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CORRESP
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dcorresp.htm
CORRESPONDENCE FILING

Correspondence Filing

 [SHEARMAN & STERLING LLP LETTERHEAD]

 (212) 848-8519

 WRITER’S EMAIL ADDRESS:

 jberman@shearman.com

 September 10, 2004

 John Ganley, Esq.

 Division of Investment Management

 Securities and Exchange Commission

 450 Fifth Street, N.W.

 Washington, D.C. 20549

 IQ S&P ARN Fund Inc. (the “Company”):

 Registration Statement File Nos. 333-118070 and 811-21611

Dear Mr. Ganley:

 As requested, attached is a copy of the example the Company submitted to you today via email.

 Best regards,

 /S/    JENNIFER E. BERMAN

 Jennifer E. Berman

 [EMAIL DATED SEPTEMBER 10, 2004, 3:07 PM

 FROM: JENNIFER E. BERMAN

 TO: GANLEYJ@SEC.GOV

 SUBJECT: IQ S&P ARN FUND INC—EXAMPLE]

 John,

 We look forward to speaking with you on Monday at 11:30am
regarding the IQ S&P 500 ARN Fund Inc. (soon to be known as “IQ S&P 500 GEARED Fund Inc.”). Attached to this email is the example that we believe will provide a clear explanation of how the Fund works. As we discussed, we are
edgarizing the document and filing it as SEC Correspondence. If you have any questions between now and Monday feel free to call me at (212) 848-8519.

 Thank you,

 Jen Berman

 *        *        *

 [ATTACHMENT TITLED “lprg02!.DOC” READS AS FOLLOWS:]

 IQ S&P
500 GEARED Fund: Hypothetical Return Examples

 The
following chart and Hypothetical Return Examples are intended to illustrate the Fund’s gearing strategy and do not reflect fees, expenses, or dividends. For purposes of this illustration, the annual Index Participation Level is assumed to be
3%, and consequently the Annual Return Cap is 9%. The chart and examples do not represent a guaranty of any level of performance of the Index.

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 Example A. Negative Index Returns.

 As the strategy is designed to provide annual returns that track the
performance of the Index on a one-for-one basis in instances where the returns on the Index are negative, the returns on the strategy in this example are expected to match the returns on the Index.

 Example B. Positive Index Returns up to the Index Participation
Level (i.e., 0 to 3% Index Returns)

 As the strategy is
designed to deliver 3-for-1 returns in instances where the Index performs positively up to the Index Participation Level, the returns on the strategy will outperform the returns on the Index by a factor of 3.

 Example C. Positive Index Returns in excess of the
Index Participation Level but less than the Annual Return Cap (i.e., 3% to less than 9% Index Returns).

 If the performance of the Index exceeds the Index Participation Level, the strategy will not deliver further upside, and instead its return will be
limited to the Annual Return Cap. Thus, in instances where the Index exceeds the Index Participation Level but does not exceed the Annual Return Cap, the strategy will still outperform the Index (but not by a factor of 3).

 Example D. Positive Index Returns in excess of the the
Annual Return Cap (i.e., returns of 9% or greater)

 In
instances where the Index exceeds the Annual Return Cap, the strategy will under-perform the Index in an amount equal to the Index’s performance minus the Annual Return Cap.

 Revised Investment Objective

 The Fund ‘s investment objective is to provide returns exclusive of fees and expenses of the Fund linked to the performance of the S&P 500
Composite Stock Price Index (the “S&P 500 Index” or “Index”), and differs depending on whether the Index has positive or negative performance for each annual period (approximately one year). Where the Index has negative
returns for an annual period, the Fund’s investment objective is to provide annual returns that track the

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performance of the Index on a one-for-one basis over the annual period. Where the performance of the Index is positive for an annual period, the Fund ‘s
investment objective is to deliver a “geared” return equal to approximately three times the performance of the Index up to a maximum index participation level (the “Index Participation Level”). The Fund will not participate in
any Index returns in excess of the Index Participation Level, and as a result the Fund’s performance over an annual period will be subject to a maximum annual return cap (the “Annual Return Cap”). The Fund currently anticipates that
the Index Participation Level for its first year of operations will be between 3% and 4%, and accordingly that its Annual Return Cap will equal three times this amount, or 9% to 12%, respectively. In instances where the return of the Index exceeds
the Annual Return Cap, the gearing strategy will under-perform the Index. See “Hypothetical Return Examples” on page          of this prospectus.

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