| Release No. 34-11079 Release No. 35-18638 Release No. IC-8563 October 31, 1974
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 Table of Contents
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I. BACKGROUND
Rule 14a-3 generally provides that any solicitation of security holders, made on behalf of management and relating to an annual meeting of security holders at which directors are to be elected, must be accompanied or preceded by a written proxy statement conforming to Schedule 14A and that each such proxy statement must be accompanied or preceded by an annual report to security holders containing certain specified information. Rule 14c-3 contains substantially similar provisions with respect to the furnishing of information statements. Prior to the adoption of the amendments set forth herein, annual reports to security holders were only required to contain certain basic financial information and were not required to contain any textual disclosures.
The annual report to security holders has long been recognized as the most effective means of communication between management and security holders. Such reports are readable because they generally avoid legalistic and technical terminology and present information in an understandable, and often innovative, form. However, some issuers present very little meaningful information regarding their operations other than the basic financial information required by the existing proxy rules. The Commission believes it is in the public interest that all security holders be provided with meaningful information regarding the business, management, operations and financial position of the issuer and that the annual report to security holders is the most suitable vehicle presently available for providing this information. Accordingly, the Commission has amended Rules 14a-3 and 14c-3 to require that an annual report to security holders contain a minimum quantum of meaningful business and financial information, most of which is already required in the annual report on Form 10-K which most issuers subject to the proxy rules file with the Commission. The Commission continues to encourage issuers to improve voluntarily the content and format of their annual reports to security holders.
It should be particularly noted that the annual report to security holders will retain its status as a non-filed document and as non-proxy soliciting material pursuant to Rules 14a-3(c) and 14c-3(b), so that it is not subject tothe express civil liability provisions of Section 18 of the Exchange Act or to Rule 14a-9 thereunder. As in the past, there will be no review of the annual report to security holders by the Commissions staff prior to such reports being furnished to security holders.
II. SYNOPSIS OF THE AMENDMENTS TO RULES 14a-3 14c-3 AND 14c-7
A. Provisions Relating to Disclosure in Annual Reports to Security Holders
1. Financial Statements.
As amended, Rules 14a-3 and 14c-3 will now require certified financial statements for the last two fiscal years, rather than for just the last year, and will continue to require the same financial information previously required by Subparagraphs (b)(1) through (b)(3) and (a)(1) through (a)(3), respectively. In addition, Subparagraphs (b)(1) of Rule 14a-3 and (a)(1) of Rule 14c-3 have been amended to provide that financial statements and the notes thereto contained in the annual report to security holders must now be set forth in roman type at least as large and as legible as 10-point modern type except that to the extent necessary for convenient presentation the financial statements may be set forth in roman type at least as large and as legible as 8-point modern type. Finally, Subparagraphs (b)(2) of Rule 14a-3 and (a)(2) of Rule 14c-3 have been amended to clarify that any material differences between the financial statements included in an annual report to security holders and the financial statements required to be filed with the Commission must be noted and the effect thereof reconciled "in the financial statements or the notes thereto" in the annual report to security holders.
2. Summary of Operations.
New Subparagraphs (b)(4) of Rule 14a-3 and (a)(4) of Rule 14c-3 require that an annual report to security holders include a summary of operations containing certain information required by Item 2 of Form 10-K. As proposed, the summary of operations would have been required to be "in substantially the form" required by Form 10-K. The phrase "in substantially the form" has been deleted and a note has been added to clarify that this information may be set forth in any form deemed suitable by management. Attention is called to the fact that Guide 1 of the Guides for the Preparation and Filing of Reports and Registration Statements under the Exchange Act (Release No. 34-10961, Aug. 14, 1974; 39 Fed. Reg. 31894) applies to annual reports to security holders so that a management analysis of the summary of operations may be appropriate.
3. Description of Business.
New Subparagraphs (b)(5) of Rule 14a-3 and (a)(5) of Rule 14c-3 require that an annual report to security holders contain a brief description of the business done by the issuer and its subsidiaries during the most recent fiscal year which will, in the opinion of management, indicate the general nature and scope of the business of the issuer and its subsidiaries. This requirement was formerly applicable only to issuers who had not previously solicited proxies or furnished information statements subject to Regulation 14A or 14C under the Exchange Act. Contrary to the apparent understanding of many persons commenting on these requirements as proposed, these Subparagraphs do not require the inclusion of the detailed information called for by Items 1(a) and 1(b) of Form 10-K.
4. Lines-of-Business Information.
New Subparagraphs (b)(6) of Rule 14a-3 and (a)(6) of Rule 14c-3 require that an annual report to security holders contain information in any form deemed suitable by management regarding the issuers lines of business and its classes of similar products and services as comprehensive as that required by Items 1(c)(1) and 1(c)(2) of Form 10-K, respectively.
5. Management Information.
New Subparagraphs (b)(7) of Rule 14a-3 and (a)(7) of Rule 14c-3 require that an annual report to security holders identify each of the issuers executive officers and directors and indicate the principal occupation or employment of each such person and the name and principal business of any organization by which such person is so employed. The definition of the term "executive officer," as set forth in Item 8 of Form 10-K, has been included for convenience in its entirety as a note to these Subparagraphs. As proposed, these Subparagraphs would have required this information "at a minimum." This phrase has been deleted in response to letters of comment indicating that the phrase created confusion as to the extent of disclosure required. Issuers may, of course, include additional management information in their annual reports.
6. Market and Dividend Information.
New Subparagraphs (b)(8) of Rule 14a-3 and (a)(8) of Rule 14c-3 require that an annual report to security holders identify the principal market for each class of the issuers securities entitled to vote at the meeting of security holders, and include the high and low sales price (or the range of bid and asked quotations) and the dividends paid for each quarterly period within the two most recent fiscal years. As proposed in Exchange Act Release No. 10591, an annual report to security holders would have been required to contain a statement of the issuers dividend policy with respect to securities entitled to vote at the annual meeting of security holders. The Commission has determined at this time not to adopt this proposal because this type of disclosure may, in part, involve future orientated information, which is not presently required to be disclosed in filings with the Commission, and may result in meaningless "boiler plate" statements.
7. Format of Annual Report to Security Holders.
As amended, Subparagraphs (b)(10) of Rule 14a-3 and (a)(10) of Rule 14c-3 provide that the annual report to security holders may be in any form deemed suitable by management so long as the information required by Rules 14a-3 and 14c-3 is contained therein. The Subparagraphs specifically permit the information required by theamended rules to be set forth in an appendix or other separate section of the annual report to security holders. A note to such Subparagraphs encourages the utilization of charts and graphic illustrations to present financial information in an understandable format. However, such presentations of financial information must be consistent with the data in the financial statements and notes thereto contained in the annual report to security holders.
8. Applicability to Investment Companies.
New Subparagraphs (b)(11) of Rule 14a-3 and (a)(11) of Rule 14c-3 permit the annual report to security holders of a registered investment company to be in any form deemed suitable by management so long as the financial statements required by Subparagraphs (b)(1) through (b)(3) of Rule 14a-3 and (a)(1) through (a)(3) of Rule 14c-3 are contained therein. The Subparagraphs also provide that the information requirements of Subparagraphs (b)(4) through (b)(10) of Rule 14a-3 and (a)(4) through (a)(10) of Rule 14c-3 are not applicable to reports of such investment companies.
9. Proposed Amendment Not Adopted.
As proposed in Exchange Act Release No. 10591, an annual report to security holders would have been required to include textual information which would, in the opinion of management, indicate the nature and scope of the issuers liquidity position and working capital requirements based on such considerations as peak seasonal demands for working capital, availability and cost of credit, policies associated with the extension of credit to customers, purchase commitments related to inventories, policies followed as to the magnitude of inventory to be maintained, and future financing requirements and plans. The Commission has determined not to adopt this proposal at this time because of a lack of objective standards with respect to these types of disclosure.
B. Provisions Relating to the Dissemination of Annual Reports to Security Holders.
The Commission is concerned that some security holders whose securities are held in street name or otherwise by a record holder may not receive copies of the annual report or of proxy solicitation material. Since, in many cases, brokers, dealers, banks, or their nominees, hold securities in their names on behalf of a beneficial owner, the issuer will only have the names and addresses of the record holders and will not be able to forward directly to its beneficial owners its proxy soliciting material and the annual report to security holders.
Rule 14c-7 of the Information Statement Rules under the Exchange Act presently requires that, if the issuer knows that securities of any class entitled to vote at a meeting are held of record by a broker, dealer, bank or voting trustee, or their nominees, the issuer must inquire of such record holder whether other persons are the beneficial owners. If there are other beneficial owners, the rule requires the issuer to obtain from the record holder information as to the number of copies of the information statement, and if an annual report is required, of the annual report, necessary to supply these documents to the beneficial owners of the securities. The issuer is then required to supply as many copies as are needed and to pay reasonable expenses to the record holder for completing the mailing of the material to the beneficial owners.
As adopted, Paragraph (d) of Rule 14a-3 will impose the same obligations on the issuer when it solicits proxies in order to help assure that all beneficial owners have timely access to the financial and business information now required to be included in the annual report to security holders. A note has been added under Rules 14a-3(d) and 14c-7 to clarify the issuers obligations to make appropriate inquiry of a central certificate depository system and of the participants in such a system whenever some of the issuers securities are registered in the name of a nominee for a central depository system, such as "Cede & Co." A second note, formerly under Rules 14a-3(b) and 14c-3(a), has been set forth under Rules 14a-3(d) and 14c-7 to permit issuers to send one annual report to a holder of record at a particular address whenever there are several holders of record at that same address who agree in writing to such a procedure. The note has been revised, however, to indicate clearly that such a procedure is not available where banks, broker-dealers and other persons hold securities on behalf of beneficial owners and that such persons are not relieved of any obligation to obtain or send annual reports to the beneficial owners. A third note calls the attention of issuers to the fact that broker-dealers have an obligation pursuant to the applicable self-regulatory requirements to obtain and distribute annual reports in a timely manner to beneficial owners for whom such broker-dealers hold securities.
C. Provisions Relating to the Dissemination of Annual Reports on Form 10-K or 12-K
The amendments to Rules 14a-3 and 14c-3 have been designed to help assure that security holders, including beneficial owners of securities, receive an annual report to security holders containing meaningful business and financial information. However, some security holders will be interested in more detailed and extensive information of the type that appears in an issuers annual report on Form 10-K or 12-K required to be filed with the Commission pursuant to Rule 13a-1 under the Exchange Act. Such reports are available for inspection and copying at the Commissions Public Reference Rooms upon the payment of the requisite fees. The Commission is of the opinion that interested security holders, as of the record date for an annual meeting of security holders, as of the record date for an annual meeting of security holders, should be able to obtain such reports directly from the issuer on a timely basis. Accordingly, the Commission has adopted Subparagraphs (b)(9) of Rule 14a-3 and (a)(9) of Rule 14c-3 which require that managements proxy statement, or the issuers information statement, or the annual report to security holders contain an undertaking in bold face or otherwise reasonably prominent type to provide without charge to each person solicited, or to each person furnished an information statement, on the written request of any such person, a copy of the issuers annual report on Form 10-K or 12-K, including the financial statements and the schedules thereto, for its most recent fiscal year required to be filed with the Commission pursuant to Rule 13a-1 under the Exchange Act. Because of the length ofcertain exhibits to such reports an issuer may impose a reasonable fee limited to its reasonable expenses in connection with providing copies of the exhibits to the annual reports on Form 10-K or 12-K, provided that all annual reports on Form 10-K or 12-K furnished to requesting security holders are accompanied by a list briefly describing all exhibits not contained therein and indicating the reasonable fee for obtaining any such exhibit. Issuers who elect to file an annual report under the Exchange Act on Form U5S are also required to undertake to furnish copies of such a report in accordance with these Subparagraphs.
Several letters of comment requested a clarification as to whether an issuer, upon written request, would be required to furnish copies of its annual report on Form 10-K or 12-K to beneficial owners of its securities. A note has been added indicating that an issuer shall furnish a copy of its annual report on Form 10-K or 12-K upon receipt of a beneficial owners written request containing a good faith representation that the person making the request was the beneficial owner, as of the record date, of securities entitled to vote at the meeting of security holders.
Several letters of comment requested a clarification with respect to an issuers obligation to furnish copies of the amendments to its annual report on Form 10-K or 12-K. It is the Commissions position that an issuer, upon receipt of an appropriate written request at any time prior to the record date for the next annual meeting of security holders, must furnish a copy of its annual report on Form 10-K or 12-K including all amendments, if any, which have been filed to that date. However, an issuer is not required under the proxy rules to furnish subsequently filed amendments to its Form 10-K or 12-K to security holders previously furnished copies of the annual report on Form 10-K or 12-K unless a security holder had specifically requested a copy of the annual report on Form 10-K or 12-K and all amendments subsequently filed, in which case the issuer would furnish all subsequently filed amendments until it files a Form 10-K or 12-K for its next fiscal year.
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The Commission hereby amends Rules 14a-3, 14c-3 and 14c-7 pursuant to Sections 14(a), 14(c) and 23(a) of the Securities Exchange Act of 1934, as amended, effective December 20, 1974 with respect to issuers who have fiscal years ending on or after that date and who solicit proxies or furnish information statements on or after that date. The Commission finds that the changes reflected in the amendments from the amendments as proposed for comment have already been generally subject to public comment or are technical in nature and that further notice and other rule making procedure pursuant to the Administrative Procedure Act are not necessary.
The full text of Rules 14a-3, 14c-3 and 14c-7, as amended, is attached hereto.
By the Commission.
George A. Fitzsimmons
Secretary
Rules 14a-3, 14c-3 and 14c-7, as amended.
(Changes from existing rules in italics).
RULE 14a-3. INFORMATION TO BE FURNISHED TO SECURITY HOLDERS
(a) No solicatation subject to this regulation shall be made unless each person solicited is concurrently furnished or has previously been furnished with a written proxy statement containing the information specified in Schedule 14A.
(b) If the solicitation is made on behalf of the management of the issuer, and relates to an annual meeting of security holders at which directors are to be elected, each proxy statement furnished pursuant to paragraph (a) shall be accompanied or preceded by an annual report to security holders as follows:
(1) The report shall contain, in comparative columnar form, such financial statements for the last two fiscal years, prepared on a consistent basis, as will in the opinion of the management adequately reflect the financial position of the issuer at the end of each such year and the results of its operations for each such year: Provided, however, that investment companies registered under the Investment Company Act of 1940 need include such financial statements only for the last fiscal year. Consolidated financial statements of the issuer and its subsidiaries shall be included in the report if they are necessary to reflect adequately the financial position and results of operations of the issuer and its subsidiaries, but in such case the individual statements of the issuer may be omitted even though they are required to be included in reports to the Commission. Such financial statements and the notes thereto shall be in roman type at least as large and as legible as 10-point modern type except that to the extent necessary for convenient presentation financial statements, but not the notes thereto, may be in roman type at least as large and as legible as 8-point modern type. All such type shall be leaded at least 2 points. The Commission may, upon the request of the issuer, permit the omission of financial statements for the earlier of such two fiscal years upon a showing of good cause therefor.
(2) Any differences, reflected in the financial statements included in the report to security holders, from the principles of consolidation or other accounting principles or practices, or methods of applying accounting principles or practices, applicable to the financial statements of the issuer filed or proposed to be filed with the Commission, which have a material effect on the financial position or results of operation of the issuer, shall be noted and the effect thereof reconciled or explained in the financial statements or the notes thereto in such report. Financial statements included in the report may, however, omit such details or employ such condensation as may be deemed suitable by the management: Provided, that such statements, considered as a whole in the light of other information contained in the report shall not by such procedure omit any material information necessary to a fair presentation or to make the financial statements not misleading under the circumstances.
(3) The financial statements for the last two fiscal years required by Subparagraph (b)(1) shall be certified by independent public or certified accountants, unless (i) the corresponding statements included in the issuers annual report filed or to be filed with the Commission for the same fiscalyears are not required to be certified, or (ii) the Commission finds in a particular case that certification would be impracticable or would involve undue effort or expense.
(4) The report shall include a summary of the issuers operations containing the information required by Item 2 of Form 10-K except for the reconciliations, exhibits and supplemental information required by the instructions thereto.
Note 1: Subparagraph (b)(10) permits the information required by this subparagraph to be set forth in any form deemed suitable by management.
Note 2: Guide 1 of the Guides for the Preparation and Filing of Reports and Registration Statements Under the Act (Release 34-10961, August 14, 1974; 39 Fed. Reg. 31894) and any other guides subsequently published by the Commission relating to Item 2 of Form 10-K apply to annual reports to security holders.
(5) The report shall contain a brief description of the business done by the issuer and its subsidiaries during the most recent fiscal year which will, in the opinion of management, indicate the general nature and scope of the business of the issuer and its subsidiaries.
(6) The report shall contain information as comprehensive as that required by Item 1(c)(1) of Form 10-K regarding the issuers lines of business and by Item 1(c)(2) of Form 10-K regarding its classes of similar products and services.
Note: Subparagraph (b)(10) permits the information required by this subparagraph to be set forth in any form deemed suitable by management.
(7) The report shall identify each of the issuers directors and executive officers, and shall indicate the principal occupation or employment of each such person and the name and principal business of any organization by which such person is so employed.
Note: The term "executive officer" means the president, secretary, treasurer, any vice president in charge of a principal business function (such as sales, administration or finance) and any other person who performs similar policy making functions for the issuer.
(8) The report shall identify the principal market in which securities of any class entitled to vote at the meeting are traded, and shall state the high and low sales prices for such securities (or, in the absense of such information, the range of bid and asked quotation) and the dividends paid on such securities for each quarterly period during the issuers two most recent fiscal years.
(9) Managements proxy statement, or the report, shall contain an undertaking in hold face or otherwise reasonably prominent type to provide without charge to each person solicited, on the written request of any such person, a copy of the issuers annual report on Form 10-K or 12-K, including the financial statements and the schedules thereto, required to be filed with the Commission pursuant to Rule 13a-1 under the Act for the issuers most recent fiscal year, and shall indicate the name and address of the person to whom such a written request is to be directed. In the discretion of management, an issuer need not undertake to furnish without charge copies of all exhibits to its Form 10-K or 12-K, provided that the copy of the annual report on Form 10-K or 12-K furnished without charge to requesting security holders is accompanied by a list briefly describing all the exhibits not contained therein and indicating that the issuer will furnish any exhibit upon the payment of a specified reasonable fee which fee shall be limited to the issuers reasonable expenses in furnishing such exhibit.
Note: Pursuant to the undertaking required by the above subparagraph, an issuer shall furnish a copy of its annual report on Form 10-K or 12-K to a beneficial owner of its securities upon receipt of a written request from such person. Each request must set forth a good faith representation that, as of the record date for the annual meeting of the issuers security holders, the person making the request was a beneficial owner of securities entitled to vote at such meeting.
(10) Subject to the foregoing requirements, the report may be in any form deemed suitable by management and the information required by subparagraphs (b)(4) to (b)(9) may be presented in an appendix or other separate section of the report, provided that the attention of security holders is called to such presentation.
Note: Issuers are encouraged to utilize tables, schedules, charts, and graphic illustrations to present financial information in an understandable manner. Any presentation of financial information must be consistent with the data in the financial statements contained in the report and, if appropriate, should refer to relevant portions of the financial statements and notes thereto.
(11) Subparagraphs (b)(4) through (b)(10) shall not apply to an investment company registered under the Investment Company Act of 1940. Subject to the requirements of subparagraphs (b)(1) through (3), the annual report to security holders of such investment company may be in any form deemed suitable by management.
(12) This paragraph (b) shall not apply, however, to solicitations made on behalf of the management before the financial statements are available if solicitation is being made at the time in opposition to the management and if the managements proxy statement includes an undertaking in bold face type to furnish such annual report to all persons being solicited, at least 20 days before the date of the meeting.
(c) Seven copies of the report sent to security holders pursuant to this rule shall be mailed to the Commission, solely for its information, not later than the date on which such report is first sent or given to security holders or the date on which preliminary copies of solicitation material are filed with the Commission pursuant to Rule 14a-6(a), whichever date is later. The report is not deemed to be "soliciting material" or to be "filed" with the Commission or subject to this regulation otherwisethan as provided in this rule, or to the liabilities of Section 18 of the Act, except to the extent that the issuer specifically requests that it be treated as a part of the proxy soliciting material or incorporates it in the proxy statement by reference.
Note: To assist the staff, managements of issuers are requested to indicate in a letter transmitting to the Commission copies of their annual reports to shareholders or in a separate letter at or about the time the annual report is furnished to the Commission, whether the financial statements in the report reflect a change from the preceding year in any accounting principles or practices or in the method of applying any such principles or practices.
(d) If the issuer knows that securities of any class entitled to vote at a metting with respect to which the issuer intends to solicit proxies, consents or authorization are held of record by a broker, dealer, bank or voting trustee, or their nominees, the issuer shall inquire of such record holder whether other persons are the beneficial owners of such securities and, if so, the number of copies of the proxy and other soliciting material and, in the case of an annual meeting at which directors are to be elected, the number of copies of the annual report to security holders, necessary to supply such material to such beneficial owners. The issuer shall supply such record holder with additional copies in such quantities, assembled in such from and at such a place, as the record holder may reasonably request in order to address and send one copy of each to each beneficial owner of securities so held and shall, upon the request of such record holder, pay its reasonable expenses for completing the mailing of such material to security holders to whom the material is sent.
Note 1: If the issuers list of security holders indicates that some of its securities are registered in the name of "Cede & Co.", a nominee for the Depository Trust Company, or in the name of a nominee for any central certificate depository system, an issuer shall make appropriate inquiry of the central depository system and thereafter of the participants in such a system who may hold on behalf of a beneficial owner, and shall comply with the above paragraph with respect to any such participant.
Note 2: The requirement for sending an annual report to security holders of record having the same address will be satisfied by sending at least one report to a holder of record at that address provided that those holders of record to whom a report is not sent agree thereto in writing. This procedure is not available to issuers, however, where banks, broker-dealers, and other persons hold securities in nominee accounts or "street names" on behalf of beneficial owners, and such persons are not relieved of any obligation to obtain or send such annual report to the beneficial owners.
Note 3: The attention of issuers is called to the fact that broker-dealers have an obligation pursuant to applicable self-regulatory requirements to obtain and forward annual reports and proxy soliciting materials in a timely manner to beneficial owners for whom such broker-dealers hold securities.
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RULE 14c-3. ANNUAL REPORT TO BE FURNISHED SECURITY HOLDERS
(a) If the information statement relates to an annual meeting of security holders at which directors are to be elected, it shall be accompanied or preceded by an annual report to such security holders as follows:
(1) The report shall contain, in comparative columnar form, such financial statements for the last two fiscal years, prepared on a consistent basis, as will in the opinion of the management adequately reflect the financial position of the issuer at the end of each such year and the results of its operations for each such year: Provided, however, that investment companies registered under the Investment Company Act of 1940 need include such financial statements only for the last fiscal year. Consolidated financial statements of the issuer and its subsidiaries shall be included in the report if they are necessary to reflect adequately the financial position and results of operations of the issuer and its subsidiaries, but in such case the individual statements of the issuer may be omitted even though they are required to be included in reports to the Commission. Such financial statements and the notes thereto shall be in roman type at least as large and as legible as 10-point modern type except that to the extent necessary for convenient presentation financial statements, but not the notes thereto, may be roman type at least as large and as legible as 8-point modern type. All such type shall be leaded at least 2 points. The Commission may, upon the request of the issuer, permit the omission of financial statements for the earlier of such two fiscal years upon a showing of good cause therefor.
(2) Any differences, reflected in the financial statements included in the report to security holders, from the principles of consolidation or other accounting principles or practices, or methods of applying accounting principles or practices, applicable to the financial statements of the issuer filed or proposed to be filed with the Commission, which have a material effect on the financial position or results of operation of the issuer, shall be noted and the effect thereof reconciled or explained in the financial statements or the notes thereto in such report. Financial statements included in the report may, however, omit such details or employ such condensation as may be deemed suitable by the management: Provided, that such statements, considered as a whole in the light of other information contained in the report shall not be such procedure omit any material information necessary to a fair presentation or to make the financial statements not misleading under the circumstances.
(3) The financial statements for the last two fiscal years required by Subparagraph (a)(1) shall be certified by independent public or certified accountants, unless (i) the corresponding statements included in the issuers annual report filed or to be filed with the Commission for the same fiscal years are not required to be certified, or (ii) the Commission finds in a particular case that certification would be impracticable or would involve undue effort or expenses.
(4) The report shall include a summary of the issuersoperations containing the information required by Item 2 of Form 10-K except for the reconciliations, exhibits and supplemental information required by the instructions thereto.
Note 1: Subparagraph (a)(10) permits the information required by this subparagraph to be set forth in any form deemed suitable by management.
Note 2: Guide 1 of the Guides for the Preparation and Filing of Reports and Registration Statements Under the Act (Release 34-10961, August 14, 1974; 39 Fed. Reg. 31894) and any other guides subsequently published by the Commission relating to Item 2 of Form 10-K apply to annual reports to security holders.
(5) The report shall contain a brief description of the business done by the issuer and its subsidiaries during the most recent fiscal year which will, in the opinion of management, indicate the general nature and scope of the business of the issuer and its subsidiaries.
(6) The report shall contain information as comprehensive as that required by Item 1(c)(1) of Form 10-K regarding the issuers lines of business and by Item 1(c)(2) of Form 10-K regarding its classes of similar products and services.
Note: Subparagraph (a)(10) permits the information required by this subparagraph to be set forth in any form deemed suitable by management.
(7) The report shall identify each of the issuers directors and executive officers, and shall indicate the principal occupation or employment of each such person and the name and principal business of any organization by which such person is so employed.
Note: The term "executive officer" means the president, secretary, treasurer, any vice president in charge of a principal business function (such as sales, administration or finance) and any other person who performs similar policy making functions for the issuer.
(8) The report shall identify the principal market in which securities of any class entitled to vote at the meeting are traded, and shall state the high and low sales price for such securities (or, in the absence of such information, the range of bid and asked quotation) and the dividends paid on such securities for each quarterly period during the issuers two most recent fiscal years.
(9) The information statement, or the report, shall contain an undertaking in bold face or otherwise reasonably prominent type to provide without charge to each person furnished a copy of the information statement, on the written request of any such person, a copy of the issuers annual report on Form 10-K or 12-K, including the financial statements and the schedules thereto, required to be filed with the Commission pursuant to Rule 13a-1 under the Act for the issuers most recent fiscal year, and shall indicate the name and address of the person to whom such a written request is to be directed. In the discretion of management, an issuer need not undertake to furnish without charge copies of all exhibits to its Form 10-K or 12-K, provided that the copy of the annual report on Form 10-K or 12-K furnished without charge to requesting security holders is accompanied by a list briefly describing all the exhibits not contained therein and indicating that the issuer will furnish any exhibit upon the payment of a specified reasonable fee which fee shall be limited to the issuers reasonable expense in furnishing such exhibit.
Note: Pursuant to the undertaking required by the above subparagraph, an issuer shall furnish a copy of its annual report on Form 10-K or 12-K to a beneficial owner of its securities upon receipt of a written request from such person. Each request must set forth a good faith representation that, as of the record date for the annual meeting of the issuers security holders, the person making the request was a beneficial owner of securities entitled to vote at such meeting.
(10) Subject to the foregoing requirements, the report may be in any form deemed suitable by management and the information required by subparagraphs (a)(4) to (a)(9) may be presented in an appendix or other separate section of the report, provided that the attention of security holders is called to such presentation.
Note: Issuers are encouraged to utilize tables, schedules, charts, and graphic illustrations to present financial information in an understandable manner. Any presentation of financial information must be consistent with the data in the financial statements contained in the report and, if appropriate, should refer to relevant portions of the financial statements and notes thereto.
(11) Subparagraphs (a)(4) through (a)(10) shall not apply to an investment company registered under the Investment Company Act of 1940. Subject to the requirements of subparagraphs (a)(1) through (3), the annual report to security holders of such investment company may be in any form deemed suitable by management.
(b) Seven copies of the report sent to security holders pursuant to this rule shall be mailed to the Commission, solely for its information, not later than the date on which such report is first sent or given to security holders or the date on which preliminary copies of the information statement are filed with the Commission pursuant to Rule 14c-5, whichever date is later. The report is not deemed to be "filed" with the Commission or subject to this regulation otherwise than as provided in this rule, or to the liabilities of Section 18 of the Act, except to the extent that the issuer specifically requests that it be treated as a part of the information statement or incorporates it therein by reference.
Note: To assist the staff, managements of issuers are requested to indicate in a letter transmitting to the Commission copies of their annual reports to shareholders or in a separate letter at or about the time the annual report is furnished to the Commission, whether the financial statements in the report reflect a change from the preceding year in any accounting principles or in the method of applying any such principles or practices.
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RULE 14c-7. PROVIDING COPIES OF MATERIAL FOR CERTAIN BENEFICIAL OWNERS
If the issuer knows that securities of any class entitled to vote at a meeting are held of record by a broker, dealer, bank or voting trustee, or their nominees, the issuer shall inquire of such record holder whether other persons are the beneficial owners of such securities and, if so, the number of copies of the information statement and, in the case of an annual meeting at which directors are to be elected, the number of copies of the annual report to security holders, necessary to supply such material to such beneficial owners for whom proxy material has not been and is not to be made available. The issuer shall supply such record holder with additional copies in such quantities, assembled in such form and at such a place, as the record holder may reasonably request in order to address and send one copy of each to each beneficial owner of securities so held and shall, upon the request of such record holder, pay its reasonable expenses for completing the mailing of such material to security holders to whom the material is sent.
Note 1: If the issuers list of security holders indicates that some of its securities are registered in the name of "Cede & Co.", a nominee for the Depository Trust Company, or in the name of a nominee for any central certificate depository system, an issuer shall make appropriate inquiry of the central depository system and thereafter of the participants in such a system who may hold on behalf of a beneficial owner, and to comply with the above rule with respect to any such participant.
Note 2: The requirement for sending an annual report to security holders of record having the same address will be satisfied by sending at least one report to a holder of record at that address provided that those holders of record to whom a report is not sent agree thereto in writing. This procedure is not available to issuers, however, where banks, broker-dealers and other persons hold securities in nominee accounts or "street names" on behalf of beneficial owners, and such persons are not relieved of any obligation to obtain or send such annual report to the beneficial owners.
Note 3: The attention of issuers is called to the fact that broker-dealers have an obligation pursuant to applicable self-regulatory requirements to obtain and forward annual reports and information statements in a timely manner to beneficial owners for whom such broker-dealers hold securities.
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