SEC Division of Investment Management staff letter: Dean Witter World Wide Investment Trust

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~ SEP'.Î~.~"I99.~; aJu ~i( i ~'~.:f::-:, :~~¿,:;~¿.¡R-l ~ 4~ tS~' . '/~ t~.'~.. .,.:~-:. ; Our Ref. No. 96-467-CC t..f;".,"...,¡~2:¿'. ,.. . ~:_.. '.:¡~ ....:
Dea Witter W orId Wide
Investment Trust; Dea Witter
International SmalCap Food REPONSE OF TIE OFFICE OF CHI COUNSEL File Nos. 811-3800; 811-' DIVISION. OF INTM MAAGEM 7169 By letter dated September 17, 1996, you request assurace that the sta wil not

recommend that the Commission tae enforcement action under Section 17(a) of the Investment Company Act of 1940 (the "1940 Act") agaist Morgan Grenfell Asset

Management Ud. ("MGAM"), Morgan Grenfell Investment Services Ud. ("MGIS"), Dea

Witter World Wide Investment Trust (the "Trust"), Dea Witter International SmalCap Fund

(the Trust and the SmalCap Fund both referred to as the "Funds"),l or Deutsche Ban, A. G., if MGAM enters into the purchase trasactions with the Funds (the "Purchase 3 Trasactions"),2 as descnbed in your letter.

On the basis of the unusual facts and circumstaces descnbed in your letter, and the , specifc representations made therein, we wil not reommend enforcement action to the Commission under Section 17(a).4 Ths position applies solely to the Purchase Trasactions specifcaly identied in yo"ur letter. We tae no position with respect to any other aspect of

the underlying matter, including, but not liited to, the valuation of the securities that are

the subject of the Purchase Trasactions. You should note that any diferent facts or .

representations might require a diferent conclusion. Moreover, this response expresses the

Division's position on enforcement action only and does not express any legal conclusions on

the issues presented.
~('\Llu.
W. Murphy

Associate Dirtor (Chief Counsel)

The Funds are open-end management investment companes registere under the 1940

Act.
2 Your letter describes MGAM's proposed purchase of two specifc securities from.the

Funds: Opcon AB, and Sendit AB. Ths response is liited to the purchase of these

securities.

3 You state that MGAM is the parnt of MGIS, which is the subadviser of each Fund

pursuant to subadvisory agreements between MGIS and Dea Witter InterCapita,

Inc., the investment adviser of each"
Fund. MqAM is also an indit, wholly-owned ì subsidiar of Deutsche Ban, A. G ~

4 See.~, Morgan Grenfell Investment Trust (pub. avai. Sept. 16, 1996).

bRDON ALTMAN BUTOWSKY WEITZEN SHALOV & WEIN T£L~PHONe:: 1e:t. Ó2e-060o . . 1/4 WEST 47TH STREET W"'TE"sa'''!:CTa'LNUMBER T'E:LECOPl€:A 121.21 d2o-ö.J!:û NEW YORK, N.Y. 10036-1510 (212.)' 626-0869 ",,,I:..OR'IC !&..auL A.DAMS eo,...lt; D. "'OOOLSKY Tl-COOORE I1l.T..""N S..MUEl L. B..AK.IN £l.LIS i.. D~C"'4:D SARA KRAUSS JaRO~N L. BlC~"'CK MICH.iC:, a. REu.e.N BRIAN G. ee:u..£ROS£ ....RC Â. KUSHNER O_VIO M. ØUTO-SKY. P.C. oaUG~ 8. qic.. O£NNl5 "' SQ£S..AN CARIN t-. l.uHLBÂUH RONALD M. ~t:I"'A'" viCTOR, J. ROCO ANDREW 1-. C:'~'::lL.C::! STC~lo(....It: C. "...t.LOG q..YHONO S. ,:1i~f(O 1(£ITH L. fPHAiTl(''' Pe:,'U::LOP£ £. COORI..GTOH 6RY"'"'O. PELTZ .J£,~ÇqE'Y ... du550F'f" eARAY O. SHALOV' :fTV..Ql J. COt1£N BONNY B. Fli.ZO ~TCØHCN A. ~ELMAN GTU-.RT "1. IiTAAUS:S CORI C cAGG£TT HOLLy a t:u$SELL RICl1Ai:b M. HERVEY BRUCE J. WEIN CUFiFORO ~. DICKSON t:RIC 0 SACKS P..UL AICH..RO KARAN MA~ wc,rZ£N 01.".... L. E:RBSEN , MAR..Ol:ie. R. SCHAEFFER JONATH"".. r(l£IN CC:SOQ..H 4. OAQi"i£..O

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LAWRENCE J. ZWEir",Cl- .JILL gçJoIc:F"-..ONOSON .Je:f'PAC.. 5. GeRa"" GEOAdc ... $ILt'EN K""AC'N B. C;OLOf"AQ8 LiS..... ~T..,.C..Tf

JO.. O. ~PLON ci,: C:o"'..:ico. C.....TESI L. ìff;Sçl9 OANI£L A. £TN.. HOWARD 6. flOH ADRIENNE M. WARD O£NNI~ H. GR£.£HY'''LO GAR"" l. fl£LD8 ANDREW N. k£fN£. p,C. ç. LEONARD GOctDON JAVICR HERNAHDEZ September 17, 1996

1940 Act/Section 17 (a)
Jack W. Murphy i Esq. ACT - -J. A
Associate Director and Chief Counsel
BEaON--~ =- Oi vision of Investment Management

Securities and Exchange Commission BULE'

450 Fifth Street, N.W.
PD1LIC .. Washington, D.C. 20549
AV AILA_ ~/(Tl?Çe. Re; Dean
Witter World Wide Investment Trust

("World Wide Investment I~)
Dean Witter International SmaiiCap Fund

(h International Smal leap" )

Dear Mr. Murphy:

On behalf of the above-captioned investment companies (the "Drl Funds" or '~Funds") I we request the assurance of the Division of Investment Management that,

based Upon the facts and circumstances set forth below iit

will not recommend any enforcement action to the Securities

and Exchange Commission (the "Commission") pursuant to

Section 17 (a) of the Investment Company Act of 1940, as

amended (the "Act") i agâinst the Funds or against Morgan

Grenfell Asset Management Limited ("MGAM"), Morgan Grenfell

Investment Services Liinit~d (IIMGI~II) o:i Deutsche Bank, A.G.

(IIDeutsche Bank."), if MGhM purchases from the Funds two

securities for which a trading market currently does not

.J
Jack W. Murphy, Esq. ,
Sept:ember 17, 1996 exist. The Board and the investment adviser of each of the

Funds believe that the propoaed sale would be in the best

interests of each Fund and its shareholders and that, under the unusual and novel circumscances preaent:ed here, a no￾action pösition is appropriate in this matter.

I . Backqround

The Funds are registered"under the Act as open-

end, diversified, management investment companies organized

under the laws. of the Commonwealth of Massachusetts as

business trusts. The investment object:ives of r.he Funds are

as follows =

World wide Investment aims for total return

on its assets primarily through investments in securi"ties "of domestic ahd forei~n c9mpanies and' governments. International SmallCap., a.ims t.Q achieve long- term capital growth by investing primarily in

securities of small non-U. S. companies 0

Dean Witte~ InterCapital Inc o. (" InterCapital ii) is the investment adviser of each. Fund and, through i.ts subsidiary, Dean Witter ..Services Company (1I0WSCII), also provides the administrative services necessary for t.he ... . '"... 'n operation of the Funds. . Dean Witter Reynolds Inc. ("Dean

Witter"), a sister company of Int~rÇapital, ',is the primary

dealer in the Funds'. shares. . '.

MGIS is the subadviser of each Fund pursuant to

subadvisory agreements between InterCapit~l and MGlS

approved in accordance wi th Section 15 (c) of the Act. Under

the terms of each agreement, MGIS'provides discretionary

investment management services to each Fund for assets of

the Fund invested outside the United States.
. . .

MGIS is regi-stered as '..an. .innestmenr. adviser with the Commission and is regulated by the Investment Management

Regulatory Organization :rimited (II IMRüll), .a sel f -regulatory .....?rganization und!3r the tJ Financ"Íal Services Act of 1986.

Jack W - Murphy, Esq.

September 17, 1996 ,
, Page 3 ,
MGIS serves as investment adviser for U. S, corporate and

public employee benefit plans, investment companies,

endowments and foundations with assets under management of

approximately S14 billion at June 30, 1996.

MGIS is a wholly-owned subsidiary of MGA. Other money management subsidiaries of MGAM manage assets of

foreign investment companies and other client accounts_

MGAM is an indirect wholly-owned subsidiary of Deutsche

Bank.
Deutsche Bank is an international banking and

financial services organization. It is the largest bank in

Germany and the 24th largest bank worldwide with branch

offices in more than 50 countries.

The principal business office of MGIS and of MGAM

is 20 Pinsbury circus, London, England. The principal

busineas office of Deutsche Bank is Taunusanlage 12, Frankfurt am Main, Germy. On November 23, 1995 World Wide Investment and

International SmallCap each purchased shares of Opcon AB, a

Swedish company, through Fiba Nordic Securities (IIPiba Nordic"), a London-based brokerage firm. international

SmallCap purchased 370 shares, for. a total investment of

$327,419. World Wide In~estment purchased 190 shares, for a

total investment of $168,134.

On June 13, 1996 World Wide lnvestment and

International SmallCap each purchased shares of Sendit AB,

also a Swedish company, Lhrough Fiba Nordic. International

SmallCap purchased 33,810 shares, for a total investment of

$432,736. World Wide Investment purchased 6,650 shares, for a total investment of $110 ,712 _

The net assets of International SmaiiCap on

September 9, 1996 were $139 million. The value at which

Opcon securities is ca~ried on the books of the Fund

represented 0_23~ of ~he FUnd's net assets ac that date and

the carrying value of the Sendit securities represented

o - 31~. The net assets o~ World Wide Investment on that date were $499 million. The ~alue ab 'which the Opcon securities j !

Jack W _ Murphy, Esq_

September i 7, 1996 ,
,
Page 4 ,

is carried on the books of the Fund represented O. 03 ~ of the

Fund's net assets and the carrying value of the Sendit

securities represented 0.02%. From the date of purchase of

Opcon and Sendit until the present time the securities have

been valued at the foreign currency original cost, translated into U - S. dollars at current exchange rates, in accordance with procedures established by the Boards of the

Funds based on recommendations of the MGIS portfolio

managers .
During the first week of September, MGIS informed InterCapital that trading in three of the European

investment funds managed by MGAM had been suspended, that

Deutsche Bank was investigating irregularities in relation

to certain unlisted securities purchased for the portfolios

of Lhose funds, that Deutsche Bank had agreed to purchase

some of those securities from those funds, that all unlisted

securities held by those funds were being investigated, that

Opcon and Sendit were two of the unlisted securities being

investigated by Deutsche Bank, that these securicies had not

yet been listed on an exchange, that there were no current

buyers for the securities willing to pay an amount equal to

or greater than the Funds' cost, that the pricing of these

two securities could not be validated on a timely basis, and

that therefore the securities were among those purchased

from the European funds by Deutsche Bank. At the same time,

the international press was beginning to carry reports of IIproblemsll .at Morgan Grenfell, involving "unquotedll and unlisted securities, into which category Opcon and Sendit fell. InterCapital and the Funds' Boards considered the

foregoing matters and COncluded that it would be in the best

interests of each Fund and its shareholders to dispose of

the Opcon and Sendit securities immediately. MGAM offered

to buy the securities at their carrying price on the books

of the DW Funds on August 30, 1996 (i.e., at cost) and the

Boards determined to accept the offer provided that the

purchase price also i~eluded interest from the date of the

Funds i investment to ~he date of purchase by MGAM. MGAM

agreed that the purchase price would include the payment of

interest which would be ~aicuiated at the average repo rates

in effect at the Bank of New York for that period. Such

.'.-" Jack W. Murphy, Esq.
September 17, 1996 ..
,
Page 5 ,
interest amounts to approximatèly $6, 000 in the aggregate for the two Funds on the proposed purchases of Sendit and

$20,000 in the aggregate on the proposed purchases of Opcon.

II. Analysis

.' Section 17(a) of the 1940 Act prohibits, among

other things, an affiliated person of a registered

investment company or an affiliated person of such person,

acting as principal, from knowingly purchasing any securi ty

or other property from such registered investment company.

Accordingly, Section 17 (aJ would proscribe the proposed

transaction, which involves a purchase of securities from

each Fund by an affiliated person of an affiliated person of

the Fund, acting as principal. We understand that as a

general matter, the Staff ~ill n6t ent~~tain no-acti6n requests under Section i 7 (a). However, the Staff has granted .no-action relief under Section i 7 (a) in situations which were considered to present "very unusual or novel

circumstances"i or where the dollar amounts involved were

deemed to be de minimis. 2
Consistent with positions previou~ly taken by the

Staff, no-action relief" is appropriate in this situation in

view of the unusual and novel circumstances presented and

the business urgency they create. The publicity surrounding

1/ See, Massachusetts Investors Trust, SEe No-Action

Letter (Dec. 8, 1992). See,~, Liquid Green Trust, SEC

No'-Action Letter (Dec. 19, 1991) (Staff 'g"ranted no-action

request under Sections 17 (a)' and i 7 (d) to' permi t the purchase by an adviser of defaulted commercial paper held by

the fund);. PaineWeb~er Managed Investments Trust, SEC No-

Action Letter (Aug.. 4, 199.4') (Stair granted no-action . request to permit purchase by an investment adviser of inverse floaters for which there were "no reliabl~ and

meaningful market quoi.lions" L..
2/ National Aviation & Technolo9Y Corporati.on, SEC No-'

Action Letter (May 28, ~'83); N~i8on Fund, SEC No-Action ) ) letter (Dec. is, 1995).

Jack W. Murphy, Esq.

September 17, 1996 ,
,

, the "problems" involving MGAM has increased in amount and

frequency. The press reports raised the issue whether there

was mismanagement at MGAM and referred to the investigations

by IMRO and Deutsche Bank, the purchase of portfolio

securities from the European funds by Deutsche Bank, the

suspension of two portfolio managers, and alleged

"irregularities" in the purchase and pricing of unlisted

portfolio securities. The press also reported fears of

investors that they are in danger of .losing money on

investments managed by MGAM, notwithstanding Deutsche Bank's

purchases of portfolio securities, and that the European

funds were exp~riencing significant redemptions_

Whatever the outcome of the investigations and the

extent of any alleged mismanagement at: MGAM,the Funds'

Boards and investment adviser are concerned that the mere

holding by the Funds of the two securities which are

questioned in any way could give rise to broker and investor

concerns quite dispropor~ionate to the relative importance

of the securities in the Funds i portfolios and might lead to

redemptions to the detriment of those shareholders and the

Funds as a whole - Removing the two securities from the

Funds' portfolios would eliminate any problems in t:his regard _

In the time that ~ould be required for the Funds

and MGAM to file, and for the Commission to act upon, an

exemptive application under Section i 7 (b), the. adverse publicity surrounding MGAM could influence shareholders of

the Funds to redeem shares at such a rate that efforts to

achieve the Funds' objectives would be impaired, thereby

harming the Funds' remaining shareholders.
The proposed purchases by MGAM of the Opcon and

Sendit shares from the Funds are clearly in the best

interests of each Fund and its shareholders, and the terms

of the proposed purchases, including the consideration to be

paid to each Fund, are reasonable and fair and do not

invol ve overreaching o~ the part of any of the parties. As

mentioned earlier, MG~ has informed the DW Funds that there

are no current buyers for the securities willing to pay an

amount equal to or greate~ than the DW Funds' cost. MGAM

has also advised the DW .~unds thåt no information has yet

. ,

" '.
Jack W _ Murphy, Esq.

September 17, 1996

,
,
, come to light in the course of the continuing investigation

co che present which would currencly justify an upward

adjustment in the August 30, 1996 valuation at cost and,

accordingly, the proposed purchase price is at least a fair

price and perhaps an advantageous price for the DW Funds_

For che reasons mentioned earlier, the DW Funds' Boards

believe the purchase transactions should be effected and

that the proposed purchase price is a fair price, In the

absence of such purchases, and in light of recent events,

the DW Funds would have to consider whether the securities

should be marked down until sUch time, presently indeterminate, as a trading market might develop. I f the otter to purchase the securities were delayed or prohibited,

the present unçertainty of the timing of a possible future

sale and the possibility that the securities might have to

be marked down in value can only be viewed as harmful to

each Fund and its shareholders_

In conclusion, we believe that because the

proposed transaction is fair and reasonable and in the best

interests of each Fund and its shareholders, and because

business exigencies and the potentially adverse effects of

delay militate against undertaking a lengthy exemptive

process, it is appropriate for the Staff to take the no-

action position requested. We understand that the Staff is

not taking any position on any other aspects of the

underlying matter_

If you have any questions or wish additional information, please contact the undersigned at the direct

dial number shown on this letterhead, or Stuart Strauss at

his direct dial number, (212) 626 -0842.

Very truly yours,

...::'~""/'-¿.... ."i, , /~./ ./.' . ~;/ . /(. """~ -") //. '...(.(.~:.~.L"l-¿..

Dennis H _ Greenwald

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