212 344-0600

CABLE CLEARGOLAW

TELEX

WUI 62985

RCA 235438

FACSIMII.E

TELEc0PIERGPS 1/2/3 212 480-0152

RAPIFAX 212 483-1361

FAX GP2 2I2 344 0925

Attention Thomas Lemke

Chief Counsel

Division of Investment Management

Re Salomon Brothers Inc

Dear Sirs

Salomon Brothers Inc Salomon proposes to pro

vide financial services in connection with the establishment

of trust the Trust for the purpose of issuing partici

pation certificates the Certificates evidencing frac

tional undivided interests in real estate mortgages the

interest on which is exempt from Federal income tax

Salomon believes that such real estate interests exist in

the form of industrial development bonds and other obliga

tions the Mortgage Bonds secured at the time of their

issuance by purchase money mortgages or deeds of trust on

real estate

The Mortgage Bonds will be purchased from one or

more institutional lenders collectively the Institutional

Lender which acquired the Mortgage Bonds under circum

stances that according to legal opinions rendered at the

time of such transactions did not require registration

CLEARY GOTTLIEB STEEN HAMILTON

ONE STATE STREET PLAZA

NEW YORK N.Y 10004

CR c44 14Y MAN R.3MINO M.XRR MARK PRAWLEY JR GERGE 05 SIPIO

ANDRE NEWBURG

JAMES BLAIR

%LTER ROTHSCHILD

.RD PUGH

OE WEISZ

HA000RT STILES

...-IEYM.CONE.m

ALAN APPELBAUM EDWIN MISHKIN

GEORGE COHEN

STEPHEN L.DINCES

..J.SPEED CARROLL PETER PAINE.JR

ANTHONY 000CH

ROGER W.THOMAS

ALBERT PERGAM

GEORGE .1 ORUMBACHJR PETER KARASZ

LOUIS KAHN

MARK WALKER

LESLIE SAMUELS

ALLAN SPERLNG

PETER GAPROW

JAMES MUMSELL

SANDRA WEIKSNER

EVAN DAVIS

WEBB MON 12

MARIETTA POERIO

ALAN DUNNING

CHRISTOPHER LUNDINO

LAURENT ALPERT

BARRY M.FOX pt JUDITH RIPPS

VICTOR LEWKOW LESLIE SILVERMAN

RICHARD SUSKO

STEPHEN SHALEN

RICHARD ZIEGLER

JAMES PEASLEE

ALAN SELLER

THOMAS .1 MOLONEY

DAVID BABEL

EDWARD KLEINBARD

ReSIDENT PARTNERS

Securities and Exchange Cæthission

Investment Company Act of 1940/3c

GEORGE CLEARY

1690- 19611

FOWLER HAMILTON

lOll -1954

LEO GOTTLIEB

MELVIN STEEN

GEORGE BALL

LYMAN TOMDEL.JR JAMES JOHNSON JR

COUNSEL

1752 STREET N.W

WASHINGTON D.C 00030

202 725-2700

TELEX 440507 FAX OPS 513 lOll 409.0542

FAX 003 /0/3 lOll 420-0046

41.AVENUE CE FRIEDLAND 75008 PARIS FRANCE

1-563-1494

TELEX 650021

FAX GPO 1-563-6637

FAX 0P3I 18633509

RUE DE LA LQI 23 STE

1040 BRUSSELS BELGIUM 2-030-2020

TELEX 22935

FAX GPO 12301635 FAX SF3 0-630-0006

WINCHESTER HOUSE

M_tco4zPrIoA.ENO 77 LONDON WALL

LAND

TELEX 67659

_.i-C-ft

-4 -_.- f\ I0iCCNOUSC$TRCET

TELEX 00401

FAX 003 1-101100

Aor1 17

Judiciary Plaza

450 Fifth Street N.W

Washington D.C 20549

-- ----

__________
Securities and Exchange Commission

under the Securities Act of 1933 as amended The Mortgage

Bonds will be purchased from the Institutional Lender by

Salomon or special purpose corporation wholly-owned by

Salomon or its parent the Grantor in any case acting as

principal which will in turn serve as sponsor of the Trust

and assign the Mortgage Bonds contemporaneously to the

Trust

The Trust will enter into an agreement the

Backup Purchase Agreement with special purpose corpora

tion the Backup Purchaser which is an affiliate of the

Institutional Lender pursuant to which the Backup Purchaser

will irrevocably agree to purchase from the Trust any Mort

gage Bonds as to which there occurs default in the payment

when due of principal or interest which is not cured through

payment in full within 90 days after the payment was due

The purchase price would be calculated pursuant to the

Backup Purchase Agreement to be that price which would

provide yield to the holders of the Certificates equal to

the yield at which the Certificates were originally offered

to the public

Timely payment of amounts due from the Backup

Purchaser under the Backup Purchase Agreement will be guar

anteed by surety bond the Surety Bond to be purchased

by the Backup Purchaser from an insurance company the Surety which may be the Institutional Lender or an af

Eiliated corporation The Surety Bond will be issued to the

independent trustee the Trustee of the Trust for the

benefit of the holders from time to time of the Certifi

cates

On behalf of Salomon we respectfully request that

the staff of the Division of Investment Management advise us

that it will not recommend that the Commission take enforce

ment action if the Trust issues the Certificates without

registering under the Investment Company Act of 1940 as

amended the 1940 Act

Description of the Proposed Transaction

Proceeds from the sale of the Certificates will be

used by the Trust to purchase the Mortgage Bonds from the

Grantor contemporaneously with the delivery of the Certifi

cates and to pay various costs of issuance including legal

fees and costs of distribution The Mortgage Bonds will

bear interest at fixed rate Interest on the Mortgage

Bonds will be paid either monthly or semiannually In all
Securities and Exchange Commission

cases interest on the Mortgage Bonds will at the time of

the issuance of the Certificates be exempt from Federal

income tax according to legal opinions rendered at the time

the Mortgage Bonds were issued

Each Certificate will entitle its holder to cash

distribution payable either monthly or semiannually of the

pro rata share of all payments of principal of and interest

on the Mortgage Bonds held by the Trust and the pro rata

share of all amounts received by the Trust from the Backup

Purchaser or under the Surety Bond upon the purchase of

defaulted Mortgage Bonds pursuant to the Backup Purchase

Agreement less fees and expenses of the Trustee and fees of

the servicer of the Mortgage Bonds which will be the Insti

tutional Lender or its affiliate all as described below

Such distributions will be exempt from Federal income tax to

the same extent as interest on the respective Mortgage Bonds

held by the Trust The Certificates will be sold to inves

tors at price equal to specified percentage of the

unpaid principal amount of the Mortgage Bonds to be deter

mined by Salomon based on market conditions at the time of

sale plus accrued interest on the Mortgage Bonds

Under the Backup Purchase Agreement between the

Trust and the Backup Purchaser the Backup Purchaser will

irrevocably agree to purchase from the Trust any Mortgage

Bonds as to which there occurs default in the payment when

due of principal or interest which is not cured through

payment in full within 90 days after the payment was due

The purchase price would be calculated pursuant to the

Backup Purchase Agreement to be that price which would

provide yield to the holders of the Certificates equal to

the yield at which the Certificates were originally offered

to the public In addition the Surety Bond to be purchased

by the Backup Purchaser from the Surety will be in an amount

sufficient to provide for the payment of the Backup Pur

chasers obligations in connection with the purchase of

defaulted Mortgage Bonds pursuant to the Backup Purchase

Agreement The Backup Purchase Agreement and the Surety

Bond will eliminate the need for prospective investors to

investigate in detail the adequacy of the assets securing

the Mortgage Bonds or the financial condition of the indi

vidual companies which use the facilities financed with the

proceeds of the Mortgage Bonds

The Trust will be passive trust created by the

Grantor solely to hold the Mortgage Bonds on behalf of the

holders of the Certificates The Trustee will not invest
Securities and Exchange Commission

any Trust assets other than the short-term investment pend

ing distribution to holders of Certificates of payments

received on the Mortgage Bonds No Mortgage Bonds will be

sold from added to or withdrawn from the Trust after the

Certificates are issued except for Mortgage Bonds purchased

by the Backup Purchaser on default as described above and

certain Mortgage Bonds which the Trustee of the Trust will

be instructed to tender for purchase as described below

The Certificates will not be redeemable either at

the option of the Certificateholders or the Trust and the

Certificateholders will have no right to require the Trust

the Backup Purchaser or the Surety to purchase any Certifi

cates The Mortgage Bonds generally contain no provision

for redemption or purchase at the option of the holder

thereof In those few cases where the Mortgage Bonds con

tain such provisions the Trustee will be instructed at the

time of the establishment of the Trust to tender such Mort

gage Bonds for redemption or purchase at the earliest date

on which it may do so in accordance with the terms of the

Mortgage Bonds In the event of the redemption of any of

the Mortgage Bonds or the purchase of any Mortgage Bonds by

the Backup Purchaser pursuant to the Backup Purchase Agree

ment any amounts received by the Trust will be distributed

on pro rata basis to the Certificateholders and be cred

ited against the unpaid principal amount of the Certifi

cates

The Institutional Lender or its affiliate will

continue to service the Mortgage Bonds pursuant to servic

ing agreement with the Trust providing for fixed servicing

fees which will be agreed upon at the time of the establish

ment of the Trust The Trustee will have authority to sub

stitute another servicer if the Institutional Lender or its

affiliate as the case may be defaults under the servicing

agreement

The Grantor will realize profit or sustain

loss resulting from the difference between the purchase

price paid to the Institutional Lender for the Mortgage

Bonds and the cost of the Mortgage Bonds to the Trust In

addition the Trust may pay to Salomon fixed percentage of

the outstanding principal amount of the Mortgage Bonds held

by the Trust as fee for Salomons services in connection

with the establishment of the Trust and selling the Certifi

cates to investors
Securities and Exchange Commission

Exemption of the Trust prom Registration under the

1940 Act

Each of the Mortgage Bonds will be primarily se

cured by purchase money mortgages or deeds of trust on real

property acquired or developed with the proceeds of the

Mortgage Bonds and had loan to value ratio at the time

the Mortgage Bonds were issued of not more than 100 percent

At least 55 percent of the Mortgage Bonds by principal

amount will be secured at the date of their issuance and at

the date of issuance of the Certificates exclusively by

interests in real estate Such Mortgage Bonds will repre

sent the entire outstanding issue of one or more issues of

Mortgage Bonds In those cases where the mortgages or deeds

of trust securing the Mortgage Bonds run to an indenture

trustee for the benefit of the holders from time to time of

the Mortgage Bonds the Trust will have the right as the

holder of the entire issue of such bonds to direct the

indenture trustee to foreclose on the real property covered

by such mortgages or deeds of trust In all other cases

the mortgages or deeds of trust securing the Mortgage Bonds

will be assigned and title to such mortgages transferred

to the Trustee who will have the right to foreclose on the

real property subject to such mortgages or deeds of trust

The Mortgage Bonds will not be readily tradable in any

currently-existing secondary market

In our opinion the Trust will be excluded from

the definition of an investment company by reason of Section 3c5C of the 1940 Act which exempts from the defini

tion of investment company any company that is not en

gaged in the business of issuing redeemable securities face

amount certificates of the installment type or periodic

payment plan certificates and that is primarily engaged

in purchasing or otherwise acquiring mortgages and

other liens on and interests in real estate See generally

Shearson Lehman/American Express Inc pub avail March 25

1985 McDonald Company Securities Inc pub avail Dec

14 1983 Merrill Lynch Pierce Fenner Smith Inc pub

avail Nov 1981 In similar context the staff has

taken the position that an issuer is exempt under Section 3c5C if at least 55 percent by principal amount of an

issuers assets constitute mortgages and other liens on and

interests in real estate See Shearson Lehman/American

Express Inc pub avail March 25 1985 Salomon Brothers

Mortgage Securities Inc pub avail Nov 1983
Securities and Exchange Commission

We are also of the view that the Trust will not be

exigaged in the business of issuing redeemable securitiest

that would render the Section 3c5C exemption unavail

able See generally Shearson Lehman/American Express Inc

pub avail March 25 1985 McDonald Company Securities

Inc pub avail Dec 14 1983 Section 2a32 of the

Act defines redeemable security as any security other

than short-term paper under the terms of which the holder

upon its presentation to the issuer or to person desig

nated by the issuer is entitled to receive approxi

mately his proportionate share of the issuers current net

assets or the cash equivalent thereof

There will be no obligation on the part of the

Trust or any one designated by the Trust as acting on its

behalf to purchase any Certificates whether on demand of

the holders thereof or otherwise Any amounts received by

the Trust upon redemption of any of the Mortgage Bonds or

purchase of any Mortgage Bonds by the Backup Purchaser pur

suant to the Backup Purchase Agreement will be distributed

pro rata to the holders of the Certificates and not used to

redeem Certificates

On the basis of the foregoing we respectfully

request that the staff of the Division of Investment Manage

ment advise us that it will not recommend that the Commis

sion take enforcement action if the Trust issues the Certif

icates without registering under the 1940 Act

Salomon would like to proceed with the offering of

the Certificates at the earliest possible time and would

therefore appreciate your earliest consideration of this

matter If further clarification is requested please call

Alan Appelbaum or Richard Lincer of this firm at 212

344-0600

Very truly yours

CLEARY STEEN HANILTON
MAY 1985

Our Ref No 85189

RESIONSE OF THE OFFICE OF CHIEF COUNSEL Salomon Brothers Inc

DIVISION OF INVESTMENT MANAGEMENT File No 132-3

We would not reccrrend that the Carinission take any enforcement action

under the Investment Ccxnpany Act of 1940 1940 Act against Salcenon Brothers

Inc or the Trust if in reliance upon your opinion as counsel that the Trust

is excepted fran the definition of investment company by section 3c

of the 1940 Act the Trust does not register under the 1940 Act Our position

is based upon the facts and representations contained in your letter of

April 17 1985 specifically that at least 55% of the Trusts assets will

be invested in Mortgage Bonds representing the entire outstanding issue

of one or nre issues of Mortgage Bonds and the oral representation

made to me on May 10 1985 to the effect that the remaining 45% of the

Trusts assets will be invested primarily in real estatetype interests

Because this position is based both upon the representations made to the

Division in your letter and upon your oral representation you should

note that any different facts or conditions might require different

conclusion Further this response only expresses the Divisions position

on enforcement action and it does not purport to express any legal or

interpretive conclusion on the questions presented

4JJ7

Gerald Lins

Attorney