimizing any significant adverse impact on small issuers. In
connection with the amendments, the Commission considered the following
alternatives: (1) The establishment of differing compliance or
reporting requirements or timetables that take into account the
resources available to small entities; (2) the clarification,
consolidation, or simplification of compliance and reporting
requirements under the amendments for small entities; (3) the use of
performance rather than design standards; and (4) an exemption from
coverage of the amendments, or any part thereof, for small entities.
    The Commission believes at the present time that special compliance
or reporting requirements for small entities, or an exemption from
coverage for small entities, would not be appropriate or consistent
with investor protection. We believe that the amendments to Form N-1A
will provide investors with enhanced disclosure regarding funds. This
enhanced disclosure will allow investors to better assess their
investment decisions. The ETF amendments to Form N-1A are designed to
accommodate the form for use by ETFs and to meet the needs of investors
(including retail investors) who purchase ETF shares in secondary
market transactions rather than financial institutions purchasing
creation units directly from the ETF. Different disclosure requirements
for funds that are small entities may create the risk that investors in
these funds would be less able to evaluate funds and less able to
compare different funds, thereby lessening the ability of investors to
make informed choices among funds. We believe it is important for the
disclosure that is required by the amendments to Form N-1A to be
provided to investors in all funds, not just funds that are not
considered small entities.
    Rule 498 provides a new option that permits a person to satisfy its
mutual fund prospectus delivery obligations under the Securities Act.
Under the

option, key information is to be sent or given to investors in the form
of a Summary Prospectus, and the statutory prospectus is to be provided
on an Internet Web site. Upon an investor's request, funds are required
to send the statutory prospectus to the investor. Because the rule is
optional, an exemption from the rule for small entities would deprive
small entities of the potential benefits of the rule.
    We have endeavored through the amendments to minimize the
regulatory burden on all funds, including small entities, while meeting
our regulatory objectives. Small entities should benefit from the
Commission's reasoned approach to the amendments to the same degree as
other funds. We also have endeavored to clarify, consolidate, and
simplify disclosure for all funds, including those that are small
entities. Finally, we do not consider using performance rather than
design standards to be consistent with our statutory mandate of
investor protection in the present context. Based on our past
experience, we believe that the disclosure required by the amendments
will be more useful to investors if there are enumerated informational
requirements.

VIII. Statutory Authority

    The Commission is adopting amendments to Form N-1A and Form N-4
pursuant to authority set forth in sections 5, 6, 7, 10, and 19(a) of
the Securities Act [15 U.S.C. 77e, 77f, 77g, 77j, and 77s(a)] and
sections 8, 24(a), 24(g), 30, and 38 of the Investment Company Act [15
U.S.C. 80a-8, 80a-24(a), 80a-24(g), 80a-29, and 80a-37]. The Commission
is adopting amendments to Form N-14 pursuant to authority set forth in
sections 5, 6, 7, 10, and 19(a) of the Securities Act [15 U.S.C. 77e,
77f, 77g, 77j, and 77s(a)]. The Commission is adopting amendments to
rules 159A, 482, 485, 497, and 498 under the Securities Act and to
rules 304 and 401 of Regulation S-T pursuant to authority set forth in
sections 5, 6, 7, 10, 19, and 28 of the Securities Act [15 U.S.C. 77e,
77f, 77g, 77j, 77s, and 77z-3] and sections 8, 24(a), 24(g), 30, and 38
of the Investment Company Act [15 U.S.C. 80a-8, 80a-24(a), 80a-24(g),
80a-29, and 80a-37].

List of Subjects

17 CFR Parts 230 and 274

    Investment companies, Reporting and recordkeeping requirements,
Securities.

17 CFR Parts 232 and 239

    Reporting and recordkeeping requirements, Securities.

Text of Final Rule and Form Amendments

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

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

0
1. The authority citation for part 230 continues to read in part as
follows:

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

0
2. Section 230.159A is amended by removing the word ``profile'' in
paragraph (a)(2) and adding in its place ``summary prospectus''.

0
3. Section 230.482 is amended by:
0
a. Revising paragraph (a) before the note; and
0
b. Revising paragraphs (b)(1) and (c).
    The revisions read as follows:

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

    (a) Scope of rule. This section applies to an advertisement or
other sales material (advertisement) with respect to securities of an
investment company registered under the Investment Company Act of 1940
(15 U.S.C. 80a-1 et seq.) (1940 Act), or a business development
company, that is selling or proposing to sell its securities pursuant
to a registration statement that has been filed under the Act. This
section does not apply to an advertisement that is excepted from the
definition of prospectus by section 2(a)(10) of the Act (15 U.S.C.
77b(a)(10)) or Sec.  230.498(d) or to a summary prospectus under Sec.
230.498. An advertisement that complies with this section, which may
include information the substance of which is not included in the
prospectus specified in section 10(a) of the Act (15 U.S.C 77j(a)),
will be deemed to be a prospectus under section 10(b) of the Act (15
U.S.C. 77j(b)) for the purposes of section 5(b)(1) of the Act (15
U.S.C. 77e(b)(1)).
* * * * *
    (b) * * *
    (1) Availability of additional information. An advertisement must
include a statement that advises an investor to consider the investment
objectives, risks, and charges and expenses of the investment company
carefully before investing; explains that the prospectus and, if
available, the summary prospectus contain this and other information
about the investment company; identifies a source from which an
investor may obtain a prospectus and, if available, a summary
prospectus; and states that the prospectus and, if available, the
summary prospectus should be read carefully before investing.
* * * * *
    (c) Use of applications. An advertisement that complies with this
section may not contain or be accompanied by any application by which a
prospective investor may invest in the investment company, except that
a prospectus meeting the requirements of section 10(a) of the Act (15
U.S.C. 77j(a)) by which a unit investment trust offers variable annuity
or variable life insurance contracts may contain a contract application
although the prospectus includes, or is accompanied by, information
about an investment company in which the unit investment trust invests
that, pursuant to this section, is deemed a prospectus under section
10(b) of the Act (15 U.S.C. 77j(b)).
* * * * *

0
4. Section 230.485 is amended by removing the reference ``Items 5 or
6(a)(2) of Form N-1A'' in paragraph (b)(1)(iv) and adding in its place
``Item 5(b) or 10(a)(2) of Form N-1A''.

0
5. Section 230.497 is amended by revising paragraphs (a) and (k) to
read as follows:

Sec.  230.497  Filing of investment company prospectuses--number of
copies.

    (a) Five copies of every form of prospectus sent or given to any
person prior to the effective date of the registration statement that
varies from the form or forms of prospectus included in the
registration statement filed pursuant to Sec.  230.402(a) shall be
filed as part of the registration statement not later than the date
that form of prospectus is first sent or given to any person, except
that an investment company advertisement under Sec.  230.482 shall be
filed under this paragraph (a) (but not as part of the registration
statement) unless filed under paragraph (i) of this section.
* * * * *
    (k) Summary Prospectus filing requirements. This paragraph (k), and
not the other provisions of Sec.  230.497, shall govern the filing of
summary prospectuses under Sec.  230.498. Each definitive form of a
summary prospectus

under Sec.  230.498 shall be filed with the Commission no later than
the date that it is first used.

0
6. Revise Sec.  230.498 to read as follows:

Sec.  230.498  Summary Prospectuses for open-end management investment
companies.

    (a) Definitions. For purposes of this section:
    (1) Class means a class of shares issued by a Fund that has more
than one class that represent interests in the same portfolio of
securities under Sec.  270.18f-3 of this chapter or under an order
exempting the Fund from sections 18(f), 18(g), and 18(i) of the
Investment Company Act (15 U.S.C. 80a-18(f), 80a-18(g), and 80a-18(i)).
    (2) Exchange-Traded Fund means a Fund or a Class, the shares of
which are traded on a national securities exchange, and that has formed
and operates pursuant to an exemptive order granted by the Commission
or in reliance on an exemptive rule adopted by the Commission.
    (3) Fund means an open-end management investment company, or any
Series of such a company, that has, or is included in, an effective
registration statement on Form N-1A (Sec. Sec.  239.15A and 274.11A of
this chapter) and that has a current prospectus that satisfies the
requirements of section 10(a) of the Act (15 U.S.C. 77j(a)).
    (4) Series means shares offered by a Fund that represent undivided
interests in a portfolio of investments and that are preferred over all
other series of shares for assets specifically allocated to that series
in accordance with Sec.  270.18f-2(a) of this chapter.
    (5) Statement of Additional Information means the statement of
additional information required by Part B of Form N-1A.
    (6) Statutory Prospectus means a prospectus that satisfies the
requirements of section 10(a) of the Act.
    (7) Summary Prospectus means the summary prospectus described in
paragraph (b) of this section.
    (b) General requirements for Summary Prospectus. This paragraph
describes the requirements for a Fund's Summary Prospectus. A Summary
Prospectus that complies with this paragraph (b) will be deemed to be a
prospectus that is authorized under section 10(b) of the Act (15 U.S.C.
77j(b)) and section 24(g) of the Investment Company Act (15 U.S.C. 80a-
24(g)) for the purposes of section 5(b)(1) of the Act (15 U.S.C.
77e(b)(1)).
    (1) Cover page or beginning of Summary Prospectus. Include on the
cover page of the Summary Prospectus or at the beginning of the Summary
Prospectus:
    (i) The Fund's name and the Class or Classes, if any, to which the
Summary Prospectus relates.
    (ii) The exchange ticker symbol of the Fund's shares or, if the
Summary Prospectus relates to one or more Classes of the Fund's shares,
adjacent to each such Class, the exchange ticker symbol of such Class
of the Fund's shares. If the Fund is an Exchange-Traded Fund, also
identify the principal U.S. market or markets on which the Fund shares
are traded.
    (iii) A statement identifying the document as a ``Summary
Prospectus.''
    (iv) The approximate date of the Summary Prospectus's first use.
    (v) The following legend:
    Before you invest, you may want to review the Fund's prospectus,
which contains more information about the Fund and its risks. You can
find the Fund's prospectus and other information about the Fund online
at [--------]. You can also get this information at no cost by calling
[--------] or by sending an e-mail request to [--------].
    (A) The legend must provide an Internet address, other than the
address of the Commission's electronic filing system; toll free (or
collect) telephone number; and e-mail address that investors can use to
obtain the Statutory Prospectus and other information. The Internet Web
site address must be specific enough to lead investors directly to the
Statutory Prospectus and other materials that are required to be
accessible under paragraph (e)(1) of this section, rather than to the
home page or other section of the Web site on which the materials are
posted. The Web site could be a central site with prominent links to
each document. The legend may indicate, if applicable, that the
Statutory Prospectus and other information are available from a
financial intermediary (such as a broker-dealer or bank) through which
shares of the Fund may be purchased or sold.
    (B) If a Fund incorporates any information by reference into the
Summary Prospectus, the legend must identify the type of document
(e.g., Statutory Prospectus) from which the information is incorporated
and the date of the document. If a Fund incorporates by reference a
part of a document, the legend must clearly identify the part by page,
paragraph, caption, or otherwise. If information is incorporated from a
source other than the Statutory Prospectus, the legend must explain
that the incorporated information may be obtained, free of charge, in
the same manner as the Statutory Prospectus. A Fund may modify the
legend to include a statement to the effect that the Summary Prospectus
is intended for use in connection with a defined contribution plan that
meets the requirements for qualification under section 401(k) of the
Internal Revenue Code (26 U.S.C. 401(k)), a tax-deferred arrangement
under section 403(b) or 457 of the Internal Revenue Code (26 U.S.C.
403(b) or 457), or a variable contract as defined in section 817(d) of
the Internal Revenue Code (26 U.S.C. 817(d)), as applicable, and is not
intended for use by other investors.
    (2) Contents of the Summary Prospectus. Except as otherwise
provided in this paragraph (b), provide the information required or
permitted by Items 2 through 8 of Form N-1A, and only that information,
in the order required by the form. A Summary Prospectus may omit the
explanation and information required by Instruction 2(c) to Item
4(b)(2) of Form N-1A.
    (3) Incorporation by reference.
    (i) Except as provided by paragraph (b)(3)(ii) of this section,
information may not be incorporated by reference into a Summary
Prospectus. Information that is incorporated by reference into a
Summary Prospectus in accordance with paragraph (b)(3)(ii) of this
section need not be sent or given with the Summary Prospectus.
    (ii) A Fund may incorporate by reference into a Summary Prospectus
any or all of the information contained in the Fund's Statutory
Prospectus and Statement of Additional Information, and any information
from the Fund's reports to shareholders under Sec.  270.30e-1 that the
Fund has incorporated by reference into the Fund's Statutory
Prospectus, provided that:
    (A) The conditions of paragraphs (b)(1)(v)(B) and (e) of this
section are met;
    (B) A Fund may not incorporate by reference into a Summary
Prospectus information that paragraphs (b)(1) and (2) of this section
require to be included in the Summary Prospectus; and
    (C) Information that is permitted to be incorporated by reference
into the Summary Prospectus may be incorporated by reference into the
Summary Prospectus only by reference to the specific document that
contains the information, not by reference to another document that
incorporates such information by reference.
    (iii) For purposes of Sec.  230.159, information is conveyed to a
person not later than the time that a Summary Prospectus is received by
the person if the information is incorporated by reference into the
Summary Prospectus

in accordance with paragraph (b)(3)(ii) of this section.
    (4) Multiple Funds and Classes. A Summary Prospectus may describe
only one Fund, but may describe more than one Class of a Fund.
    (c) Transfer of the security. Any obligation under section 5(b)(2)
of the Act (15 U.S.C. 77e(b)(2)) to have a Statutory Prospectus precede
or accompany the carrying or delivery of a Fund security in an offering
registered on Form N-1A is satisfied if:
    (1) A Summary Prospectus is sent or given no later than the time of
the carrying or delivery of the Fund security;
    (2) The Summary Prospectus is not bound together with any
materials, except that a Summary Prospectus for a Fund that is
available as an investment option in a variable annuity or variable
life insurance contract may be bound together with the Statutory
Prospectus for the contract and Summary Prospectuses and Statutory
Prospectuses for other investment options available in the contract,
provided that:
    (i) All of the Funds to which the Summary Prospectuses and
Statutory Prospectuses that are bound together relate are available to
the person to whom such documents are sent or given; and
    (ii) A table of contents identifying each Summary Prospectus and
Statutory Prospectus that is bound together, and the page number on
which it is found, is included at the beginning or immediately
following a cover page of the bound materials;
    (3) The Summary Prospectus that is sent or given satisfies the
requirements of paragraph (b) of this section at the time of the
carrying or delivery of the Fund security; and
    (4) The conditions set forth in paragraph (e) of this section are
satisfied.
    (d) Sending communications. A communication relating to an offering
registered on Form N-1A sent or given after the effective date of a
Fund's registration statement (other than a prospectus permitted or
required under section 10 of the Act) shall not be deemed a prospectus
under section 2(a)(10) of the Act (15 U.S.C. 77b(a)(10)) if:
    (1) It is proved that prior to or at the same time with such
communication a Summary Prospectus was sent or given to the person to
whom the communication was made;
    (2) The Summary Prospectus is not bound together with any
materials, except as permitted by paragraph (c)(2) of this section;
    (3) The Summary Prospectus that was sent or given satisfies the
requirements of paragraph (b) of this section at the time of such
communication; and
    (4) The conditions set forth in paragraph (e) of this section are
satisfied.
    (e) Availability of Fund's Statutory Prospectus and certain other
Fund documents.
    (1) The Fund's current Summary Prospectus, Statutory Prospectus,
Statement of Additional Information, and most recent annual and semi-
annual reports to shareholders under Sec.  270.30e-1 are publicly
accessible, free of charge, at the Web site address specified on the
cover page or at the beginning of the Summary Prospectus on or before
the time that the Summary Prospectus is sent or given and current
versions of those documents remain on the Web site through the date
that is at least 90 days after:
    (i) In the case of reliance on paragraph (c) of this section, the
date that the Fund security is carried or delivered; or
    (ii) In the case of reliance on paragraph (d) of this section, the
date that the communication is sent or given.
    (2) The materials that are accessible in accordance with paragraph
(e)(1) of this section must be presented on the Web site in a format,
or formats, that:
    (i) Are human-readable and capable of being printed on paper in
human-readable format;
    (ii) Permit persons accessing the Statutory Prospectus or Statement
of Additional Information to move directly back and forth between each
section heading in a table of contents of such document and the section
of the document referenced in that section heading; provided that, in
the case of the Statutory Prospectus, the table of contents is either
required by Sec.  230.481(c) or contains the same section headings as
the table of contents required by Sec.  230.481(c); and
    (iii) Permit persons accessing the Summary Prospectus to move
directly back and forth between:
    (A) Each section of the Summary Prospectus and any section of the
Statutory Prospectus and Statement of Additional Information that
provides additional detail concerning that section of the Summary
Prospectus; or
    (B) Links located at both the beginning and end of the Summary
Prospectus, or that remain continuously visible to persons accessing
the Summary Prospectus, and tables of contents of both the Statutory
Prospectus and the Statement of Additional Information that meet the
requirements of paragraph (e)(2)(ii) of this section.
    (3) Persons accessing the materials specified in paragraph (e)(1)
of this section must be able to permanently retain, free of charge, an
electronic version of such materials in a format, or formats, that meet
each of the requirements of paragraphs (e)(2)(i) and (ii) of this
section.
    (4) The conditions set forth in paragraphs (e)(1), (e)(2), and
(e)(3) of this section shall be deemed to be met, notwithstanding the
fact that the materials specified in paragraph (e)(1) of this section
are not available for a time in the manner required by paragraphs
(e)(1), (e)(2), and (e)(3) of this section, provided that:
    (i) The Fund has reasonable procedures in place to ensure that the
specified materials are available in the manner required by paragraphs
(e)(1), (e)(2), and (e)(3) of this section; and
    (ii) The Fund takes prompt action to ensure that the specified
documents become available in the manner required by paragraphs (e)(1),
(e)(2), and (e)(3) of this section, as soon as practicable following
the earlier of the time at which it knows or reasonably should have
known that the documents are not available in the manner required by
paragraphs (e)(1), (e)(2), and (e)(3) of this section.
    (f) Other requirements.
    (1) Delivery upon request. If paragraph (c) or (d) of this section
is relied on with respect to a Fund, the Fund (or a financial
intermediary through which shares of the Fund may be purchased or sold)
must send, at no cost to the requestor and by U.S. first class mail or
other reasonably prompt means, a paper copy of the Fund's Statutory
Prospectus, Statement of Additional Information, and most recent annual
and semi-annual reports to shareholders to any person requesting such a
copy within three business days after receiving a request for a paper
copy. If paragraph (c) or (d) of this section is relied on with respect
to a Fund, the Fund (or a financial intermediary through which shares
of the Fund may be purchased or sold) must send, at no cost to the
requestor and by e-mail, an electronic copy of the Fund's Statutory
Prospectus, Statement of Additional Information, and most recent annual
and semi-annual reports to shareholders to any person requesting such a
copy within three business days after receiving a request for an
electronic copy. The requirement to send an electronic copy of a
document by e-mail may be satisfied by sending a direct link to the
document on the Internet; provided that a current version of the
document is directly accessible through the link from the time that the
e-mail is sent through

the date that is six months after the date that the e-mail is sent and
the e-mail explains both how long the link will remain useable and
that, if the recipient desires to retain a copy of the document, he or
she should access and save the document.
    (2) Greater prominence. If paragraph (c) or (d) of this section is
relied on with respect to a Fund, the Fund's Summary Prospectus shall
be given greater prominence than any materials, with the exception of
other Summary Prospectuses or Statutory Prospectuses, that accompany
the Fund's Summary Prospectus.
    (3) Convenient for reading and printing. If paragraph (c) or (d) of
this section is relied on with respect to a Fund:
    (i) The materials that are accessible in accordance with paragraph
(e)(1) of this section must be presented on the Web site in a format,
or formats, that are convenient for both reading online and printing on
paper; and
    (ii) Persons accessing the materials that are accessible in
accordance with paragraph (e)(1) of this section must be able to
permanently retain, free of charge, an electronic version of such
materials in a format, or formats, that are convenient for both reading
online and printing on paper.
    (4) Information in Summary Prospectus must be the same as
information in Statutory Prospectus. If paragraph (c) or (d) of this
section is relied on with respect to a Fund, the information provided
in response to Items 2 through 8 of Form N-1A in the Fund's Summary
Prospectus must be the same as the information provided in response to
Items 2 through 8 of Form N-1A in the Fund's Statutory Prospectus
except as expressly permitted by paragraph (b)(2) of this section.
    (5) Compliance with paragraph (f) not a condition to reliance on
paragraphs (c) and (d). Compliance with this paragraph (f) is not a
condition to the ability to rely on paragraph (c) or (d) of this
section with respect to a Fund, and failure to comply with paragraph
(f) does not negate the ability to rely on paragraph (c) or (d).

PART 232--REGULATION S-T--GENERAL RULES AND REGULATIONS FOR
ELECTRONIC FILINGS

0
7. The authority citation for part 232 continues to read in part as
follows:

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s(a), 77z-3,
77sss(a), 78c(b), 78l, 78m, 78n, 78o(d), 78w(a), 78ll, 80a-6(c),
80a-8, 80a-29, 80a-30, 80a-37, and 7201 et seq.; and 18 U.S.C. 1350.
* * * * *

0
8. Section 232.304 is amended by removing the references ``Item 22 of
Form N-1A'' in paragraphs (d) and (e) and adding in their place ``Item
27 of Form N-1A''.
0
9. Section 232.401 is amended by:

0
a. Removing the reference ``Item 8(a) of Form N-1A'' in paragraph
(b)(1)(iii) and adding in its place ``Item 13(a) of Form N-1A''; and
0
b. Removing the reference ``Items 2 and 3 of Form N-1A'' in paragraph
(b)(1)(iv) and adding in its place ``Items 2, 3, and 4 of Form N-1A''.

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

0
10. The general authority citation for part 239 is revised to read as
follows:

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77z-2, 77z-3,
77sss, 78c, 78l, 78m, 78n, 78o(d), 78u-5, 78w(a), 78ll, 78mm, 80a-
2(a), 80a-3, 80a-8, 80a-9, 80a-10, 80a-13, 80a-24, 80a-26, 80a-29,
80a-30, and 80a-37, unless otherwise noted.

0
11. Form N-14 (referenced in Sec.  239.23) is amended by:
0
a. Revising paragraph (a) in Item 5;
0
b. Revising the reference ``Items 10 through 22 of Form N-1A'' in Item
12(a) to read ``Items 14 through 27 of Form N-1A''; and
0
c. Revising the reference ``Items 10 through 13 and 15 through 22 of
Form N-1A'' in Item 13(a) to read ``Items 14 through 17 and 19 through
27 of Form N-1A''.
    The revision to paragraph (a) of Item 5 reads as follows:

    Note: The text of Form N-14 does not, and these amendments will
not, appear in the Code of Federal Regulations.

Form N-14

* * * * *

Item 5. Information About the Registrant

* * * * *
    (a) If the registrant is an open-end management investment company,
furnish the information required by Items 2 through 8, 9(a), 9(b), and
10 through 13 of Form N-1A under the 1940 Act;
* * * * *

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

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

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 78c(b), 78l, 78m,