UNITED STATES SECURITIES AND EXCHANGE COMMISSION
          DIVISION OF INVESTMENT MANAGEMENT
         WASHINGTON, D.C.  20549

           May 19, 1998

  Craig S. Tyle, Esq.
  General Counsel
  Investment Company Institute
  1401 H Street, N.W.
  Washington, DC  20005-2148

  Dear Mr. Tyle:

       Since the adoption of amended Form N-1A and rule 498 on
  March 13, 1998,[1] the Division of Investment Management has
  received many questions from mutual funds and their counsel
  regarding the Form and the rule.  We are in the process of
  compiling a list of frequently asked questions and the
  answers that we have provided to these questions.  We plan to
  make the list available in the near future and will send you
  a copy that we would ask that you share with your members.
  We believe, however, the immediate dissemination of answers
  to some of these questions may be helpful to registrants as
  they prepare to file new registration statements and fund
  profiles.  The following is a discussion of these questions
  and answers.

  Rule 485(a) Filing

       We have been asked whether a post-effective amendment to
  a registration statement that has been updated to comply with
  the requirements of Form N-1A, as amended, should be filed
  under paragraph (a) or (b) of rule 485.  As explained below,
  funds should file these post-effective amendments under rule
  485(a).

       The amendments to Form N-1A require registration
  statement disclosure that is, in some cases, revised, and in
  other cases, such as the information required by Item 2 of
  the risk/return summary, completely new.  When a post-
  effective amendment to a registration statement is filed to
  make non-material changes, or when an amendment is filed to
  update or change certain specified routine items, rule 485(b)
  provides for automatic effectiveness of the post-effective
  amendment.  Amendments that make other changes to disclosure
  must be filed under rule 485(a).  Because post-effective
  amendments filed to comply with the requirements of amended
  Form N-1A will likely involve substantial changes to
  disclosure that do not fall within the scope of rule 485(b),
  funds should file these amendments under rule 485(a).

       We recognize that the Commission will receive
  substantially more post-effective amendments filed under rule
  485(a), particularly in 1999.  Consequently, we encourage
  registrants to request selective review of their filings when
  appropriate.[2]

  Preparation of a Profile Before the Amended Prospectus

       Noting that the profile includes a risk/return summary
  that is substantially the same as the risk/return summary in
  a fund's prospectus, some registrants have asked whether a
  fund must revise its prospectus to comply with amended Form
  N-1A before filing a profile with the Commission.  Although a
  fund must have an effective registration statement and a
  current prospectus under section 10(a) of the Securities Act
  before it may use a profile, there is no requirement that a
  fund first update its registration statement to comply with
  the requirements of amended Form N-1A.  As a practical
  matter, we anticipate, however, that funds would prepare
  revised prospectuses and profiles concurrently because the
  profile will summarize information that is required by
  amended Form N-1A to be in a fund's prospectus.

  Filing and Use of the Profile

       Some funds have asked whether they may file a profile
  with the Commission before June 1, 1998, the effective date
  of rule 498, so that they may use a profile shortly after the
  rule becomes effective.  We are in the process of making
  changes to the Commission's EDGAR system to accommodate the
  filing of the profile.  We anticipate that new form types
  will not be available until June 1, 1998.  Thus, the
  Commission will not accept profile filings before that date.

       In determining when a registrant will be able to first
  use a profile, funds should note that rule 497(k)(1)
  provides, generally, that a fund may not distribute a new
  form of profile to any person unless it has been on file with
  the Commission for 30 days.  A fund may not be able to use
  the profile after 30 days, however, when a new profile is
  filed in connection with an initial registration statement, a
  post-effective amendment that adds a series of a fund to a
  registration statement, or when the profile reflects changes
  to a prospectus included in a post-effective amendment filed
  to update a registration statement under rule 485.  In these
  cases, the profile may be used on the later of 30 days after
  it is filed or the date that the registration statement or
  post-effective amendment becomes effective.

  **FOOTNOTES**

    [1]:  Investment Company Act Release No. IC-23064 (Mar. 13, 1998) (63 FR
          13916) ("Form N-1A Adopting Release");  Investment Company Act
          Release No. IC-23065 (Mar. 13, 1998) (63 FR 13968).


    [2]:  See Investment Company Act Release No. IC-13768 (Feb. 15, 1984) (49
          FR 6708).





==========================================START OF PAGE 2======



  Three-day Requirement

       Instruction 3 to Item 1(b)(1) of Form N-1A, as amended,
  requires a fund that receives a request for the Statement of
  Additional Information ("SAI"), the annual report, or the
  semi-annual report, to send the requested document within
  three business days of receipt of the request.  An
  instruction to rule 498(c)(1)(v) contains a similar
  requirement and also requires a fund to send the prospectus
  upon request within three business days.  We have been asked
  whether a fund must begin to comply with these requirements
  on June 1, 1998.  A fund must begin to comply with the three
  business day requirement at the time its registration
  statement under amended Form N-1A becomes effective or when
  it begins to use a profile.

       The Form N-1A Adopting Release noted that the
  Commission's Office of Compliance Inspections and
  Examinations will examine fund compliance with the three
  business day requirement.  We have been asked what a fund
  would need to show the staff to establish compliance with
  this requirement.  A fund should show that it maintains
  policies and procedures, internally and with financial
  intermediaries through which shares of the fund may be
  purchased or sold, that assure that the fund honors requests
  for the prospectus, SAI, and annual/semi-annual reports
  within the three business day period.  The fund also should
  be able to demonstrate that its policies and procedures in
  fact result in the timely distribution of documents subject
  to the three business day requirement.

  4 to 6 Month Undertaking

       Item 32(b) of current Form N-1A requires that a new fund
  undertake to file a
  post-effective amendment containing updated financial
  statements within 4 to 6 months of the effective date of its
  registration statement ("4 to 6 month undertaking").  Newly
  organized funds filing a registration statement on current
  Form N-1A before December 1, 1998, and funds with pending or
  effective registration statements that have made a 4 to 6
  month undertaking have asked whether they must comply with
  this requirement.  The funds base their request on the
  Commission's decision to omit the requirement from amended
  Form N-1A.

       In the Form N-1A Adopting Release, the Commission stated
  that the costs associated with the 4 to 6 month update are
  not outweighed by the benefits that the information may
  provide to some investors.  The Commission also noted that an
  investor interested in financial information about a fund's
  initial operations can obtain the information by requesting
  the fund's most recent shareholder report, which is generally
  available 6 to 8 months after the fund commences operations
  and begins selling shares to investors.  For these reasons,
  the Commission decided that amended Form N-1A should not
  require the filing of updated financial statements for a new
  fund.

       We would not object if any newly organized investment
  company or series filing a registration statement on Form N-
  1A before December 1, 1998 omits the 4 to 6 month
  undertaking.  In addition, we would not object if an
  investment company or series with a pending or effective
  registration statement that includes a 4 to 6 month
  undertaking does
  not file the update.  Our determination not to object under
  these circumstances is premised upon the fund providing an
  investor with an annual or semi-annual report upon request.

            *   *   *

       We hope that this information will be helpful to
  registrants.  If you have any questions, please contact
  Markian Melnyk, Deputy Chief of the Office of Disclosure
  Regulation at (202) 942-0592.  Thank you for communicating
  these positions to your membership.


                 Sincerely,



                 Barry D. Miller
                 Associate Director