SEC Division of Investment Management staff letter: Investec Ernst & Company

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Investec Ernst & Company

April 24, 2001

RESPONSE OF THE OFFICE OF INVESTMENT COMPANY REGULATION DIVISION OF INVESTMENT MANAGEMENT

Our Ref. No. 01-5-ICR Investec Ernst & Company

Your letter of April 20, 2001 requests our assurance that we would not recommend that the Commission take any enforcement action under the Investment Company Act of 1940 ("Act") if Investec Ernst & Company ("Investec") relies on certain exemptive orders issued to Reich & Tang Distributors, Inc. ("Reich & Tang") and certain unit investment trusts registered under the Act ("UITs") pending action by the Commission on Investec's application for an exemption under sections 6(c), 11(a), 11(c), 12(d)(1)(J), and 17(b) of the Act. On February 9, 2000, Reich & Tang transferred its UIT business to ING Mutual Funds Management Co. LLC and ING Funds Distributor, Inc. (collectively, "ING"), and ING began to serve as sponsor and depositor for the UITs. Prior to the date of transfer, ING requested and received no-action relief from the Division to permit ING to rely on certain exemptive orders issued to Reich & Tang until the earlier of the issuance by the Commission of an exemptive order amending the previous orders, or one year from the date of the letter (the "2000 Letter"). 1 On February 9, 2001, the staff extended the no-action relief granted in the 2000 Letter for a maximum time period ending February 9, 2002. 2

On April 5, 2001, ING entered into an agreement with Investec, pursuant to which ING agreed to transfer the unit investment business that it had acquired from Reich & Tang to Investec (the "Transfer"). 3 The Transfer is conditioned upon the occurrence of certain events. Assuming satisfaction of all events, it is expected that the Transfer will be consummated by May 1, 2001. As of the date of the Transfer, Investec will commence serving as sponsor and depositor for the UITs. You state that the personnel administering the UITs will be substantially unchanged. Reich & Tang and certain UITs received the following orders from the Commission granting exemptions from various provisions of the Act (collectively, the "Exemptive Orders"): (1) an order under section 6(c) of the Act permitting certain UITs to impose sales charges on a deferred basis and waive the deferred sales charges in certain cases; 4 (2) an order under sections 6(c) and 17(b) of the Act permitting certain terminating series of a UIT to sell portfolio securities to new series of the UIT; 5 (3) an order under sections 11(a) and 11(c) of the Act permitting offers of exchange between certain UITs at reduced sales charges; 6 and (4) an order under sections 6(c), 12(d)(1)(J), and 17(b) of the Act permitting a UIT: (a) to offer shares of its series to the public with sales loads that exceed the 1.5% limit of section 12(d)(1)(F)(ii) of the Act, (b) to invest in affiliated registered investment companies within the limits of section 12(d)(1)(F) of the Act, and (c) to publicly offer units without requiring the UIT sponsor to take for its own account or place with others $100,000 worth of units in the UIT and the UIT to distribute capital gains resulting from the sale of portfolio securities within a reasonable time after receipt. 7

Investec, as sponsor and depositor, is not covered by the Exemptive Orders. The various UITs and Investec intend promptly to file an application with the Commission in which they will request an exemptive order that would continue the relief previously granted in the Exemptive Orders ("Requested Order"). Investec agrees to comply with the terms and conditions of the Exemptive Orders imposed on Reich & Tang as though such terms and conditions were imposed directly on Investec. The UITs covered by the Exemptive Orders agree that they would rely on the Requested Order when it is granted, rather than continuing to rely on the Exemptive Orders. Based on the representations made in your letter, we would not recommend enforcement action if, pending action by the Commission on the Requested Order, Investec relies on the Exemptive Orders subsequent to the date of issuance of this letter. This position will be effective until the earlier of the issuance by the Commission of the Requested Order, or one year from the date of this letter. This response expresses the Division's position on enforcement action only, and does not purport to express any legal conclusions on the questions presented. Facts or conditions different from those presented in your letter might require a different conclusion. In addition, this letter provides no assurance that the Commission will grant the Requested Order, or that the Division will not comment upon or seek modification of any application for the Requested Order. Laura J. Riegel Senior Counsel

Endnotes

1 ING Mutual Funds Management Co. LLC and ING Funds Distributor, Inc., and Reich & Tang Distributors, Inc. (pub. avail. Feb. 8, 2000). 2 ING Mutual Funds Management Co. LLC and ING Funds Distributor, Inc., and Reich & Tang Distributors, Inc. (pub. avail. Feb. 9, 2001). 3 The Transfer will not include the following existing trusts which ING had acquired from Reich & Tang and whose terms expire by June 26, 2001: The Pinnacle Family of Trusts, Industrial Trust Series IV and Technology Trust Series IV; and The Pinnacle Family of Trusts, Internet Trust Series I ("Non-transferred Trusts"). As of the date of the Transfer, ING and the Non-transferred Trusts will no longer rely upon the Exemptive Orders. 4 Reich & Tang Distributors L.P., et al., Investment Company Act Release Nos. 22840 (Oct. 3, 1997) (notice) and 22866 (Oct. 29, 1997) (order). 5 Reich & Tang Distributors L.P., et al., Investment Company Act Release Nos. 22700 (June 11, 1997) (notice) and 22739 (July 8, 1997) (order). 6 Reich & Tang Distributors L.P., et al., Investment Company Act Release Nos. 22222 (Sept. 13, 1996) (notice) and 22273 (Oct. 9, 1996) (order). 7 Reich & Tang Distributors, Inc., et al., Investment Company Act Release Nos. 23106 (April 8, 1998) (notice) and 23173 (May 5, 1998) (order).

Incoming Letter

(212) 318-6800

April 20, 2001 VIA FEDERAL EXPRESS

Ms. Nadya B. Roytblat Office of Investment Company Regulation Division of Investment Management Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549-1004 Re: Investec Ernst & Company

Dear Ms. Roytblat: On behalf of Investec Ernst & Company ("Investec"), we request that the Staff of the Division of Investment Management of the Securities and Exchange Commission (the "Commission") advise us that it will not recommend that the Commission take any enforcement action under the Investment Company Act of 1940, as amended (the "1940 Act"), under the circumstances described below. On November 15, 1999 Reich & Tang Distributors, Inc., the successor to Reich & Tang Distributors L.P. (either entity referred to as "Reich & Tang") entered into an agreement with ING Mutual Funds Management Co. LLC and ING Funds Distributor, Inc. (collectively, "ING"), pursuant to which Reich & Tang agreed to transfer its unit investment trust business to ING. The transfer was consummated on February 9, 2000. ING entered into an agreement with Investec on April 5, 2001 (the "Asset Assignment Agreement"), pursuant to which ING agreed to transfer its unit investment trust business to Investec (the transfer of such business referred to herein as the "Transfer"). The Transfer is conditioned upon the occurrence of certain events. Assuming satisfaction of all events, it is expected that the Transfer will be consummated by May 1, 2001. Reich & Tang, and certain unit investment trusts for which Reich & Tang acted as sponsor, engaged in certain transactions in reliance on several exemptive orders. Investec, which is not covered by the exemptive orders, wishes to engage in transactions similar to those which were the subject of the exemptive orders obtained by Reich & Tang. On February 8, 2000, the Staff issued a no-action letter stating that it would not recommend enforcement action if ING relied on the exemptive orders until the earlier of the issuance by the Commission of an order amending the previous orders or one year from the date of the letter. On February 9, 2001, the Staff issued a no-action letter extending the maximum time period for an additional year. Investec is seeking a no-action position as it would pertain to the following four exemptive orders, the first three of which were included in the two no-action letters issued to ING (collectively, the "Exemptive Orders"): Investment Company Act Release No. 22866

Reich & Tang, Equity Securities Trust ("EST"), Mortgage Securities Trust, Municipal Securities Trust, New York Municipal Trust, A Corporate Trust, and Schwab Trusts filed an application on March 7, 1997, and amendments to the application on August 26, 1997, and September 30, 1997, requesting an order under section 6(c) of the 1940 Act for an exemption from sections 2(a)(32), 2(a)(35), 22(d) and 26(a)(2) of the Act and rule 22c-1 under the Act. The order permits certain unit investment trusts to impose sales charges on a deferred basis and waive the deferred sales charge in certain cases. Investment Company Act Release No. 22739

Reich & Tang and EST (Series 1 and Signature Series), on behalf of themselves and all subsequently issued series (collectively with Series 1 and Signature Series, the "Series") containing certain types of securities and sponsored by Reich & Tang or any entity controlling, controlled by, or under common control (within the meaning of section 2(a)(9) of the 1940 Act) with Reich & Tang, filed an application on December 31, 1996, and an amendment thereto on April 21, 1997, requesting an order under sections 6(c) and 17(b) of the 1940 Act for an exemption from section 17(a) of the Act. The order permits certain terminating Series of EST, a unit investment trust, to sell portfolio securities to certain new Series of EST. Investment Company Act Release No. 22273 Reich & Tang; EST (Series 1, Signature Series, and subsequent series); Mortgage Securities Trust (CMO Series 1 and subsequent series); Municipal Securities Trust (Series 1 and subsequent series) (including Insured Municipal Securities Trust, Series 1 (and subsequent series) and 5th Discount Series (and subsequent series)); New York Municipal Trust (Series 1 and subsequent series) and A Corporate Trust (Series 1 and subsequent series) filed an application on April 29, 1996, and amendments thereto on July 19, 1996, and September 6, 1996 requesting an order under sections 11(a) and (c) of the 1940 Act permitting certain offers of exchange between the trusts at a reduced sales charge. The order supersedes three prior orders issued on May 23, 1980 (Investment Company Act Release No. 11184), amended on April 29, 1981 (Investment Company Act Release No. 11754) and subsequently amended on August 28, 1991 (Investment Company Act Release No. 18290). Investment Company Act Release No. 23173

Reich & Tang and EST, Asset Allocation Trust ("AAT Trust") (Series 1 and subsequent series) filed an application on September 15, 1997, and amendments to the application on December 31, 1997, and April 30, 1998, requesting an order under section 12(d)(1)(J) of the 1940 Act for an exemption from section 12(d)(1)(F)(ii) of the Act, and under sections 6(c) and 17(b) of the Act for an exemption from section 17(a) of the Act, and under section 6(c) of the Act for an exemption from sections 14(a) and 19(b) of the Act and rule 19b-1 under the Act. The order permits each series of AAT Trust to offer shares to the public with a sales load that exceeds the 1.5% limit of section 12(d)(1)(F)(ii), AAT Trust to invest in affiliated registered investment companies within the limits of section 12(d)(1)(F) of the Act, units of AAT Trust to be publicly offered without requiring the sponsor to take for its own account or place with others $100,000 worth of units in AAT Trust, and AAT Trust to distribute capital gains resulting from the sale of portfolio securities within a reasonable time after receipt. Statement of Facts

Pursuant to the Asset Assignment Agreement, ING will consummate a transaction pursuant to which it will assign, convey and transfer all of its right, title and interest in and to substantially all of its unit investment trust business to Investec. The primary owners and chief executive officers of Reich & Tang and ING are not associated with Investec. However, substantially all personnel involved on the date of the Asset Assignment Agreement in ING's unit investment trust business have been offered and accepted similar positions with Investec. In fact, the employee of ING who was in charge of the unit investment trust business at ING and before that at Reich & Tang accepted a similar position with Investec whose principal responsibility will be overseeing the Investec unit investment trust business. Upon consummation of the Transfer, Investec will commence acting as depositor and sponsor for both existing unit investment trusts (i.e., existing trusts for which ING acted as sponsor and depositor) ("Trusts") and subsequent unit investment trusts under the various names of the Trusts. Investec will be appointed as successor depositor and sponsor under the Indentures with respect to existing Trusts. Investec will not act as successor depositor and sponsor for the following existing trusts, whose terms expire by June 26, 2001: The Pinnacle Family of Trusts, Industrial Trust Series IV and Technology Trust Series IV; and The Pinnacle Family of Trusts, Internet Trust Series I ("Non-transferred Trusts"). As of the date of the Transfer, ING and the Non-transferred Trusts will no longer rely upon the Exemptive Orders. Rationale

Upon consummation of the Transfer, there will be no change in the investment objectives of the existing Trusts or the fees and charges in connection therewith. While a new entity acts as depositor and sponsor of the Trusts, the personnel administering such Trusts will be substantially unchanged. Investec will comply with all representations, conditions and agreements contained in each applicable Exemptive Order in order to engage in the transactions contemplated by such Order. The primary change to be effected by the Transfer will be a change in the identity and ownership of the depositor and sponsor of the Trusts. The relevant facts set forth in the applications that provided the basis for granting the Exemptive Orders, other than the identity of the sponsor/depositor, have not changed since the Exemptive Orders were granted and will not change as a result of the Transfer. The Trusts and Investec intend to promptly file an application with the Commission in which they would request an exemptive order ("Renewal Order") that would effectively continue the relief previously granted in the Exemptive Orders. The Trusts and Investec propose that, pending receipt of the Renewal Order, the Trusts that are covered by the Exemptive Orders and Investec would rely on the Exemptive Orders and would be subject to those Orders' terms and conditions. * Investec specifically agrees that, pending receipt of the Renewal Order, it will comply with the terms and conditions in the Exemptive Orders imposed on Reich & Tang (or one of its predecessors or affiliates) as though such terms and conditions were imposed directly on Investec. The various Trusts agree that they will rely on the Renewal Order when it is granted, rather than continuing to rely on the Exemptive Orders in accordance with any Staff no-action letter issued in response to this request. The various Trusts and Investec further agree that such Staff no-action position shall continue to remain in effect only until the earlier of (i) the date on which the Renewal Order is issued or (ii) one year from the date of the Staff's letter setting forth its no-action position. We believe that the Trusts covered by the Exemptive Orders should be permitted to continue relying on the Exemptive Orders because the factors supporting the issuance of the Exemptive Orders are still applicable to the Trusts even though the Trusts will have a different depositor and sponsor after the Transfer. Moreover, since, as described above, Reich & Tang's entire unit investment trust business was transferred to ING, and now substantially all of said business will be transferred from ING to Investec, in each case, for valid business reasons, we do not believe that a question can be raised that the Transfer is occasioned by a desire on the part of Investec to only acquire use of the Exemptive Orders. The Staff has previously granted no-action relief in similar situations involving various parties who, as a result of changes in
circumstances similar to those involved here, have temporarily sought to rely on exemptive orders. See, e.g., Equity Income Fund - Index Series, SEC No-Action Letter (December 19, 1996); Ranson & Assocs., Inc., SEC No-Action Letter (November 25, 1996); Reich & Tang Distributors L.P., SEC No-Action Letter (March 13, 1996); The Chase Manhattan Bank, N.A., SEC No-Action Letter (July 25, 1995); Shearson Lehman Brothers Inc.; Smith Barney Upham & Co. Incorporated, SEC No-Action Letter (June 8, 1993); The PNC Fund, SEC No-Action Letter (April 2, 1993); Cigna Funds Group, SEC No-Action Letter (July 13, 1992); Merrill Lynch Federal Securities, SEC No-Action Letter (September 26, 1991); First Boston Corporation, SEC No-Action Letter (July 3, 1991); Fiduciary Capital Partners, L.P., SEC No-Action Letter (January 24, 1990); and Federated Investors, Inc., SEC No-Action Letter (September 22, 1989). Accordingly, since Investec has agreed to satisfy all of the representations, conditions and agreements set forth in the Exemptive Orders in order to engage in the contemplated transactions after the Transfer, the original benefits and protections required by the standards set forth in sections 6(c), 17(b), 11(a), 11(c) and 12(d)(1)(J) of the 1940 Act, pursuant to which the Exemptive Orders were granted, would continue. Summary and Conclusion

Investec has agreed to comply with the terms and conditions of the existing Exemptive Orders referenced above in order to engage in the transactions described in those Orders. Based upon the facts and representations discussed herein, it is respectfully requested that the Staff advise Investec and the existing and future Trusts covered by the Exemptive Orders that the Staff will not recommend that the Commission take enforcement action against such persons if such persons continue to act in reliance on these Exemptive Orders until the earlier of the date the Renewal Order is issued or one year from the date the Staff's letter is issued. Should you have any questions regarding this request, please contact the undersigned (212/318-6800) or Gary Rawitz (212/318-6877) of this office. Very truly yours, PAUL, HASTINGS, JANOFSKY & WALKER LLP Michael R. Rosella

• In addition, where the terms of the Exemptive Orders apply to certain future unit investment trusts or future series of unit investment trusts, it is proposed that such future entities could rely on the Exemptive Orders, subject to those orders' terms and conditions, pending receipt of the Renewal Order.

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Modified: 10/30/2001