Delivery of Disclosure Documents to Households

SUMMARY: The Commission is adopting a new rule under the Securities Act

of 1933 to permit issuers and broker-dealers to satisfy the Act's

prospectus delivery requirements, with respect to two or more investors

sharing the same address, by sending a single prospectus, subject to

certain conditions. We are adopting similar amendments to the rules

under the Securities Exchange Act of 1934 and the Investment Company

Act of 1940 that require the delivery of shareholder reports. The rules

will provide greater convenience for investors and cost savings for

issuers by reducing the number of duplicate documents that investors

receive.

EFFECTIVE DATE: The new rule and rule amendments will be effective

December 20, 1999.

FOR FURTHER INFORMATION CONTACT: Marilyn Mann, Senior Counsel, at (202)

942-0690, Office of Regulatory Policy, Division of Investment

Management, or Elizabeth M. Murphy, Special Counsel, at (202) 942-2900,

Office of Chief Counsel, Division of Corporation Finance, Securities

and Exchange Commission, 450 5th Street, NW, Washington, DC 20549.

SUPPLEMENTARY INFORMATION: The Commission today is adopting rule 154

[17 CFR 230.154] under the Securities Act of 1933 [15 U.S.C. 77a] (the

``Securities Act'') \1\ and amendments to rules 14a-3, 14c-3, and 14c-7

[17 CFR 240.14a-3, 240.14c-3, 240.14c-7] under the Securities Exchange

Act of 1934 [15 U.S.C. 78a] (the ``Exchange Act''), and rules 30d-1 and

30d-2 [17 CFR 270.30d-1, 270.30d-2] under the Investment Company Act of

1940 [15 U.S.C. 80a] (the ``Investment Company Act'').

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\1\ Unless otherwise noted, all references to ``rule 154'' are

to 17 CFR 230.154 as adopted in this release.

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I. Background

The federal securities laws generally require the delivery of

prospectuses and shareholder reports to investors.\2\ As a result of

increased ownership of securities by individuals through different

types of accounts, such as brokerage accounts, individual retirement

accounts and custodial accounts for minors, duplicate copies of these

documents often are mailed to a single household.\3\

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\2\ The Securities Act requires the delivery of prospectuses to

investors who buy securities from an issuer or from underwriters or

dealers who participate in a registered distribution of securities.

See Securities Act sections 2(a)(10), 4(1), 4(3), 5(b) [15 U.S.C.

77b(a)(10), 77d(1), 77d(3), 77e(b)]; see also rule 174 under the

Securities Act [17 CFR 230.174] (regarding the prospectus delivery

obligation of dealers); rule 15c2-8 under the Exchange Act [17 CFR

240.15c2-8] (prospectus delivery obligations of brokers and

dealers). The Investment Company Act requires most registered

investment companies (``funds'') to send annual and semiannual

reports to their investors. See section 30(e) [15 U.S.C. 80a-29(e)];

rules 30d-1, 30d-2 under the Investment Company Act [17 CFR 270.30d-

1, 270.30d-2]. Rules under the Exchange Act require other types of

issuers (such as operating companies subject to Exchange Act

reporting requirements) to send annual reports to their investors.

See rules 14a-3, 14c-3 [17 CFR 240.14a-3, 240.14c-3].

\3\ See Delivery of Disclosure Documents to Households,

Securities Act Release No. 7475 (Nov. 13, 1997) [62 FR 61933 (Nov.

20, 1997)] (``Proposing Release''), at nn.1-6 and accompanying text.

The problem of delivery of duplicate documents is particularly

significant in the case of open-end management investment companies

(``mutual funds''), which are required to send their investors

annual and semiannual reports, and which generally send investors

updated prospectuses each year. See id. at nn.1-2 and accompanying

text.

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To reduce the number of duplicate disclosure documents delivered to

investors, the Commission proposed rules in November 1997 to permit,

under certain conditions, delivery of one prospectus or shareholder

report to investors who share an address (``householding'').\4\ We

received 51 comment letters in response to the proposal.\5\ Commenters

generally supported householding, but many suggested changes that would

affect the scope and conditions of the rules. The Commission is

adopting the proposed amendments, with certain modifications that

reflect many of the issues raised by commenters.

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\4\ See Proposing Release, supra note 3.

\5\ The commenters included 29 individual investors or their

representatives, 15 corporate issuers, 11 financial institutions

(investment advisers, mutual fund complexes, broker-dealers and bank

holding companies), 3 trade associations, 1 consultant, and 1 stock

exchange. Two commenters submitted two letters each, and some

comment letters were signed by more than one person. The comment

letters and a summary of the comments are available for public

inspection and copying in the Commission's Public Reference Room,

450 5th Street, NW, Washington, DC (File No. S7-27-97).

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II. Discussion

A. Delivery of Prospectuses to a Household

Under new rule 154, a prospectus is considered delivered to all

investors at a shared address, for purposes of the federal securities

laws, if the person relying on the rule delivers the prospectus to the

shared address and the investors consent to delivery of a single

prospectus.\6\ The rule applies to prospectuses and to prospectus

supplements.

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\6\ Rule 154(a). Some commenters asked us to clarify that if a

single investor holds the same security in two or more accounts with

the same address, the prospectus delivery requirements of section 5

of the Securities Act are satisfied if one copy of the prospectus is

delivered to the investor, without the need to rely on the rule. We

agree that the delivery of a single prospectus in those

circumstances meets the delivery requirements of the Securities Act.

Delivery of a single shareholder report also would meet the delivery

requirements of the federal securities laws for shareholder reports,

in similar circumstances. In addition, we believe that delivery of a

single prospectus or shareholder report is sufficient if the

investor is acting as custodian for securities in one or more

accounts created under a state Uniform Gifts to Minors Act

(``UGMA'') or Uniform Transfers to Minors Act (``UTMA'') statute.

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1. Scope of the Rule

As adopted, rule 154 permits the householding of all types of

prospectuses except those required to be delivered for business

combinations, exchange offers, or reclassifications of securities.\7\

Although the Commission did not request comment on the householding of

proxy materials, many commenters suggested that we consider rule

amendments to permit the householding of those materials. Today in a

companion release we are proposing amendments to Exchange Act rules to

permit the householding of proxy and information statements.\8\ The

release also proposes to expand the coverage of rule 154 to include

prospectuses for business combinations, exchange offers, or

reclassifications of securities.

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\7\ See rule 154(e).

\8\ See Delivery of Proxy and Information Statements to

Households, Securities Act Release No. 33-7767 (Nov. 4, 1999)

(``Companion Release'').

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2. Addressing to Investors

Proposed rule 154 would have required the prospectus to be

addressed to one person rather than a group of persons (e.g., ``The

Smith Household''). The Commission expressed concern in the Proposing

Release that mail addressed to a group may be less likely to be opened

and read, because it might be viewed as ``junk mail.'' Several

commenters argued that addressing to a group may actually increase the

chance

[[Page 62541]]

that the envelope containing the prospectus would be opened, and would

be consistent with the idea that the prospectus was intended for all

the investors. The Commission agrees that this form of address should

be acceptable. The rule as adopted therefore permits addressing to

investors as a group, and the group may be designated by reference to

any of the investors who is receiving the prospectus (e.g., ``Jane Doe

and Household'' or ``Household of Jane Doe'').\9\ The rule also permits

addressing to individuals rather than a group if each investor is

included in the address (e.g., ``Jane Doe and Bob Jones'').\10\

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\9\ See rule 154(a)(2).

\10\ See id. This requirement is designed to reduce confusion

about whether an individual is receiving a prospectus on behalf of

other investors in the household.

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The proposed rule also would have permitted householding only if

the prospectus was addressed to a natural person. Some commenters

pointed out that this provision would prohibit addressing a prospectus

to a family business that owns securities and operates out of a

household shared by individual investors. Another commenter added that

it may be difficult in many cases to determine whether the investor is

a natural person. We agree, and the rule as adopted does not include

the natural person requirement.

Proposed rule 154 would have permitted delivery of a prospectus to

any address of an investor who shares an address with other investors

consenting to householding, even if the other investors do not share

the address to which the prospectus is delivered. Some commenters

opposed this provision, either because the investors who do not share

the delivery address might not have access to the prospectus, or

because of the extra recordkeeping involved in sending the prospectus

to an unshared address. Upon further consideration, we agree that

delivery to one investor at an address that is not shared creates a

risk that the other investors will not have access to the prospectus,

and the rule as adopted requires that the prospectus be sent to the

investors' shared address.\11\

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\11\ See rule 154(a)(1).

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The proposed rule also would have permitted delivery of a

prospectus to an electronic address, for example, an electronic mail

account. Several commenters noted the difficulty of permitting

electronic delivery of householded documents. One individual investor

emphasized the risks involved in using electronic delivery, especially

the ease with which electronic messages might be deleted by

accident.\12\ Because of these concerns, we believe that investors who

are householded through electronic delivery should specifically consent

to this type of delivery. The rule as adopted permits the householding

of prospectuses that are delivered to investors electronically only if

delivery is made to a shared electronic address and the investors give

written consent to householding.\13\

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\12\ The commenter also stated that there may be difficulties in

forwarding messages from a discontinued e-mail account with an

Internet service provider.

\13\ See rule 154(b)(4) (limiting householding without written

consent to prospectuses delivered to a post office box or a

residential street address). Consent issues are discussed below.

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3. Investor Consent

a. Written Consent. Rule 154 permits delivery of one prospectus on

behalf of two or more investors at a shared address who have given

written consent to householding.\14\ The investors need not be related,

and the shared address can be a residential, commercial, or electronic

address.\15\

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\14\ Rule 154(a). A signature on a new account application form

would not satisfy the written consent requirement if the account

form merely refers to or incorporates by reference another document,

such as the prospectus, and does not describe the householding of

prospectuses. An investor can be given the option of consenting to

householding for prospectuses relating only to a particular

security, or consenting to delivery of any prospectus a person is

required to deliver to the investor. The rule, however, does not

require that investors be given this option of limiting their

consent to a particular security.

\15\ The Proposing Release noted the general requirements for

electronic delivery of documents to investors. The Commission has

issued two interpretive releases expressing its views on the

electronic delivery of documents, including prospectuses and

investment company semiannual reports. The releases state that

persons using electronic delivery of information should obtain

informed consent from the intended recipient or otherwise have

reason to believe that any electronic means so selected will result

in satisfaction of the delivery requirements. See Proposing Release,

supra note 3, at n.9; Use of Electronic Media for Delivery Purposes,

Securities Act Release No. 7233 (Oct. 6, 1995) [61 FR 53458 (Oct.

13, 1995)]; Use of Electronic Media by Broker-Dealers, Transfer

Agents, and Investment Advisers for Delivery of Information;

Additional Examples Under the Securities Act of 1933, Securities

Exchange Act of 1934, and Investment Company Act of 1940, Securities

Act Release No. 7288 (May 9, 1996) [61 FR 24644 (May 15, 1996)].

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b. Implied Consent. Rule 154 permits delivery of one prospectus on

behalf of two or more investors at a shared address without written

consent, if four conditions are met.\16\ First, the investors must have

the same last name or the person relying on the rule must reasonably

believe that they are members of the same family.\17\ Second, at least

60 days before householding begins each investor must have received

written notice \18\ with an opportunity to respond and opt out of

householding.\19\ The opportunity to respond must be provided by a

toll-free telephone number disclosed in the notice or a reply form that

accompanies the notice.\20\ Third, the investors must not opt out of

householding during the 60-day period. Fourth, the person relying on

the rule must deliver the prospectus to a residential street address or

a post office box.\21\

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\16\ Rule 154(b)(1)--(4).

\17\ Some commenters expressed concern about their ability to

discern whether certain investors at the same address are members of

the same family. We believe that persons relying on the rule may, in

many cases, be able to base their reasonable belief on information

already provided by investors (e.g., on an account application) or

on any information they may have obtained from other sources. For

example, it would be reasonable to infer that two persons residing

at the same address are members of the same family if they have

opened a joint account or have opened an account under an UGMA or

UTMA statute.

\18\ The notice must be a separate written statement. See rule

154(b)(2). The notice, as well as the envelope containing the

notice, also must contain a prominent statement such as ``Important

Notice Regarding Delivery of Shareholder Documents.'' See rule

154(b)(2)(vi). As an alternative to this requirement, if the notice

is sent in a separate mailing, the prominent statement may appear

either on the envelope or on the notice itself. Id.

\19\ The notice also must state whether the consent will be for

a limited or unlimited period of time, explain how the investor can

revoke consent, and explain that individual delivery will resume no

later than 30 days after the investor revokes consent. See rule

154(b)(2)(iii)--(v). In order to make the notice understandable to

investors, it should be written in plain English. See rule 154(b)(2)

note. Securities Act rule 421(d)(2) [17 CFR 230.421(d)(2)] lists the

following plain English principles: (i) Short sentences; (ii)

definite, concrete, everyday words; (iii) active voice; (iv) tabular

presentation or bullet lists for complex material, whenever

possible; (v) no legal jargon or highly technical terms; and (vi) no

multiple negatives.

\20\ The reply form must be pre-addressed, and returnable by

business reply mail or by another method in which the person relying

on the rule pays the postage. See rule 154(b)(2)(ii). The notice

also may list additional methods of opting out of householding, such

as sending the reply form to a facsimile telephone number or

responding by e-mail.

\21\ Rule 154 clarifies that unless the person relying on the

rule has information that indicates the address is a business

address, that person can assume that the address is a residence. See

rule 154(b)(4). The rule also provides that if the sender has reason

to believe that an address is that of a multi-unit building, the

address must include the unit number. See rule 154(d). This

requirement is designed to prevent the assumption that investors who

live in different apartments in an apartment building are members of

the same household.

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The Commission proposed to limit householding without written

consent to situations in which investors had opened their accounts

before the effective date of the new rule. We understood that persons

relying on the rule would find it difficult to obtain consent from

existing investors, and

[[Page 62542]]

were concerned that the failure of many of those investors to respond

to requests for consent would preclude the benefits of householding

from being realized. In the case of new investors, however, we believed

that consent could be obtained when the investor opened his or her

account.\22\

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\22\ See Proposing Release, supra note 3, at n.20 and

accompanying text.

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Fourteen commenters, representing primarily advisers to registered

investment companies (``funds'') and their trade associations, urged

the Commission to eliminate the written consent requirement.\23\ Some

of these commenters asserted that numerous administrative and

compliance difficulties would be created by distinguishing between

investors who must give written consent and those who need not.\24\ We

also received comments from 25 individual investors who urged the

Commission to adopt the rule as proposed but did not specifically

address the consent requirement.\25\

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\23\ Four commenters recommended that the rule permit

householding without written consent and without implied consent

under the proposed conditions. Instead, they favored permitting

householding if the company were to disclose its householding

policies in its prospectus and provide investors a means to opt out

of householding. One of these commenters suggested that investors be

informed about householding through an article in an investor

newsletter. We do not believe that investor consent can reasonably

be inferred from silence after disclosure in a prospectus or

newsletter. The suggested approach also would not necessarily work

for issuers that do not periodically deliver prospectuses or

newsletters.

\24\ Two of these commenters stated that distinguishing between

accounts that could be householded with notice, and accounts that

could be householded only with written consent, would be costly and

burdensome to administer, and potentially confusing for investors.

\25\ Another individual investor supported requiring written

consent from all investors.

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In consideration of the potential benefits of householding to

investors, the Commission has decided not to require written consent as

a prerequisite to householding with respect to all new investors. The

rule permits householding with implied consent under limited conditions

(discussed above) in which investors could be presumed to need only one

copy of the document delivered to the household. These investors should

have adequate advance notice of householding and will be able to

request individual delivery of prospectuses at any time.\26\ The rule

as adopted also requires that, at least once a year, persons relying on

the rule for the householding of open-end management investment company

prospectuses explain to investors who have provided written or implied

consent how they can revoke their consent.\27\

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\26\ We are adopting as proposed the requirement that, if an

investor requests resumption of individual delivery, the person

relying on the rule must resume individual delivery after 30 days.

See rule 154(c).

\27\ Id. Unlike other issuers, open-end management investment

companies (i.e., mutual funds) typically send investors updated

prospectuses annually. See supra note 3. Persons relying on the rule

can make the explanation required by the rule through any means

reasonably designed to reach these investors, such as in a

prospectus, shareholder report, or investor newsletter. See rule

154(c).

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B. Shareholder Reports

The Commission is adopting amendments to rules 30d-1 and 30d-2

under the Investment Company Act and rules 14a-3, 14c-3 and 14c-7 under

the Exchange Act, to permit householding of annual and semiannual

reports under substantially the same conditions as those in rule 154

with respect to prospectuses.\28\ Commenters supported requiring the

same conditions for householding of these two types of documents.\29\

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\28\ One difference between the conditions for householding

prospectuses and semiannual reports and the conditions for

householding annual reports, is that the implied consent notice

concerning annual reports must be delivered separately from other

communications. See 17 CFR 240.14a-3(e)(1)(ii)(B)(1). This condition

for the householding of annual reports corresponds to the proposed

conditions for the householding of proxy and information statements,

with which annual reports are typically delivered. See Companion

Release, supra note 8, at note 28.

\29\ Some mutual funds already household shareholder reports in

reliance on no-action letters issued by the Commission staff. See

Oppenheimer Funds, SEC No-Action Letter (July 20, 1994); Scudder

Group of Funds, SEC No-Action Letter (June 19, 1990); Allstate

Enterprises Stock Fund, Inc., SEC No-Action Letter (July 22, 1973).

These funds may continue to household shareholder reports of

investors whose reports are already being householded, without

sending notices or obtaining written consent under rules 30d-1 and

30d-2. If the investors revoke consent to householding, however, the

funds should comply with the revocation provisions of the rules. In

addition, if the funds household prospectuses, the funds would need

to comply fully with rule 154.

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III. Cost-Benefit Analysis

The Commission is sensitive to the costs and benefits imposed by

its rules. The rules adopted today permit issuers and broker-dealers to

send fewer copies of disclosure documents than they currently must

send, and therefore should result in savings in printing, postage, and

other delivery costs for issuers and broker-dealers. Investors will

benefit from the decrease in delivery costs paid by issuers and from no

longer being burdened with duplicate documents. The rules require

issuers and broker-dealers who rely on the rules to comply with certain

procedures, including obtaining either written consents from investors

or delivering notices 60 days in advance of householding. Because

exemptions provided by the rules are voluntary, the Commission expects

that issuers and broker-dealers generally will rely on the rules only

if the benefits of householding outweigh the costs.

In the Proposing Release, the Commission requested comment on the

costs and benefits of the rules. Commenters generally supported the

goals of the proposal but advocated certain changes that they believed

would decrease its costs and increase its benefits. In particular, most

commenters who addressed the issue stated that the rule should permit

householding based on implied consent for new investors, and that

obtaining written consent would be too costly in many cases. As

adopted, the rules permit householding based on either implied consent

or written consent for new as well as existing investors.\30\ This

regulatory flexibility should enable issuers and broker-dealers to

minimize compliance costs associated with the rules.

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\30\ The ability to household documents based on implied consent

should help maximize the number of investors householded, because it

is likely that few investors who receive notices will object to

being householded. One large fund complex stated in its comment

letter that when it notified approximately 3 million customers of

its plans to household shareholder reports, only 1,703 (.057%) asked

to continue receiving separate mailings for each account.

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Several commenters estimated the percentage of prospectuses and

annual reports mailed to their investors that could be eliminated

through householding. One large fund complex stated that householding

would yield savings in mailing costs for its funds in the range of 5 to

21 percent, depending on the fund. Another fund and brokerage firm

estimated that householding would reduce prospectus and shareholder

report mailings to investors in its non-proprietary open-end funds

(``mutual funds'') by approximately 9 percent, a reduction of over 2

million mail pieces and a savings of approximately $1 million, assuming

production, printing and mailing costs of $.50 per piece. This firm

also estimated that householding would reduce prospectus mailings to

its proprietary mutual fund customers by almost half (over 1.5 million

mail pieces out of 3.2 million), for a savings of approximately

$750,000. A corporate issuer stated that approximately 10 percent of

its shareholders of record have the same mailing address. These

estimates, although they vary from one issuer to another, show that the

cost savings produced by householding would be considerable. The

commenters' estimates also appear to be consistent with the estimates

made in the Proposing Release.

[[Page 62543]]

Based on information provided by two mutual fund complexes, the

Commission estimates that a prospectus costs approximately $.45 to

print and deliver, and a shareholder report costs approximately $.52 to

print and deliver.\31\ The Commission also estimates that the average

decline in the number of prospectuses and shareholder reports delivered

would be between 10 and 30 percent. As of 1997, there were

approximately 170 million shareholder accounts invested in mutual

funds.\32\ Assuming that 80 percent of mutual fund accounts receive an

updated prospectus each year, resulting in the 170 million shareholder

accounts receiving a total of approximately 136 million prospectuses

each year, the approximate potential benefit in reduced delivery of

mutual fund prospectuses as a result of rule 154 would be between $6.1

and $18.4 million per year. Each shareholder receives two reports per

year, and the approximate potential benefit from adoption of the

amendments to rules 30d-1 and 30d-2 would be between $17.7 and $53.0

million per year. We note, however, that the savings from the adoption

of the amendments to rules 30d-1 and 30d-2 will be reduced somewhat

because many funds already household reports based on Commission staff

no-action positions.\33\ Therefore, it is not possible to precisely

estimate the number of accounts for which householding of shareholder

reports will be initiated based on the amendments to rules 30d-1 and

30d-2.

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\31\ See Proposing Release, supra note 3, at n.29 and

accompanying text.

\32\ See Investment Company Institute, 1998 Mutual Fund Fact

Book 116.

\33\ See Proposing Release, supra note 3, at n.5.

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With respect to the delivery of prospectuses of issuers other than

mutual funds, the benefits of rule 154 would be less than the benefits

discussed above, because these companies do not send prospectuses to

their shareholders on an annual basis. It is likely, however, that some

broker-dealers will rely on rule 154 to deliver prospectuses of issuers

other than mutual funds in cases in which the broker-dealers have

obtained either written or implied consent from their customers to

household documents.

With respect to the delivery of annual reports by issuers other

than mutual funds, these companies probably would not realize

significant savings as a result of the amendments to rules 14a-3 and

14c-3 because rules 14a-3 and 14c-7 already include provisions

permitting householding of the annual report, although those rules did

not permit implied consent to householding. In addition, corporate

commenters on the Proposing Release stated that because they generally

mail the annual report together with the proxy or information

statement, their ability to household the annual report is limited by

their inability under current rules to household the proxy statement.

As discussed above, the Commission is proposing to permit companies to

household proxy and information statements in a companion release.\34\

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\34\ See supra note 8.

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Persons who rely on the rules would incur costs in obtaining

consents from and sending notices to investors. The principal costs

associated with sending the notice should be the printing costs and

postage costs. These printing and postage costs should be less than the

cost of sending reports to investors, and the costs should be non-

recurring because the notice generally will only have to be sent once

to each investor in a household. Costs of the annual explanation

concerning the right to revoke consent should be low, because the

explanation can be included with other matter that is routinely sent

out, such as a client newsletter.

IV. Effects on Competition, Efficiency and Capital Formation

Section 23(a) of the Exchange Act requires the Commission, in

adopting rules under the Exchange Act, to consider the competitive

effects of such rules, if any, and to refrain from adopting a rule that

would impose a burden on competition not necessary or appropriate in

furthering the purposes of the Exchange Act.\35\ In addition, section

3(f) of the Exchange Act and section 2(c) of the Investment Company Act

provide that when the Commission is engaged in rulemaking and is

required to consider whether an action is necessary or appropriate in

the public interest, it must consider, in addition to the protection of

investors, whether the action will promote efficiency, competition, and

capital formation.\36\

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\35\ 15 U.S.C. 78w(a).

\36\ 15 U.S.C. 78c(f), 80a-2(c).

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The Commission does not believe the amendments to rules 14a-3, 14c-

3 and 14c-7 will impose any burden on competition. Based on the reasons

stated in the cost-benefit analysis above, as well as the reasons

stated elsewhere in this release, the Commission believes that those

rules, as well as the amendments to rules 30d-1 and 30d-2, will promote

efficiency, competition, and capital formation. The rules will enable

brokers and issuers to decrease printing and mailing costs. These

decreased costs should promote efficiency and capital formation. The

rules may also promote competition in shareholder services.

V. Paperwork Reduction Act

Certain provisions of rule 154 and the rule amendments contain

``collection of information'' requirements within the meaning of the

Paperwork Reduction Act of 1995 (``PRA'').\37\ The Commission submitted

the collection of information requirements contained in the rules to

the Office of Management and Budget for review in accordance with 44

U.S.C. 3507(d) and 5 CFR 1320.11.\38\ An agency may not conduct or

sponsor, and a person is not required to respond to, a collection of

information unless the agency displays a valid OMB control number.\39\

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\37\ 44 U.S.C. 3501-3520.

\38\ The titles for the collections of information are: ``Rule

154 under the Securities Act of 1933, Delivery of prospectuses to

investors at the same address''; ``Regulation 14A, Commission Rules

14a-1 through 14a-14 and Schedule 14A''; ``Regulation 14C,

Commission Rules 14c-1 through 14c-7 and Schedule 14C''; ``Rule 30d-

1 under the Investment Company Act of 1940, Reports to stockholders

of management companies''; and ``Rule 30d-2 under the Investment

Company Act of 1940, Reports to shareholders of unit investment

trusts.'' The OMB control numbers for the rules are as follows: rule

154 (3235-0495, expires 2/28/2001); rule 14a-3, contained in

Regulation 14A (3235-0059, expires 1/31/2002); rules 14c-3 and 14c-

7, contained in Regulation 14C (3235-0057, expires 1/31/2002); rule

30d-1 (3235-0025, expires 2/28/2001); rule 30d-2 (3235-0494, expires

2/28/2001).

\39\ 44 U.S.C. 3506(c)(1)(B)(v).

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The rules permit delivery of a single prospectus or shareholder

report to a household to satisfy the delivery requirements with respect

to two or more investors in the household. A person relying on one of

the rules must obtain either written or implied consent to householding

from each investor. The rules require persons who wish to household

with implied consent to send a notice to each investor stating that the

investors in the household will receive one prospectus or report in the

future unless the investors provide contrary instructions.\40\ The

purpose of this requirement is to give reasonable assurance that all

investors have access to the prospectus or report. Preparing and

sending the initial notice and the annual explanation of the right to

revoke are collections of information. The Commission did not receive

any comments in response to its request for comments on the Paperwork

Reduction Act analysis in the Proposing Release.

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\40\ Under the proposed rules, implied consent could be used

only for investors who had already opened an account as of the

effective date of the rules. The rules as adopted also permit the

use of implied consent for new investors.

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Because notices will need to be sent to an investor before

householding of

[[Page 62544]]

that investor's documents begins, persons that choose to rely on the

rule will probably send the greatest number of notices in the first

year after the rule is adopted. The Commission expects that most

notices will be short, one-page statements. Accordingly, the average

annual number of burden hours spent preparing and arranging delivery of

the notices is expected to be low. The Commission estimates 20 hours

per respondent. In addition, the Commission estimates 1 hour per

respondent for preparing and delivering the annual explanation of the

right to revoke.

Although rule 154 is not limited to investment companies, the

Commission believes that it will be used mainly by mutual funds and by

broker-dealers that deliver mutual fund prospectuses. The Commission is

unable to estimate the number of issuers other than mutual funds that

will rely on the rule.

The Commission estimates that there are approximately 2,900 mutual

funds, approximately 545 of which engage in direct marketing and

therefore deliver their own prospectuses. The Commission estimates that

each direct marketed mutual fund will spend an average of 20 hours per

year complying with the notice requirement of the rule, for a total of

10,900 hours. The Commission estimates that each direct marketed fund

will spend 1 hour complying with the explanation of the right to revoke

requirement of the rule, for a total of 545 hours. The Commission

estimates that as of year-end 1998 there were approximately 300 broker-

dealers that carry customer accounts and, therefore, may be required to

deliver mutual fund prospectuses. The Commission estimates that each

affected broker-dealer will spend, on average, approximately 20 hours

complying with the notice requirement of the rule, for a total of 6,000

hours. Each broker-dealer would also spend 1 hour complying with the

annual explanation of a right to revoke requirement, for a total of 300

hours. Therefore, the total number of respondents for rule 154 is 845

(545 mutual funds plus 300 broker-dealers), and the estimated total

hour burden is 17,745 hours (11,445 hours for mutual funds plus 6,300

hours for broker-dealers).

With respect to the amendments to rules 30d-1 and 30d-2 under the

Investment Company Act, rule 30d-1 requires management investment

companies to send annual and semiannual reports to their shareholders.

Rule 30d-2 requires unit investment trusts (``UITs'') that invest

substantially all of their assets in shares of a management investment

company to send their unitholders annual and semiannual reports

containing financial information on the underlying company. The

amendments to rules 30d-1 and 30d-2 will permit management investment

companies and UITs to household these shareholder reports under

substantially the same conditions as those in rule 154.

Every registered management investment company is subject to the

reporting requirements of rule 30d-1. We estimate that there are

approximately 3,515 registered management investment companies. The

Commission currently estimates that the hour burden associated with

rule 30d-1 is approximately 181 hours per company. As discussed above,

the Commission estimates that the burden associated with the notice

requirement of the amendments to rules 30d-1 and 30d-2 is approximately

20 hours per company. The Commission estimates that the burden

associated with the explanation of the right to revoke is 1 hour per

company. Therefore, the Commission estimates that the total burden

associated with rule 30d-1 is 202 hours per company, or a total of

710,030 hours. In addition, the Commission estimates that the cost of

contracting for outside services associated with the rule is $63,150

per respondent (421 hours times $150 per hour for independent auditor

services), for a total cost of $221,972,250 ($63,150 times 3,515

respondents).

Rule 30d-2 applies to approximately 637 UITs. The Commission

estimates that the annual burden associated with rule 30d-2 is 121

hours per respondent, including the estimated 20 hours associated with

the notice requirement and the 1 hour associated with the explanation

of a right to revoke requirement. The total hourly burden is therefore

approximately 77,077 hours. The Commission estimates that the annual

financial cost of complying with rule 30d-2 (in addition to the hourly

cost) is $12,000 per respondent (80 hours times $150 per hour for

independent auditor services), or a total of $7,644,000.

With respect to the amendments to rules 14a-3, 14c-3 and 14c-7,

those rules are included in Regulations 14A and 14C, which contain

information collection requirements related to proxy and information

statements. Companies that have a class of securities registered under

section 12 of the Exchange Act are subject to these requirements. The

Commission estimates that the time required to prepare and arrange

delivery of the notice will be approximately 20 hours per respondent

per year. The Commission estimates that 9,892 respondents are subject

to Regulation 14A and that approximately 989 of these will deliver the

notice. The Commission estimates that the burden associated with

Regulation 14A as revised per registrant delivering the notice will be

approximately 74 hours, and 54 hours per registrant not delivering the

notice, for a total annual burden of 553,948 hours. An estimated 253

respondents are subject to Regulation 14C and it is estimated that 25

of these will deliver the notice. The estimated burden associated with

Regulation 14C as revised per registrant delivering the notice is 74

hours, and 54 hours for a registrant not delivering the notice, for a

total annual burden of 14,162 hours.

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

Hours Cost

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

Rule 154...................................... 17,745 NA

Rule 30d-1.................................... 710,030 $221,972,250

Rule 30d-2.................................... 77,077 $7,644,000

Rule 14A...................................... 553,948 NA

Rule 14C...................................... 14,162 NA

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

The information collection requirements imposed by the new rule and

rule amendments are required for those issuers or broker-dealers that

decide to rely on the rule to obtain the benefit of sending fewer

documents to each household. Those issuers or broker-dealers that

decide not to obtain that benefit are not required to rely on the rule.

Responses to the collection of information will not be kept

confidential.

VI. Summary of Final Regulatory Flexibility Analysis

The Commission has prepared a Final Regulatory Flexibility Analysis

(``FRFA'') in accordance with 5 U.S.C. 604 relating to the adopted rule

and amendments. A summary of the Initial Regulatory Flexibility

Analysis (``IRFA''), which was prepared in accordance with 5 U.S.C.

603, was published in the Proposing Release. No comments were received

on the IRFA.

The FRFA discusses the need for, and objectives of, new rule 154

and the amendments to rules 14a-3, 14c-3, 14c-7, 30d-1, and 30d-2. The

FRFA states that duplicate copies of prospectuses and shareholder

reports are often mailed to a household if more than one investor in

the household owns the same security. The new rule and amendments are

designed to reduce the number of duplicate documents delivered to

investors by permitting the delivery of one prospectus or shareholder

report to two or more investors who share an address.

The FRFA provides descriptions and estimates of the number of small

entities

[[Page 62545]]

to which the rules will apply. The term ``small business'' or ``small

organization'' (collectively, ``small entity''), when used with

reference to an issuer other than a fund, is defined by rule 157 under

the Securities Act to include an issuer that, on the last day of its

most recent fiscal year, had total assets of $5 million or less and is

engaged or proposing to engage in small business financing.\41\ Most of

these small issuers can conduct their offerings under Regulation A,

which exempts offerings from the registration requirements of the

Securities Act if the sum of all cash and other consideration to be

received for the securities does not exceed $5 million subject to a

number of conditions.\42\ These issuers do not need to deliver

prospectuses. Thus, the Commission estimates that among issuers other

than registered investment companies, very few small issuers, as

defined in rule 157 under the Securities Act, will be affected by rule

154.

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\41\ See 17 CFR 230.157 (1997). An issuer is considered to be

engaged or proposing to engage in ``small business financing'' if it

is conducting or proposing to conduct an offering of securities that

does not exceed the $5 million limitation prescribed by section 3(b)

of the Securities Act. The Commission last year amended certain

definitions under the Securities Act, Exchange Act, and Investment

Company Act for purposes of the Regulatory Flexibility Act. See

Definitions of ``Small Business'' or ``Small Organization'' Under

the Investment Company Act of 1940, the Investment Advisers Act of

1940, the Securities Exchange Act of 1934 and the Securities Act of

1933, Securities Act Release No. 7548 (June 24, 1998) [63 FR 35508

(June 30, 1998)]. Because the IRFA for this proposal relied on the

earlier definitions (which were broader), the FRFA also relies on

the earlier definitions.

\42\ See 17 CFR 230.251-.263.

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

As defined in rule 157, a fund generally is a small entity if it

has net assets of $50 million or less as of the end of its most recent

fiscal year.\43\ The Commission staff estimates that there are

approximately (i) 2,900 active open-end funds, of which 475 are small

entities, (ii) 678 active closed-end funds, of which 115 are small

entities, and (iii) 745 active registered UITs, about 81 of which are

small entities. Closed-end funds and UITs will be affected by rule 154

only when they are offering their shares.

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

\43\ See 17 CFR 230.157 (1997).

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

A broker-dealer generally is a small entity if it has total capital

(i.e., net worth plus subordinated liabilities) of less than $500,000

in its prior audited financial statements or, if it is not required to

file such statements, on the last business day of the preceding fiscal

year.\44\ The delivery of prospectuses and shareholder reports is

likely to be handled only by broker-dealers that carry public customer

accounts. The Commission staff estimates that as of year-end 1998,

broker-dealers carrying public customer accounts numbered approximately

300 firms, 40 of which were small businesses.

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

\44\ See 17 CFR 240.0-10(c)(1) (1997).

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

Rule 30d-1 applies to management funds (i.e., open-end and closed-

end funds). The staff estimates that out of approximately 3,515 active

management funds, approximately 587 are considered small entities.\45\

Rule 30d-2 applies to registered UITs, substantially all the assets of

which consist of securities issued by a management investment company.

The staff estimates that out of approximately 637 registered UITs that

are subject to rule 30d-2, approximately 19 are considered small

entities.

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

\45\ See CFR 270.0-10 (1997).

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

Rules 14a-3, 14c-3 and 14c-7 apply to companies that are subject to

the Exchange Act reporting requirements. Rule 0-10 under the Exchange

Act defines the term ``small business'' as a company whose total assets

on the last day of its most recent fiscal year were $5 million or

less.\46\ There are approximately 815 reporting companies that have

assets of $5 million or less.

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

\46\ See CFR 240.0-10 (1997).

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

Persons who rely on the rules would be required to obtain

investors' written or implied consent before householding documents.

Investors householded with implied consent must receive a notice 60

days in advance notifying them that their documents will be householded

unless the person relying on the rule receives contrary instructions.

The rule also requires that if householding is done with investors'

implied consent the investors must have the same last name or be

reasonably believed to be members of the same family, and the address

must be a post office box or a street address reasonably believed to be

a residence.

The FRFA states that in adopting the amendments, the Commission

considered: (i) The establishment of differing compliance requirements

that take into account the resources available to small entities; (ii)

simplification of the rule's requirements for small entities; (iii) the

use of performance rather than design standards; and (iv) an exemption

from the rules for small entities. The FRFA states that we concluded

that different requirements for small entities would be inconsistent

with investor protection.

The FRFA is available for public inspection in File No. S7-27-97,

and a copy may be obtained by contacting Marilyn Mann, Senior Counsel,

at (202) 942-0690, Office of Regulatory Policy, Division of Investment

Management, Securities and Exchange Commission, 450 5th Street, NW,

Washington, DC 20549-0506.

VII. Statutory Authority

The Commission is adopting rule 154 under the authority set forth

in section 19(a) of the Securities Act [15 U.S.C. 77s(a)]. The

Commission is adopting amendments to rules 30d-1 and 30d-2 under the

authority set forth in section 30(e) and 38(a) of the Investment

Company Act [15 U.S.C. 80a-29(e) and 80a-37(a)], and amendments to

rules 14a-3, 14c-3, and 14c-7 under the authority set forth in sections

12, 14 and 23(a) of the Exchange Act [15 U.S.C. 78l, 78n and 78w(a)].

List of Subjects

17 CFR Parts 230 and 270

Investment companies, Reporting and recordkeeping requirements,

Securities.

17 CFR Part 240

Reporting and recordkeeping requirements, Securities.

Text of Rules

For the reasons set out in the preamble, Title 17, Chapter II of

the Code of Federal Regulations is amended as follows:

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

1. The authority citation for Part 230 continues to read, in part,

as follows:

Authority: 15 U.S.C. 77b, 77f, 77g, 77h, 77j, 77r, 77s, 77sss,

78c, 78d, 78l, 78m, 78n, 78o, 78w, 78ll(d), 79t, 80a-8, 80a-24, 80a-

28, 80a-29, 80a-30, and 80a-37, unless otherwise noted.

* * * * *

2. Section 230.154 is added to read as follows:

Sec. 230.154 Delivery of prospectuses to investors at the same

address.

(a) Delivery of a single prospectus. If you must deliver a

prospectus under the federal securities laws, for purposes of sections

5(b) and 2(a)(10) of the Act (15 U.S.C. 77e(b) and 77b(a)(10)) or

Sec. 240.15c2-8(b) of this chapter, you will be considered to have

delivered a prospectus to investors who share an address if:

(1) You deliver a prospectus to the shared address;

(2) You address the prospectus to the investors as a group (for

example, ``ABC Fund [or Corporation] Shareholders,'' ``Jane Doe and

Household,'' ``The Smith Family'') or to each of the investors

individually (for example, ``John Doe and Richard Jones''); and

[[Page 62546]]

(3) The investors consent in writing to delivery of one prospectus.

(b) Implied consent. You do not need to obtain written consent from

an investor under paragraph (a)(3) of this section if all of the

following conditions are met:

(1) The investor has the same last name as the other investors, or

you reasonably believe that the investors are members of the same

family;

(2) You have sent the investor a notice at least 60 days before you

begin to rely on this section concerning delivery of prospectuses to

that investor. The notice must be a separate written statement and:

(i) State that only one prospectus will be delivered to the shared

address unless you receive contrary instructions;

(ii) Include a toll-free telephone number or be accompanied by a

reply form that is pre-addressed with postage provided, that the

investor can use to notify you that he or she wishes to receive a

separate prospectus;

(iii) State the duration of the consent;

(iv) Explain how an investor can revoke consent;

(v) State that you will begin sending individual copies to an

investor within 30 days after you receive revocation of the investor's

consent; and

(vi) Contain the following prominent statement, or similar clear

and understandable statement, in bold-face type: ``Important Notice

Regarding Delivery of Shareholder Documents.'' This statement also must

appear on the envelope in which the notice is delivered. Alternatively,

if the notice is delivered separately from other communications to

investors, this statement may appear either on the notice or on the

envelope in which the notice is delivered;

Note: to paragraph (b)(2): The notice should be written in plain

English. See Sec. 230.421(d)(2) of this chapter for a discussion of

plain English principles.

(3) You have not received the reply form or other notification

indicating that the investor wishes to continue to receive an

individual copy of the prospectus, within 60 days after you sent the

notice; and

(4) You deliver the prospectus to a post office box or to a

residential street address. You can assume a street address is a

residence unless you have information that indicates it is a business.

(c) Revocation of consent. If an investor, orally or in writing,

revokes consent to delivery of one prospectus to a shared address

(provided under paragraphs (a)(3) or (b) of this section), you must

begin sending individual copies to that investor within 30 days after

you receive the revocation. If the individual's consent concerns

delivery of the prospectus of a registered open-end management

investment company, at least once a year you must explain to investors

who have consented how they can revoke their consent. The explanation

must be reasonably designed to reach these investors.

(d) Definition of address. For purposes of this section, address

means a street address, a post office box number, an electronic mail

address, a facsimile telephone number, or other similar destination to

which paper or electronic documents are delivered, unless otherwise

provided in this section. If you have reason to believe that an address

is the street address of a multi-unit building, the address must

include the unit number.

(e) Exclusion of some prospectuses. This section does not apply to

the delivery of a prospectus filed as part of a registration statement

on Form N-14 (17 CFR 239.23), Form S-4 (17 CFR 239.25) or Form F-4 (17

CFR 239.34), or to the delivery of any other prospectus in connection

with a business combination transaction, exchange offer or

reclassification of securities.

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF

1934

3. The authority citation for Part 240 continues to read, in part,

as follows:

Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77eee,

77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78f, 78i, 78j, 78j-1, 78k,

78k-1, 78l, 78m, 78n, 78o, 78p, 78q, 78s, 78u-5, 78w, 78x, 78ll(d),

78mm, 79q, 79t, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4 and

80b-11, unless otherwise noted.

* * * * *

4. Section 240.14a-3 is amended by revising paragraph (e)(1) and

the introductory text of paragraph (e)(2) to read as follows:

Sec. 240.14a-3 Information to be furnished to security holders.

* * * * *

(e)(1)(i) A registrant will be considered to have delivered an

annual report to security holders of record who share an address if:

(A) The registrant delivers an annual report to the shared address;

(B) The registrant addresses the prospectus to the security holders

a group (for example, ``ABC Fund [or Corporation] Shareholders,''

``Jane Doe and Household,'' ``The Smith Family'') or to each of the

security holders individually (for example, ``John Doe and Richard

Jones''); and

(C) The security holders consent in writing to delivery of one

annual report.

(ii) Implied consent. The registrant need not obtain written

consent from a security holder under paragraph (e)(1)(i)(C) of this

section if all of the following conditions are met:

(A) The security holder has the same last name as the other

security holders, or the registrant reasonably believes that the

security holders are members of the same family;

(B) The registrant has sent the security holder a notice at least

60 days before the registrant begins to rely on this section concerning

delivery of annual reports to that security holder. The notice must:

(1) Be a separate written statement that is delivered separately

from other communications;

(2) State that only one annual report will be delivered to the

shared address unless the registrant receives contrary instructions;

(3) Include a toll-free telephone number or be accompanied by a

reply form that is pre-addressed with postage provided, that the

security holder can use to notify the registrant that he or she wishes

to receive a separate annual report;

(4) State the duration of the consent;

(5) Explain how a security holder can revoke consent;

(6) State that the registrant will begin sending individual copies

to a security holder within 30 days after receipt of revocation of the

security holder's consent; and

(7) Contain the following prominent statement, or similar clear and

understandable statement, in bold-face type: ``Important Notice

Regarding Delivery of Shareholder Documents.'' Alternatively, this

statement may appear on the envelope containing the notice;

Note: to paragraph (e)(1)(ii)(B): The notice should be written

in plain English. See Sec. 230.421(d)(2) of this chapter for a

discussion of plain English principles.

(C) The registrant has not received the reply form or other

notification indicating that the security holder wishes to continue to

receive an individual copy of the annual report, within 60 days after

the registrant sent the notice; and

(D) The registrant delivers the report to a post office box or to a

residential street address. The registrant can assume a street address

is a residence unless it has information that indicates it is a

business.

(iii) Revocation of consent. If a security holder, orally or in

writing, revokes consent to delivery of one report to a shared address,

the registrant

[[Page 62547]]

must begin sending individual copies to that security holder within 30

days after the registrant receives the revocation.

(iv) Definition of address. For purposes of this section, address

means a street address, a post office box number, an electronic mail

address, a facsimile telephone number, or other similar destination to

which paper or electronic documents are delivered, unless otherwise

provided in this section. If the registrant has reason to believe that

the address is a street address of a multi-unit building, the address

must include the unit number.

(2) Notwithstanding paragraphs (a) and (b) of this section, unless

state law requires otherwise, a registrant is not required to send an

annual report or proxy statement to a security holder if:

* * * * *

5. In Sec. 240.14c-3, paragraph (c) is added to read as follows:

Sec. 240.14c-3 Annual report to be furnished security holders.

* * * * *

(c) A registrant will be considered to have delivered an annual

report to all security holders of record who share an address if the

requirements set forth in Sec. 240.14a-3(e)(1) are satisfied.

6. In Sec. 240.14c-7, Note 2 is removed and Note 3 and Note 4 are

redesignated as Note 2 and Note 3.

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

7. The authority citation for Part 270 continues to read, in part,

as follows:

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

unless otherwise noted:

* * * * *

8. Section 270.30d-1 is amended by adding paragraph (f) to read as

follows:

Sec. 270.30d-1 Reports to stockholders of management companies.

* * * * *

(f)(1) A company will be considered to have transmitted a report to

shareholders who share an address if:

(i) The company transmits a report to the shared address;

(ii) The company addresses the report to the shareholders as a

group (for example, ``ABC Fund [or Corporation] Shareholders,'' ``Jane

Doe and Household,'' ``The Smith Family'') or to each of the

shareholders individually (for example, ``John Doe and Richard

Jones''); and

(iii) The shareholders consent in writing to delivery of one

report.

(2) The company need not obtain written consent from a shareholder

under paragraph (f)(1)(iii) of this section if all of the following

conditions are met:

(i) The shareholder has the same last name as the other

shareholders, or the company reasonably believes that the shareholders

are members of the same family;

(ii) The company has transmitted a notice to the shareholder at

least 60 days before the company begins to rely on this section

concerning transmission of reports to that shareholder. The notice must

be a separate written statement and:

(A) State that only one report will be delivered to the shared

address unless the company receives contrary instructions;

(B) Include a toll-free telephone number or be accompanied by a

reply form that is pre-addressed with postage provided, that the

shareholder can use to notify the company that he or she wishes to

receive a separate report;

(C) State the duration of the consent;

(D) Explain how a shareholder can revoke consent;

(E) State that the company will begin sending individual copies to

a shareholder within 30 days after the company receives revocation of

the shareholder's consent; and

(F) Contain the following prominent statement, or similar clear and

understandable statement, in bold-face type: ``Important Notice

Regarding Delivery of Shareholder Documents.'' This statement also must

appear on the envelope in which the notice is delivered. Alternatively,

if the notice is delivered separately from other communications to

investors, this statement may appear either on the notice or on the

envelope in which the notice is delivered;

Note: to paragraph (f)(2)(ii): The notice should be written in

plain English. See Sec. 230.421(d)(2) of this chapter for a

discussion of plain English principles.

(iii) The company has not received the reply form or other

notification indicating that the shareholder wishes to continue to

receive an individual copy of the report, within 60 days after the

company sent the notice; and

(iv) The company transmits the report to a post office box or to a

residential street address. The company can assume a street address is

a residence unless it has information that indicates it is a business.

(3) At least once a year, the company must explain to shareholders

who have consented under paragraph (f)(1)(iii) or paragraph (f)(2) of

this section how they can revoke their consent. The explanation must be

reasonably designed to reach these investors. If a shareholder, orally

or in writing, revokes consent to delivery of one report to a shared

address, the company must begin sending individual copies to that

shareholder within 30 days after the company receives the revocation.

(4) For purposes of this section, address means a street address, a

post office box number, an electronic mail address, a facsimile

telephone number, or other similar destination to which paper or

electronic documents are transmitted, unless otherwise provided in this

section. If the company has reason to believe that the address is a

street address of a multi-unit building, the address must include the

unit number.

9. Section 270.30d-2 is revised to read as follows:

Sec. 270.30d-2 Reports to shareholders of unit investment trusts.

(a) At least semiannually every registered unit investment trust

substantially all the assets of which consist of securities issued by a

management company must transmit to each shareholder of record

(including record holders of periodic payment plan certificates), a

report containing all the applicable information and financial

statements or their equivalent, required by Sec. 270.30d-1 to be

included in reports of the management company for the same fiscal

period. Each of these reports must be transmitted within the period

allowed the management company by Sec. 270.30d-1 for transmitting

reports to its shareholders.

(b) Any report required by this section will be considered

transmitted to a shareholder of record if the unit investment trust

satisfies the conditions set forth in Sec. 270.30d-1(f) with respect to

that shareholder.

Dated: November 4, 1999.

By the Commission.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 99-29531 Filed 11-15-99; 8:45 am]

BILLING CODE 8010-01-P