From: Brown, Matthew [MBrown1@etrade.com]
Sent: Wednesday, October 30, 2002 3:45 PM
To: 'rule-comments@sec.gov'
Subject: SEC Proposes Pro Forma Rules (s7-43-02

Maybe while you are looking at implementing some expenses into Pro Forma's
that should have always been there you can consider doing away with the
following listed below.  This is from an article from a newsletter "The
Daily Reckoning", a very insightful pull no punches publication.

Every year, companies include in their 'earnings' the investment gains they
HOPE their defined-benefit pension plans will earn.

Sometimes, the pension plans perform about as well as expected, especially
over a three- to five-year time-frame. But - and here's where it gets
interesting; sometimes they don't even come close to making their
anticipated return. Instead, like a first date that features far more bad
jokes than romantic glances, reality falls well short of expectations.

For example, during the fiscal year ending October 31, 2001, Deere & Co.,
the tractor company, expected its pension plan and post-retirement benefit
plans to produce investment gains of $657 million. In actuality, however,
these plans had losses of $1,419 billion. That's a difference of more than
$2 billion! These latest losses bring Deere's under funded pension liability
to more than $3 billion. "At some point," observes Apogee Research, "Deere
will have to deposit actual cash into its under funded pension plan to make
up the $3 billion shortfall. And yes, that's real money to Deere...$3
billion represents more than five years' worth of average net income!"

Investors should be aware that Deere is not the exception. "Last week
investors were rudely awakened to the troubles that under funded pension
plans could pose for corporate America," writes Jacqueline Doherty of
Barron's. "With the stock market down and pension-fund assets shrinking,
companies ranging from Continental Airlines to Avon Products to the New York
Times indicated they had made, or planned to make, fresh contributions to
bolster the value of their pension plans...General Motors reported that
assets in its U.S. pension plan had dropped by 10% this year, which means
the company's after-tax pension expense could rise by about $1 billion, or
$1.80 a share, in 2003." Standard & Poor's promptly downgraded GM's credit
rating. "The primary reason for the downgrade is that poor pension
investment portfolio returns have 
contributed to a huge increase in GM's already-large unfunded pension
liability," an S&P analyst explained. Recently, Contrary Investor observes,
"plan sponsor/investment industry magazine 'Pension and Investments' studied
the assumed rates of forward investment return for the 100 largest
corporate-defined benefit plans in this country...Although the study only
provides data through 2001, here are some of the highlights worth noting:
the average expected rate of return among the 100 count sample was 9.3%
[and] 88% of the plans had a return assumption of 9% or greater...Yet, 
95 of the 100 companies that made up the group experienced negative 2001
plan returns." 

Eventually, however, companies will have no choice but to face the music and
kick cash into their pension plans. That painful moment of truth has already
arrived for a few companies...and that moment is close to arriving for a few
hundred more.


Matthew I. Brown
E*TRADE Brokerage Holdings, Inc.
Professional
Regulatory Reporting Leader

W: 916-859-4039
C:  916-719-5556
F:  916-859-4096

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