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

            October 2, 1998


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

  Dear Mr. Tyle:

       In the time that has passed since the Commission adopted
  amendments to Form N-1A and the new profile rule, members of the
  fund industry have asked us a variety of questions seeking
  clarification or interpretations of certain new disclosure rules.
  In our May 19, 1998 letter to you, we answered a number of those
  questions.  The purpose of this letter is to set out our views
  about various issues raised with us since we last wrote to you.
  We believe our responses will be of interest to the entire fund
  industry and ask that you distribute our letter to the membership
  of the Investment Company Institute.  We also will make this
  letter and our May letter available on the Commission's web site
  (http://www.sec.gov/rules/othrindx.htm).

       For the convenience of the industry, we have used a
  question-and-answer format in this letter.  We begin with issues
  arising with respect to Form N-1A.

         Form N-1A

  Bar Chart and Performance Table

  1)   Q:  Should the disclosure of a fund's highest and lowest
  return for a quarter during the 10 calendar years or other period
  of the bar chart be for calendar quarters or fiscal quarters?

       A:  Consistent with the other information in the bar chart
  and the performance table, the highest and lowest quarterly
  performance information should be based on calendar quarters.

  2)   Q:  Item 2(c)(2)(ii) of Form N-1A requires that, if a fund's
  fiscal year is other than a calendar year, it must include year-
  to-date return information as of the end of the most recent
  quarter in a footnote to the bar chart.  If such a fund does not
  have a full calendar year of performance information, must it
  provide year-to-date return information?

       A:  No.  As with the bar chart itself, year-to-date return
  information is not required, and is not permitted, until a fund
  has annual return information for at least one calendar year.

  3)   Q:  May a load fund include in the performance table returns
  reflecting both the sales load and load-waived returns?

       A:  No.  Instruction 2(a) to Item 2(c)(2) requires
  calculation of average annual total returns in accordance with
  Item 21(b)(1).  That Item requires a fund to include the maximum
  sales loads (including deferred sales loads) and recurring
  account fees in the calculation of average annual total returns.

  4)   Q:  Must a money market fund include the performance table
  in its prospectus and, if so, must the table include a comparison
  to a broad-based securities market index?

     A:  Item 2(c)(2)(iii) of Form N-1A requires
        a fund, including a money market fund, that has
        annual return information for at least one
        calendar year to include the performance table
        in its prospectus.  While the performance table
        generally must include the returns of an
        appropriate broad-based securities market index,
        consistent with the requirements of Item 5,
        Management's Discussion of Fund Performance, a
        money market fund need not compare its
        performance to a broad-based securities market
        index.  A money market fund may, at its option,
        include information for one or more other
        indices as permitted by Instruction 6
        to Item 5(b).

  5)   Q:  May a non-money market fund that does not disclose yield
  information in its risk/return summary provide a telephone number
  that investors can use to obtain current yield information?

     A:  Yes.  Instruction 2(d) to Item 2(c)(2)
        of Form N-1A requires a non-money market fund
        that discloses yield to provide a toll-free (or
        collect) telephone number that investors can use
        to obtain current yield information.  This
        requirement does not preclude a non-money market
        fund that does not disclose yield in its
        prospectus from providing a telephone number for
        that purpose.  Thus, a non-money market fund,
        like a money market fund, has the option of
        providing yield information in its prospectus or
        disclosing a telephone number that investors can
        use to obtain current yield information.

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


  Fee Table

  6)   Q:  May funds with fees and/or expenses that are subject to
  reimbursements or waivers show the net amount of those fees or
  expenses in the fee table?

       A:  Yes, under certain circumstances.  If a fund's fees in
  the fee table are subject to a contractual limitation that
  requires reimbursement or waiver of expenses, a fund may add two
  lines to the fee table: one line showing the amount of the
  reimbursement or waiver, and a second line showing the fund's net
  expenses after subtracting the fee reimbursement or expense
  waiver from the total fund operating expenses.  A fund should
  place these additional lines immediately under the "Total Annual
  Fund Operating Expenses" line of the fee table and should use
  appropriate descriptive captions.  A footnote to the fee table
  should describe the contractual arrangement.  A fund could, for
  example, use a format such as the following:

  Annual Fund Operating Expenses (expenses that are deducted from
  Fund assets)

       Management Fees           xx   %
       Distribution [and/or Service](12b-1) Fees xx   %
       Other Expenses            xx   %
    ___________________        xx   %
    ___________________        xx   %
    ___________________        xx   %
       Total Annual Fund Operating Expenses      xx   %
       Fee Waiver [and/or Expense Reimbursement] xx   %
       Net Expenses      xx   %

       Fee waivers or expense reimbursements that are not
  contractually imposed may be disclosed only in a footnote to the
  fee table.  The Commission stated in its release adopting
  amendments to Form N-1A ("Form N-1A Adopting Release") that
  disclosure of the gross level of fund operating expenses would
  give investors clearer information about the long-term costs of
  an investment in a fund.[1]  The Commission was concerned that
  allowing a fund to show operating expenses net of the waiver or
  reimbursement would lead investors to focus on costs resulting
  from temporary or discretionary waiver and reimbursement
  arrangements rather than long-term costs.  In meeting the
  provisions of Form N-1A, a fund for which the investment adviser
  (or other party) intends to reimburse expenses or waive fees, but
  is not contractually obligated to do so, may include a footnote
  to the fee table showing fund operating expenses net of waivers
  or reimbursements.  We recognize that circumstances may require
  modifications to the fee table.  When such circumstances arise,
  we will work with a fund as it develops a presentation that is
  appropriate for the fund and meets the spirit of the new
  requirements.

  **FOOTNOTES**

    [1]: Investment Company Act Release No. IC-23064 (Mar. 13, 1998) [63 FR 13916,
         13925].



==========================================START OF PAGE 3======



  Purchase and Sale Information

  7)   Q:  The Form N-1A Adopting Release states that "as long as
  the purchase and sale information in a fund's prospectus is not
  reduced below the minimum [disclosure] required by Form N-1A, the
  fund would be able to create and use a separate purchase and sale
  disclosure document as supplemental sales literature."[2]  What
  is the minimum disclosure required in the prospectus?

       A:  The minimum disclosure required in a prospectus depends
  upon the facts and circumstances specific to a particular fund.
  The following types of disclosures, however, are examples of
  those that would not be required to appear in the prospectus: (1)
  a description of every possible way to purchase or redeem fund
  shares; (2) a description of every restriction or process related
  to purchasing or redeeming fund shares (e.g., requirements that
  checks be drawn in U.S. dollars, and disclosure about share
  certificates); and (3) detailed information about various types
  of accounts, such as different types of tax-deferred accounts.
  Among the information that would be required is disclosure of any
  material restrictions that a fund imposes on the right of
  redemption and disclosure of minimum investment requirements.

  8)   Q:  Item 18(a) of Form N-1A provides that a fund may
  incorporate purchase and redemption information required by Item
  18(a) into its Statement of Additional Information ("SAI") by
  reference to a separate disclosure document that may be provided
  to investors with the SAI or separately.  If a fund elects to
  provide purchase and redemption information in a separate
  disclosure document that it incorporates by reference into the
  SAI, can the SAI, in turn, be incorporated by reference into the
  fund's prospectus without violating the Commission's rule that
  restricts double incorporation by reference?  Are the delivery
  requirements for this separate document the same as for the
  complete SAI?

       A:  Rule 10(d) [17 CFR 229.10(d)] generally prohibits double
  incorporation by reference -- an incorporation by reference that
  is twice removed from the primary document.  Funds that choose to
  incorporate the SAI into the prospectus should include, rather
  than incorporate, the information required by Item 18(a) in a
  separate section of the SAI and provide that section individually
  and apart from the SAI to investors who request additional
  purchase and redemption information.  Since the purchase and
  redemption information would be a separable section of the SAI
  and not a separate document, the fund would avoid double
  incorporation by reference when the SAI is incorporated by
  reference into the prospectus.

       Item 1 of Form N-1A requires a fund that receives a request
  for the SAI or the shareholder report to send the requested
  document within 3 business days of receipt of the request.  The
  same delivery requirement would apply to a request for a separate
  section of the SAI containing additional information on purchase
  and redemption procedures.  We note that a fund that chooses to
  use these SAI disclosure options must provide a complete SAI to
  investors who request the SAI and do not limit their request to
  information on purchase and redemption procedures.

  Compliance

  9)   Q:  May a post-effective amendment that is not yet required
  to comply with amended Form N-1A reflect some, but not all, of
  the amended requirements?

       A:  Generally, no.  The staff would not object, however, if,
  prior to updating its entire registration statement, a fund chose
  to: (i) move the 10-year financial highlights table from the
  front of the prospectus and delete average commission rate
  information from that table; (ii) move from the prospectus to the
  SAI disclosure about technical, legal, or operational matters as
  permitted by Form N-1A, as amended; (iii) omit, as exhibits to
  its registration statement, model retirement plans used to offer
  fund shares, schedules showing the calculation of performance
  information, and voting trust agreements; or (iv) omit the table
  showing the number of holders of each class of fund shares from
  Part C of its registration statement.

  Three-Day Mailing Requirement

  10)  Q:  Must a fund ensure that a third-party intermediary
  selling its shares complies with the requirement to send the SAI,
  annual or semi-annual report (and, in the case of the profile,
  the prospectus) to an investor within 3 business days of receipt
  of a request?

       A:  Yes, if the third-party intermediary is named in the
  prospectus (or profile) or otherwise acts as an agent of the
  fund.  In the Form N-1A Adopting Release and the release adopting
  the profile rule ("Profile Adopting Release"),[3] the Commission
  stated that funds are required to mail SAIs and prospectuses to
  investors within 3 days of a request because prompt delivery of
  the those documents to investors is essential to the disclosure
  formats contemplated by Form N-1A and the profile.  Recognizing
  that many funds are distributed through financial intermediaries
  and that investors may look to those intermediaries to provide
  information, the Commission allowed a fund to indicate in its
  prospectus or profile that an investor may obtain an SAI or
  shareholder report (or, in the case of the profile, the
  prospectus) from a financial intermediary.  When a financial
  intermediary is named in the prospectus (or profile) as a party
  to contact in order to obtain information or when a financial
  intermediary otherwise acts as an agent for a fund, the fund
  remains obligated to ensure that the information is sent to
  investors within 3 business days of receipt of a request.  In
  those cases, the fund can contract with intermediaries to ensure
  their compliance with the 3-day mailing requirement.

       A fund, however, is not responsible for ensuring that a
  third-party intermediary complies with the 3-day mailing
  requirement if:  (1) the third-party intermediary is not an agent
  of the fund; (2) the prospectus or profile provides the fund's
  toll-free (or collect) telephone number for investors to call to
  obtain a copy of the specified documents from the fund; (3) the
  prospectus or profile does not mention that intermediary as a
  source for obtaining these documents and does not generally
  instruct investors to contact an intermediary to obtain
  documents; and (4) an investor directly contacts the third-party
  intermediary to request one or more of these documents.

         Rule 498

  Profile Filings

  11)  Q:  Must a fund that has previously filed a definitive form
  of profile with the Commission subsequently file the updates to
  the bar chart and performance table as required by rule
  498(c)(2)(iii)?

       A:  Yes.  Rules 497(k)(1)(iii)(A) and (B), respectively,
  require a fund that has filed a definitive form of profile with
  the Commission to file any subsequent material and non-material
  changes to the information disclosed under rules 498 (c)(2)(i)-
  (iii).  The Instruction to rule 498(c)(2)(iii) gives a fund the
  option to reflect updated performance information to the bar
  chart and the performance table by affixing a label or sticker to
  the profile or by other reasonable means.  If a fund updates the
  bar chart and the performance table in accordance with the
  Instruction, the fund should file the label, sticker, or "other
  reasonable means" of updating performance information under the
  applicable sub-paragraph of rule 497(k)(1)(iii).  If a fund
  reflects updated performance information to the bar chart and the
  performance table by reprinting and distributing the entire form
  of profile, however, the fund should refile the complete, revised
  definitive form of profile under the applicable sub-paragraph of
  rule 497(k)(1)(iii).

  12)  Q:  Under what sub-paragraph of rule 497(k)(1)(iii) must a
  fund that has previously filed a definitive form of profile with
  the Commission file routine updates to the bar chart, the
  performance table, and the fee table required by rule 498(c)(2)?

       A:  Those kinds of updates should be filed under rule
  497(k)(1)(iii)(B).  A fund should submit routine updates to the
  bar chart, the performance table, and the fee table in the
  profile on EDGAR form type 497K3B.

  13)  Q:  If a fund has filed a definitive form of profile with
  the Commission and subsequently tailors the definitive profile
  for use by investors in participant-directed defined contribution
  plans, must the fund file a new form of profile under rule
  497(k)(1)(i) and observe a 30-day waiting period?

       A:  No.  Rule 498(d) permits a registrant to modify certain
  information included in a profile to be used for a fund that is
  offered as an investment option for certain defined contribution
  plans, tax-deferred arrangements, or variable contracts.  If a
  profile modified under rule 498(d) contains material changes to
  the information disclosed under rules 498(c)(2)(i)-(iii), the
  fund must file the revised definitive form of profile under rule
  497(k)(1)(iii)(A) on EDGAR form type 497K3A.  Conversely, if a
  profile modified under rule 498(d) contains non-material changes
  to the information disclosed under rules 498(c)(2)(i)-(iii)
  (e.g., routine updates to the bar chart, performance table, and
  fee table; omission of, or changes to, the disclosure required by
  rules 498(c)(2)(vi)-(ix); changes to the profile legend), the
  fund must file the revised definitive form of profile under rule
  497(k)(1)(iii)(B) on EDGAR form type 497K3B.  In each instance,
  the definitive form of profile reflecting modifications under
  rule 498(d) must be filed with the Commission no later than the
  fifth business day after the profile's first date of use.

  14)  Q:  If a fund uses a separate application to purchase fund
  shares with the profile, must the fund file that application with
  the Commission?

       A:  Yes.  A fund that uses a separate application with the
  profile must file the application with its profile in three
  circumstances:

       (1)  when it files its first profile under rule 497(k)(1)(i)
       (EDGAR form type 497K1),

       (2)  when it files its definitive form of profile under rule
       497(k)(1)(ii) (EDGAR form type 497K2), and

       (3)  whenever it revises the form of application used with
       the profile.  In this case, the profile should be refiled
       with the revised application under rule 497(k)(1)(iii)(B)
       (EDGAR form type 497K3B).

       Registrants are reminded that, under rule 498(c)(3), an
  application used with a profile must note with equal prominence
  that an investor has the option of purchasing fund shares after
  reviewing the profile or after requesting and reviewing the
  fund's prospectus (and other information).

  Specific Requirements

  15)  Q:  May a fund modify the legend required by rule
  498(c)(1)(iv) that should appear on the cover page or at the
  beginning of the profile?

       A:  No.  In contrast to the disclosure required by rule
  498(c)(2)(ii) which allows some flexibility in the wording of a
  required legend, a fund must include the rule 498(c)(1)(iv)
  legend verbatim on the cover page or at the beginning of the
  profile.

  **FOOTNOTES**

  [2]: 63 FR at 13932-13933.

  [3]:  Investment Company Act Release No. IC-23065 (Mar. 13, 1998)
  [63 FR 13968] (adopting profile rule).


==========================================START OF PAGE 4======



  16)  Q:   If a fund reprints its profile when it updates its
  performance, should the reprinted profile reflect the date that
  the profile was first used, and the date that the profile was
  revised, or should the profile reflect only the date of the
  reprint?

       A:  The profile should reflect only the date of the reprint.

  17)  Q:  What is contemplated by the requirement to provide a
  brief summary of services available to typical investors in a
  fund (see rule 498(c)(2)(ix) and related Instruction)?

       A:  A fund may comply with this requirement by listing the
  services commonly used by a typical fund investor.  We recognize
  that available services vary among different fund groups and
  therefore believe it is appropriate to provide funds with
  flexibility to determine which services to disclose.

  18)  Q:  If a fund group decides to include more than one fund in
  a profile, does the same combination of funds that is described
  in the profile have to appear in a prospectus for the funds?

       A:  No.  There is no requirement that profiles maintain a
  one-to-one correlation with prospectuses.  For example, a single
  profile may be used to offer multiple funds, each having a
  separate prospectus; or multiple profiles may be used to offer
  funds included in a single prospectus.

  19)  Q:  May a fund include information in the profile other than
  the disclosure specified by rules 498(c)(2)(i)-(ix)?

       A:  Generally, no. The profile is intended to be a
  standardized summary of key information in a fund's prospectus.
  Consistent with this purpose, rule 498(b) limits profile
  disclosure to information required or not precluded by paragraph
  (c) of the rule.  Based on the limitations imposed by rule
  498(b), a fund could not include in the profile, for example, a
  list of the fund's top ten portfolio holdings, cumulative
  performance information, or a discussion of the potential rewards
  of investing in the fund, since these items are inconsistent with
  maintaining the profile as a standardized summary.  Funds are
  reminded, however, that they must include sufficient information
  in the profile necessary to avoid material misstatements or
  materially misleading disclosure.



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  20)  Q:  May a fund include in a profile performance information
  appearing in a fund's prospectus under the Nicholas Applegate[4]
  and Bramwell[5] no-action letters?

       A:  No, for the reasons outlined in our answer to question
  19.  Performance information that is consistent with the Nicholas
  Applegate and Bramwell no-action letters is neither required nor
  permitted by rule 498 and may not be included in a profile.

  21)  Q:  If a fund's fiscal year is other than a calendar year,
  the fund must include its year-to-date return information as of
  the end of the most recent quarter in a footnote to the bar chart
  in the prospectus.  See rule 498(c)(2)(iii) (incorporating Item
  2(c)(2)(ii) of Form N-1A).  Given that the profile is updated
  quarterly, is it necessary for a fund to include the footnote to
  the bar chart in the profile?

       A:  No.  Because the performance table is updated quarterly,
  a fund may omit the footnote to the bar chart in a profile.

  22)  Q:  Rule 498(c)(2)(iii) requires funds to "[u]pdate the
  return information as of the end of each succeeding calendar
  quarter as soon as practicable after the completion of the
  quarter."  Which return information must be updated quarterly?

       A:  As indicated in the Profile Adopting Release, a fund
  must update quarterly the return information in its performance
  table (i.e., the fund's average annual total returns and the
  returns of any index included in the table).[6]

  23)  Q:  Under rule 498(c)(2)(iii), at what point must a new fund
  include the performance table in its profile?

       A:  A fund that has annual returns for at least one calendar
  year must include the performance table in the profile.  See rule
  498(c)(2)(iii) (incorporating Item 2(c)(2)(iii) of Form N-1A).

  24)  Q:  The Instruction to rule 498(c)(2)(iii) provides that a
  fund may update the performance table by affixing a label or
  sticker, or by other reasonable means.  Based on this
  Instruction, could a fund update the performance table by
  including the updated performance information in a cover letter
  introducing the profile?

       A:  No. Although the Instruction to rule 498(c)(2)(iii)
  states that a fund may update performance information by affixing
  a label or sticker, or by other reasonable means, a profile may
  not incorporate information by reference to another document.
  Cross-references in a profile to another document are also
  restricted.  These restrictions were intended to ensure that the
  profile is a self-contained disclosure document.  For these
  reasons, we believe that a fund may not update its profile with a
  separate document, even if that separate document is a letter
  that accompanies the profile.

  25)  Q:  Instruction 2(c) to Item 2(c)(2) of Form N-1A states
  that, if a fund selects an index that is different from the index
  used in the performance table for the immediately preceding
  period, the fund must explain the reason(s) for the selection of
  a different index and provide information for both the newly
  selected and the former index.  Given that rule 498(c)(2)(iii)
  incorporates Item 2(c)(2)(iii) of Form N-1A, must a fund that
  changes an index previously used in the profile's performance
  table comply with the Form N-1A Instruction?

       A:  No.  Consistent with the profile's intended purpose as a
  standardized summary of key information in a fund's prospectus,
  we would not object if a fund omitted the explanation and
  information specified in Instruction 2(c) to Item 2(c)(2) of Form
  N-1A from the performance table in the profile.

  26)  Q:  Must a fund describe all sales load waivers in the
  profile?

       A:  No.  Under rules 498(c)(2)(vi) and (vii), a fund that
  offers them should include a statement that waivers are available
  for initial sales loads and for sales loads or charges assessed
  upon redemption.  It need mention specifically only those waivers
  that would apply to a typical purchaser.

  Using the Profile with Rule 482 Materials

  27)  Q:  If an advertisement designed to meet the requirements of
  rule 482 under the Securities Act of 1933 does not accompany a
  profile, may the advertisement include language inviting an
  investor to request and read a profile prior to investment?

       A:  Funds may add language to a rule 482 advertisement that
  invites an investor to request a profile or a prospectus, so long
  as the advertisement refers to both the profile and the
  prospectus and the reference to the profile is no more prominent
  than the reference to the prospectus.

  **FOOTNOTES**

  [4]: Nicholas-Applegate  Mutual  Funds (pub. avail. Aug. 6, 1996)
  (fund  to include in its prospectus  performance  information  of
  private  accounts  managed  by the fund's investment adviser that
  had substantially similar investment  objectives,  policies,  and
  strategies).

  [5]:  Bramwell  Growth  Fund  (pub. avail. Aug. 7, 1996) (fund to
  include in its prospectus standardized  total  return information
  of  another registered investment company previously  managed  by
  the fund's  portfolio  manager  that  had  substantially  similar
  investment objectives and policies).

  [6]: 63 FR 13977.

==========================================START OF PAGE 6======



  28)  Q:  May rule 482 material be bound to or wrapped around the
  profile?

       A:  Yes, if it is clear that the wrapper is not part of the
  profile and each document complies with the rule regulating its
  content as a stand-alone document.

  29)  Q:  Assume that a full page of newspaper copy combines a
  profile with a rule 482 advertisement for the same fund.  Should
  the profile be separated from the rule 482 advertisement?

       A:  Yes.  As discussed in response to question 24, the
  Commission intended that the profile be a short, summary, self-
  contained disclosure document.  In our view, in light of this
  purpose, rule 482 advertisements and profiles should not appear
  as a single document in newspaper copy.  We would not object,
  however, if both documents are used together in newspaper copy so
  long as the boundaries of each document are distinct and each
  document includes its required content.


              *   *   *

       We hope this information will be helpful to members of the
  Investment Company Institute and others as they prepare profiles
  and registration statements on Form N-1A, as amended.  In the
  future, we intend to provide additional guidance as necessary.
  If you have any questions, please contact the Office of
  Disclosure and Review, Division of Investment Management at (202)
  942-0586.  Questions about specific filings should be directed to
  the staff member responsible for reviewing that fund's documents.


             Sincerely,



             Barry D. Miller
             Associate Director