GARDNER CARTON DOUGLAS

SUITE 3400-QUAKER TOWER WASHINGTON DC

321 NORTH CLARK STREET LIBERTYVILLE ILLINOIS

WRITERS DIRECT DIAL NUMBER CHICAGO ILLINOIS 60610-4795 SOUTHFIELD MICHIGAN

312 644-3000 DENVER COLORADO THOMAS LANCTOT

TELEX 25-3628

312 2458450

TELECOPIER 312 644-3381

Investment Company Act/2a32

Investment Company Act/3c5

April 14 1989

---- -----

zo__

Re No-Action Letter Request on Behalf of

United States Property Investments N.y

Concerning Sections 2a32 and 3c5

of the Investment Company Act of 1940

On behalf of our clients United States Property

Investments N.y tobe-formed Netherlands AnUlles corpo

ration the Company and the Companys to-beformed United

States subsidiary USPI Ralty Inc the Subsidiary we

request that the staff the Staff of the Securities and

Exchange Commission the Commission concur in our position

that for the reasons described below the securities issued by

the Company and the Subsidiary will not constitute redeemable

securities for purposes of Sections 2a32 and 3c5 of

the Investment Company Act of 1940 as amended the Act and

that the Company and the Subsidiary will not be required to

register as investment companies under the Act

The Company will own 100% of the voting stock of the

Subsidiary The Company will offer shares of its preferred

stock the Shares on paired basis with an offering of debt

securities the Bonds by the Subsidiary The Shares and the

Bonds will be sold primarily outside the United States The

Shares and the Bonds also may be sold in the United States

VIA FEDERAL EXPRESS

Office of Chief Counsel

Division of Investment Man

Securities and Exchange Commissi

450 Fifth Street N.W

Washington DC 20549

Attention Mr Thomas Harman

Ladies and Gentlemen

The Company and the Subsidiary
Office of Chief Counsel

April 14 1989

Page

pursuant to Rule 506 of Regulation promulgated under the

Securities Act of 1933 as amended Offers and sales of the

Shares and the Bonds only will be made to investors who are not

residents or citizens of the United States and who qualify as

accredited investors as that term is defined in Rule 501a

of Regulation Offers of Shares and Bonds will be made in

the United States solely for the convenience of foreign

investors who have assets and investment advisers or securities

brokers located in the United States The minimum investment

for each investor will be $50000 and will be allocated ap

proximately 30% to Shares and 70% to Bonds It is expected

that initially there will be more than 100 holders of Shares

and Bonds

The proceeds from the sale of Shares will be transferred by

the Company to the Subsidiary as capital contribution and

together with the proceeds from the sale of Bonds will be

invested by the Subsidiary in fee and joint venture inter

ests in real estate located in the United States and iiin

mortgage loans secured by real estate located in the United

States and interests in joint ventures formed to make mortgage

loans secured by real estate located in the United States It

is expected that the Subsidiarys mortgage loan investments

will have shared appreciation features whereby the Subsidiary

will be entitled to participate in any appreciation in the

value of the underlying property The Subsidiary presently

expects to invest its assets equally in fee interests in real

properties and mortgages although the actual allocation be

tween properties and mortgages has not been firmly established

and is subject to change At least 55% of the Subsidiarys

assets will be invested in fee interests in real estate joint

venture interests in fee interests in real estate mortgage

loans secured exclusively by real estate and interests in joint

ventures formed to make mortgage loans secured exclusively by

real estate or some combination of the foregoing collectively

referred to below as the Qualifying Assets The remaining

portion of the Subsidiarys assets will be invested in mortgage

loans secured primarily by real estate additional security for

these mortgage loans may include other assets of borrower or

guarantees

The Subsidiarys joint venture investments will exclusively

consist of general partnership interests in joint ventures

formed to own fee interests in real estate or ii own

mortgage loans secured by real estate In joint venture that

makes mortgage loan the joint venture partners each will

contribute funds which will be loaned to borrower in

connection with the borrowers acquisition or ownership of
Office of Chief Counsel

April 14 1989

Page

real property and the borrowers obligation to repay the loan

will be secured by mortgage on the real property In any

mortgage loan joint venture the Subsidiary will have the right

by itself to foreclose the mortgage securing the loan in the

event of default While it is unlikely that the Subsidiary

will make such joint venture investment in property or

mortgage loan with more than one partner it is possible that

such joint venture could include two or three partners The

Subsidiary primarily intends to enter into joint ventures with

affiliates of Balcor Realty Company Inc the Advisor

which will serve as investment adviser to the Subsidiary It

also is possible though less likely that joint venture in

vestment would be made with partner not affiliated with the

Advisor In the case of investments in fee interests in real

estate the most likely unaffiliated joint venture partner

would be seller of property

The Subsidiarys interest in joint venture investment

will be determined on the basis of its capital contribution to

the joint venture The Subsidiary will acquire at least 10%

interest in each mortgage loan joint venture included as part

of the Subsidiarys Qualifying Assets although it is expected

that the Subsidiary typically will acquire much higher owner

ship interest in each mortgage loan In the event that joint

venture investment is made with an affiliate of the Advisor

the Subsidiarys ownership percentage in the joint venture in

part may be determined in accordance with investment priority

rules applicable to the affiliate that were imposed by various

state securities regulators The Subsidiary will be active in

the management and operation of each joint venture investment

in fee interests in real estate and the agreement of the

Subsidiary will be required for all major decisions affecting

each such joint venture The Subsidiary will have right of

first refusal to acquire the interest of its partners in each

joint venture We believe that these factors support the

conclusion that the Subsidiarys joint venture investments will

be the functional equivalents of direct ownership by the

Subsidiary in fee interests in real estate and loans secured by

mortgages on real estate

The Company does not expect to pay dividends on the Shares

during the initial years of operation because of the high

degree of leverage including the Bonds to be incurred by the

Subsidiary in acquiring its investments This expectation will

be disclosed in the offering memorandum the Offering

Memorandum delivered to the purchasers of Shares and Bonds

The Bonds will bear interest from the date of issuance through

the termination date of the offering at rate of 10% per annum
Office of Chief Counsel

April 14 1989

Page

and thereafter at rate of 12% per annum An amount equal to

10% per annum on the Bonds will be paid on semi-annual basis

and the remaining 2% will be accrued and paid no later than

upon liquidation of the Subsidiarys investments No market

for Shares or Bonds presently exists or is expected to develop

although it is possible that at some time in the future the

Shares and/or Bonds would be listed on the Luxembourg stock

exchange

Unlike classic open-ended mutual fund the Subsidiarys

investments in real properties and mortgage loans will be

illiquid and will not be susceptible to prompt sale or liquida

tion As result an investment in Shares and Bonds is

intended to be long-term investment This intention also

will be disclosed in the Offering Memorandum However because

market for Shares and Bonds is unlikely to develop an inves

tor who is faced with need for cash or change in his in

vestment objectives or financial circumstances may be unable to

liquidate his investment in Shares and Bonds

Proposed Limited Purchase Option Credit Facility and Optional

Redemption Feature

rchase of Shares and Bonds The Company and the

Subsidiary intend to offer an arLangement the Limited

Purchase Option whereby holders of Shares and Bonds may

request that the Subsidiary purchase their securities subject

to the terms and conditions described below

An investors opportunity to request that his

Shares and Bonds be purchased would commence 24

months after the termination of the offering of

Shares and Bonds

Purchases only will be made in April of each

year and an investor must submit his purchase

request no later than December of the preceding

year For example an investor who in February

requests that the Subsidiary purchase his Shares

and Bonds would have to wait until April of the

following year for the purchase to take place

Any redemption of Shares and Bonds will be made

by the Subsidiary in its sole discretion and

there will be no obligation on the part of the

Company or the Subsidiary to purchase any or all

of the Shares or Bonds tendered
Office of Chief Counsel

April 14 1989

Page

Purchases of Shares and Bonds by the Company and

the Subsidiary will be made on first-come

firstserved basis and only to the extent that

funds are available after payment of current

expenses and ii adequate provision has been

made for the next semiannual interest payment

due on the Bonds

No separate fund will be established to finance

the purchase of Shares and Bonds at the request

of investors

The purchase price paid will be 85% of the net

asset value of the Shares and Bonds

The net asset value of the Shares and Bonds will be deter

mined by the Advisor The net asset value of the Bonds

will be equal to the face value of the Bonds plus any

accrued and unpaid interest to the date of the calcula

tion The net asset value of the Shares will be determined

on the basis of annual independent property appraisals and

the annual audited consolidated financial statements of the

Company and the Subsidiary The Subsidiary will obtain

appraisals as of December 31 of each year for each property

that it owns and for each property underlying its mortgage

loans These appraisals will be prepared by independent

qualified real estate appraisers The net asset value of

the Shares will equal iA the aggregate appraised

value of the properties owned by the Subsidiary plus

the principal amount of the Subsidiarys mortgage loans and

the appraised value of any shared appreciation feature re

lating to such mortgage loans plus the amount of all

other assets as shown on the most recent audited

consolidated balance sheet of the Company and the

Subsidiary less ii all liabilities including the Bonds

outstanding as shown on the audited consolidated balance

sheet of the Company and the Subsidiary As result the

calculation of the net asset value of the Shares will be

based upon independent appraisals and financial statements

audited by independent certified public accountants

Credjt_Faciljti The Company intends to establish an ar

rangement the Credit Facility whereby holder of Shares

and Bonds may borrow up to 50% of the net asset value of his

securities This would be nonrecourse loan secured by the

investors Shares and Bonds and would bear interest at two per

centage points over the prime commercial bank lending rate It
Office of Chief Counsel

April 14 1989

Page

is possible that the Credit Facility could be operated by The

Balcor Company Balcor or an affiliate Balcor is the spon

sor of the Company and the Advisor is an affiliate of Balcor

Balcor or an affiliate would use its own funds to operate the

Credit Facility and would not utilize any funds of the Company

or the Subsidiary Each loan will have term of no more than

three years and any interest not paid from distributions to

investors will accrue and be payable at maturity

The availability of the Credit Facility would not be auto

matic The lender under the Credit Facility will have no

obligation to make any loans to holders of Shares and Bonds

If Balcor or an affiliate provides the Credit Facility loans

generally will be available to investors Primarily because

the amount of loan will be limited to 50% of the net asset

value determined as described above of the Shares and Bonds

securing the loan Balcor or its affiliate will not require

credit checks or establish any other requirements for

borrowers If Balcor or an affiliate does not provide the

Credit Faility it is not possible to predict what if any

loan underwriting requirements an independent lender would es

tablish There will be no limitations on the number of

investors who may utilize the Credit Facility Of course the

availability of the Credit Facility will depend upon the avail

ability of funds and the willingness of the lender to make

loans on the terms described above

Interest and principal on loan will be paid from the

following sources interest paid on the Bonds and divi

dends paid on the Shares and ii payments by the borrower It

is expected that the interest and portion of the principal on

each loan will be repaid from the interest paid on the Bonds

Loans under the Credit Facility will be non-recourse to

investors so that if the loan is not fully satisfied by the

proceeds of the Shares and Bonds securing the loan the lender

will have no right to seek recovery against the borrower Any

proceeds received from the sale of the Shares and Bonds secur

ing defaulted loan that exceed the amount of the outstanding

loan plus any related expenses will be paid to the Borrower

Optional Redemption Provisions All or portion of the

Bonds will be redeemable at any time and from time to time at

the option of the Subsidiary but only from the sources de

scribed below

Regular payments of principal on the Subsidiarys

mortgage loan investments
Office of Chief Counsel

April 14 1989

Page

Full or partial prepayments of the Subsidiarys

mortgage loan investments

Proceeds from the liquidation of the Subsidiarys

investments in mortgages and properties The

Subsidiarys investments only will be liquidated

in accordance with its investment objectives and

no investments will be liquidated for the specif

ic purpose of funding an optional redemption of

Bonds for any reason including request by

holder of Bonds

Discussion

The Company and the Subsidiary do not intend to register

under the Act in reliance on Sections 3c5C and 3c6

of the Act Section 3c5 excludes from the definition of an

investment company

Any person who is not engaged in the business of

issuing redeemable securities. .and who is primarily

engaged in purchasing or otherwise acquiring

mortgages and other liens on and interests in real

estate

The direct ownership by the Subsidiary of fee interests in real

estate and mortgage loans secured exclusively by real estate

falls within the literal language of Section 3c5C of the

Act We also believe that the Subsidiarys joint venture in

vestments are the functional equivalents of direct ownership by

the Subsidiary and would not constitute securities under the

investment contract test used for securities law purposes

Because the Subsidiarys joint venture investments in fee in

terests in real estate will consist of general partnership

interests iiwill include only one or limited number of

partners iiiwill give the Subsidiary right of first re

fusal to purchase the interest of its joint venture partners iv will actively involve the Subsidiary in the management and

operation of the joint venture will require the agreement

of the Subsidiary for all major decisions affecting the joint

venture and vi will primarily involve as partners either

affiliates of the Advisor or property sellers we believe that

these joint venture investments will satisfy the conditions

described in the Staffs NoAction letter issued to MSA Realty

Corporation available March 19 1984 Because in connection

with its joint venture investments in mortgage loans the

Subsidiary will have the right by itself to foreclose the

mortgage securing loan in the event of default ii the
Office of Chief Counsel

April 14 1989

Page

loans included in the Subsidiarys Qualifying Assets will be

secured exclusively by real property and iii the Subsidiary

will own at least 10% interest in each mortgage loan joint

venture included in the Subsidiarys Qualifying Assets we also

believe that the Subsidiarys joint venture interests in

mortgage loans will satisfy the conditions established by the

Staff in NoAction letters issued to Dayton Area Building and

Construction Industry Foundation available May 1987 Baton

Rouge Building and Construction Industry Foundation available

August 31 1984 Northwestern Ohio Building and Construction

Trades Foundation available May 21 1984 and MGIC Mortgage

Corporation available August 1974 As result of these

and other facts stated earlier in this letter we believe that

the Subsidiary would be primarily engaged in purchasing or oth

erwise acquiring mortgages and other liens on and interests in

real estate within the meaning of Section 3c5C of the

Act

In addition Section 3c6 of the Act excludes from the

definition of an investment company company that primarily

engages through majority-owned subsidiary in the business

described in Section 3c5 Because the business of the

Subsidiary will consist exclusively of the activities described

in Section 3c5C and at least 55% of the Subsidiarys

assets will be invested in fee interests in real estate joint

venture interests in fee interests in real estate mortgage

loans secured exclusively by mortgages on real estate and joint

venture interests in mortgage loans secured exclusively by real

estate and because the sole business of the Company will con

sist of owning 100% of the voting stock of the Subsidiary we

believe that the Company satisfies the requirements of Section 3c6 of the Act

In order to qualify for the exclusions from the definition

of investment company contained in Sections 3c5C and 3c6 of the Act the Limited Purchase Option Credit

Facility and optional redemption feature described above must

not cause the Shares and Bonds to constitute redeemable

securities for purposes of Section 3c5 of the Act

Section 2a32 of the Act defines redeemable security as

Any security under the terms of which the

holder upon its presentation to the issuer or to

person designated by the issuer is entitled whether

absolutely or only out of surplus to receive approxi

mately his proportionate share of the issuers current

net assets or the cash equivalent thereof
Office of Chief Counsel

April 14 1989

Page

We believe that the reasons described below support the

conclusion that the Limited Purchase Option Credit Facility

and optional redemption feature described above should not

cause the Shares and the Bonds to be deemed redeemable

securities for purposes of Section 3c5 of the Act

Limited Purchase Option

An investor will not be entitled to receive pay

ment for his Shares and Bonds upon presen

tation of his securities because no

purchases will be made until 24 months after the

termination of the offering and iiShares and

Bonds only would be purchased once year there

after upon at least four months prior notice

As discussed above an investor could wait as

long as 16 months to have his securities pur

chased

The Subsidiary will not liquidate its investments

in properties and mortgage loans in order to fi

nance the purchase of Shares and Bonds and

purchases only will be made out of available

funds limited as described above on first

come firstserved basis No separate purchase

fund will be established

An investor only will be entitled to 85% of the

net asset value of his investment and not his

proportionate share of net assets Because an

investment in Shares and Bonds is intended to be

longterm investment the Company believes that

investors who wish to withdraw their investment

prior to the liquidation of the Subsidiarys in

vestments should be penalized The remaining

investors in the Company and the Subsidiary will

benefit since withdrawing investor will forfeit

15% of the net asset value of his investment

which will accrue to the benefit of the remaining

investors In addition withdrawing investor

also will forfeit any future appreciation in the

value of the Subsidiarys real property and

shared appreciation mortgage loan investments

The legislative history of Section 3c5

supports the conclusion that the Shares and Bonds

are not redeemable securities In adopting an

amendment to Section 3c5 that added the
Office of Chief Counsel

April 14 1989

Page 10

language concerning redeemable securities the

Senate Committee Report stated

The amendment applies only to those com

panies which purport to model themselves

after open-end companies by issuing secur

ity redeemable at the option of the

holder Report of the Senate Committee on

Banking and Currency dated May 21 1969

1970-73 U.S Code Cong Adm News page

4933

Nothing about the Company or the Subsidiary re

sembles an openend mutual fund The

Subsidiarys investments will be illiquid and

once acquired will be held until sale or maturity

and the liquidation proceeds will not be

reinvested The considerable conditions and

limitations described above contrast sharply with

the immediate redemption features offered by

open-end mutual funds Moreover the Company and

the Subsidiary will not engage in the continuous

offering and repurchase of Shares and Bonds

We believe that the Limited Purchase Option

closely resembles the one discussed in the

Staffs NoAction letter issued to Breen Mortgage

Company available January 20 1988

Credit Facility Because it does not involve the

redemption or purchase of securities or the use of any funds of

the Company or the Subsidiary we believe that the availability

of the Credit Facility should not cause the Shares and the

Bonds to be deemed redeemable securities Even if Shares and

Bonds are acquired by Balcor or an affiliate pursuant to the

foreclosure of defaulted loan this arms length lending ar

rangement should not be considered redemption or purchase

feature Moreover the availability of the Credit Facility

will not be automatic and is subject to the availability of

funding independent of the Company or the Subsidiary The

amount of loan will be limited to 50% of the net asset value

of borrowers securities As discussed above the Company

and the Subsidiary will not engage in the continuous offering

and repurchase of Shares and Bonds
Office of Chief Counsel

April 14 1989

Page 11

Optional Redemption Provisions

We believe that the definition of redeemable se

curity contained in Section 2a32 of the Act

is intended to apply only to redemptions

initiated by the holder of securities and not to

optional redemptions by an issuer While it is

possible to construe Section 2a32 as applica

ble to optional issuer redemptions because pre

sentation of the Bonds to the Subsidiary

presumably would be necessary in order for

holder of Bonds to receive his optional

redemption payment we believe that this would be

strained and artificial interpretation of

provision clearly intended to apply to investorinitiated redemptions

Because the source of funds for any optional

redemptions would be principal payments on mort

gages mortgage prepayments or the proceeds from

the liquidation of the Subsidiarys investments

in accordance with its investment objectives the

optional redemption feature is consistent with

those considered in the following NoAction

Letters issued by the Staff Premier Mortgage

Corporation available March 14 1983 American

Home Finance Corporation available May 11 1981

and U.S Home Finance Corporation available

May 30 1980

Conclusion

We believe that the reasons discussed above support the

conclusion that the Limited Purchase Option Credit Facility

and optional redemption feature will not cause the Shares and

the Bonds to be deemed redeemable securities for purposes of

Section 3c5 of the Act and that as result the Company

and the Subsidiary will not be required to register under the

Act We request that the Staff issue letter stating that it

concurs in our conclusion and that it will not recommend that

action be taken by the Commission if the Limited Purchase

Option Credit Facility and optional redemption feature
Office of Chief Counsel

April 14 1989

Page 12

described above are utilized Please contact Thomas Lanctot

3122458450 in our Chicago office with any questions or

requests for additional information

Very truly yours

Thomas Lanctot

TEL dir

cc Ms Hope Lewis

Mr Jerry Ogle

Mr Frank Ball

Mr Gerald Penner

56511
TAY 11989

Our Ref No 89-231CC

United States Property

RESPONSE OF OFFICE OF CHIEF COUNSEL Investments N.y

DIVISION OF INVESTMENT MANAGEMENT File No 13 2-3

Your letter dated April 14 1989 requests that we concur

in your position that the proposed securities to be issued by

United States Property Investments N.y the Company and its

proposed United States subsidiary USPI Realty Inc the

Subsidiary will not constitute redeemable securities for

purposes of sections 2a32 and 3c5 of the Investment

Company Act of 1940 the Act and that as result the

Company and the Subsidiary will not be required to register as

investment companies in reliance upon the exceptions from the

definition of investment company in sections 3c6 and

3c respectively of the Act

We understand from your letter that the Company will own

100% of the voting stock of the Subsidiary and ownership thereof

will be the sole business of the Company The Company will issue

shares of its preferred stock Shares on paired basis with

an offering of debt securities the Bonds by the Subsidiary

While the Shares and Bonds will be sold primarily outside the

United States they may be sold also in the United States

pursuant to Rule 506 of Regulation under the Securities Act of

1933 Offers and sales of the Shares and Bonds will be made only

to accredited investors as defined in Rule 501a of Regulation

who are not U.S residents or citizens

The proceeds from the sale of Shares will be transferred by

the Company to the Subsidiary as capital contribution and

together with the proceeds from the sale of Bonds will be

invested by the Subsidiary only in fee interests in real

estate located in the United States and interests in joint

ventures formed to acquire fee interests in real estate located

in the United States and iiin mortgage loans secured by real

estate located in the United States and interests in joint

ventures formed to make mortgage loans secured by real estate

located in the United States At least 55% of the Subsidiarys

assets will be invested in fee interests in real estate mortgage

loans secured exclusively by real estate interests in joint

ventures formed to acquire fee interests in real estate

interests in joint ventures formed to make mortgage loans secured

exclusively by real estate or some combination of the foregoing

The remaining assets of the Subsidiary will be invested in

mortgage loans secured primarily but not exclusively by real

estate

The Subsidiarys interests in joint ventures will consist

exclusively of general partnership interests in joint ventures

with up to three partners and in which the Subsidiarys

proportionate interest will depend on its capital contribution to
the joint venture The Subsidiary will have right of first

refusal to acquire the interests of the other partners

The Subsidiary will be active in the management and

operation of each joint venture formed to acquire fee interests

in real estate and the agreement of the Subsidiary will be

required for all major decisions affecting each such joint

venture In joint ventures formed to make mortgage loans each

partner will contribute funds to be loaned and each loan will be

secured exclusively by mortgage on real estate Even though

the Subsidiary will acquire as little as 10% interest in these

mortgage loan joint ventures you represent that the Subsidiary

will have the right by itself to foreclose the mortgage

securing the loan in the event of default

Three plans would be available to holders of Shares and

Bonds the Limited Purchase Option the Credit Facility and

Optional Redemption Provisions Under the Limited Purchase

Option no investor request to have Shares and Bonds

purchased by the Company and the Subsidiary will be honored for

24 months after the termination of the offering of Shares and

Bonds thereafter if an investor has submitted his purchase

request no later than December he may request that the Company

and the Subsidiary purchase such Shares and Bonds only in April

of the following year there will be no obligation on the

part of the Subsidiary or the Company to redeem any or all of the

Shares or Bonds tendered purchases of Shares and Bonds by

the Company and the Subsidiary will be made on first-come

first-served basis and only to the extent that they have funds

available after payment of current expenses and ii adequate

provision has been made for the next semiannual interest payment

due on the Bonds no separate fund will be established to

finance the purchase of Shares and Bonds of investors seeking

liquidation and the purchase price paid will be 85% of the

net asset value of the Shares and Bonds .j

You state that the availability of credit to holders

of Shares and Bonds through use of the Credit Facility will

.1J The net asset value of the Shares and Bonds will be

determined by the Subsidiarys investment adviser Ba.cor

Realty Company Inc The net asset value of the Bonds will

be equal to the face value of the Bonds plus any accrued and

unpaid interest to the date of the calculation

The net asset value of the Shares will be determined on the

basis of annual independent property appraisals and the

annual consolidated financial statements of the Company and

the Subsidiary as audited by independent certified public

accountants
involve only funding independent of the Company and the

Subsidiary the Credit Facility will have no contractual

obligation to make loans to investors and the amount of any

loan will be limited to 50% of the net asset value of the Shares

and Bonds securing the loan

Redemptions of Bonds under the Optional Redemption

Provisions will be made only at the option of the Subsidiary and

solely from regular payment of principal on the

Subsidiarys mortgage loan investments full or partial

prepayinents of the Subsidiarys loan investments and

proceeds from the liquidation of the Subsidiarys investments in

mortgages and properties The Subsidiarys investments in

mortgages and properties will not be liquidated to meet investor

requests for redemption but rather will be liquidated only for

purposes of meeting investment objectives

On the basis of the representations in your letter we would

not recommend that the Commission take any enforcement action

against the Company or the Subsidiary if the Company issues the

Shares and the Subsidiary issues the Bonds without registering

under the Act Because this position is based on the

representations you made to the Division you should note that

any different facts or conditions might require different

conclusion Further this response expresses only the

Divisions position on enforcement action and does not purport to

express any legal or interpretive conclusion on the issues

presented

Hope Lewis

Attorney