[Federal Register Volume 60, Number 113 (Tuesday, June 13, 1995)]
[Notices]
[Pages 31173-31175]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-14438]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IC-21111; 812-9584]
Dean Witter Select Equity Trust
June 6, 1995.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application for exemption under the Investment
Company Act of 1940 (the ``Act'').
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applicant: Dean Witter Select Equity Trust.
Relevant Act Sections: Order requested under section 6(c) of the Act
that would exempt applicant from section 12(d)(3) of the Act.
SUMMARY OF APPLICATION: Applicant requests an order on behalf of its
series (the ``Series'') to permit each Series to invest up to twenty
percent of its total assets in securities of issuers that derived more
than fifteen percent of their gross revenues in their most recent
fiscal year from securities related activities.
FILING DATE: The application was filed on May 2, 1995.
HEARING OR NOTIFICATION OF HEARING: An order granting the application
will be issued unless the SEC orders a hearing. Interested persons may
request a hearing by writing to the SEC's Secretary and serving
applicant with a copy of the request, personally or by mail. Hearing
requests should be received by the SEC by 5:30 p.m. on July 3, 1995 and
should be accompanied by proof of service on the applicant, in the form
of an affidavit or, for lawyers, a certificate of service. Hearing
requests should state the nature of the writer's interest, the reason
for the request, and the issues contested. Persons may request
notification of a hearing by writing to the SEC's Secretary.
[[Page 31174]] ADDRESSES: Secretary, SEC, 450 5th Street NW.,
Washington, D.C. 20549. Applicant c/o Dean Witter Reynolds Inc., Unit
Trust Department, Two World Trade Center, New York, NY 10048, Attn:
Thomas Hines.
FOR FURTHER INFORMATION CONTACT:
Sarah A. Buescher, Staff Attorney, at (202) 942-0573, or Robert A.
Robertson, Branch Chief, at (202) 942-0564 (Division of Investment
Management, Office of Investment Company Regulation).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee from
the SEC's Public Reference Branch.
Applicant's Representations
1. Each Series will be a series of applicant, a unit investment
trust registered under the Act. Dean Witter Reynolds Inc. is
applicant's depositor (the ``Sponsor''). The Sponsor currently intends
to offer a new Series four times a year at about the beginning of each
calendar quarter.
2. Each Series will invest approximately 20%, but in no event more
than 20.5%,\1\ of the value of its total assets in each of the five
lowest dollar price per share stocks of the ten common stocks in the
Dow Jones industrial Average (``DJIA'') with the highest dividend
yields either on or shortly before the initial date of deposit (the
``Select Five''), and hold those stocks over the life of the Series
(presently anticipated to be approximately one year).
\1\ The Sponsor will attempt to purchase equal values of each of
the five common stocks in a Series' portfolio and may choose to
purchase the securities in odd lots in order to achieve this goal.
However, it is more efficient if securities are purchased in 100
share lots and 50 share lots. As a result, the Sponsor may choose to
purchase securities of a securities related issuer which represent
over 20%, but in no event more than 20.5% percent, of a Series'
assets on the initial date of deposit to the extent necessary to
enable the Sponsor to meet its purchase requirements and to obtain
the best price for the securities.
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3. The DJIA comprises 30 common stocks chosen by the editors of The
Wall Street Journal. The DJIA is the property of Dow Jones & Company,
Inc., which is not affiliated with any Series or the Sponsor and does
not participate in any way in the creation of any Series or the
selection of its stocks.
4. The portfolio securities deposited in each Series will be chosen
solely according to the formula described above, and will not
necessarily reflect the research opinions or buy or sell
recommendations of the Sponsor. The Sponsor will have no discretion as
to which securities are purchased. Securities deposited in a Series may
include securities of issuers that derived more than fifteen percent of
their gross revenues in their most recent fiscal year from securities
related activities.
5. During the 90-day period following the initial date of deposit,
the Sponsor may deposit additional securities while maintaining to the
extent practicable the original proportionate relationship among the
number of shares of each stock in the portfolio. Deposits made after
this 90-day period generally must replicate exactly the proportionate
relationship among the face amounts of the securities comprising the
portfolio at the end of the initial 90-day period, whether or not a
stock continues to be among the Select Five.
6. A Series' portfolio will not be actively managed. Sales of
portfolio securities will be made in connection with redemptions of
units issued by a Series and at termination of the Series. The Sponsor
has no discretion as to when securities will be sold except that it is
authorized to direct the trustee to sell securities in extremely
limited circumstances, namely, upon failure of the issuer of a security
in a Series to declare or pay anticipated cash dividends, institution
of certain materially adverse legal proceedings, default under certain
documents materially and adversely affecting future declaration or
payment of dividends, or the occurrence of other market or credit
factors that, in the opinion of the Sponsor, would make the retention
of such securities in a Series detrimental to the interests of the
unitholders. The adverse financial condition of an issuer will not
necessarily require the sale of its securities from a Series'
portfolio.
Applicant's Legal Analysis
1. Section 12(d)(3) of the Act, with limited exceptions, prohibits
an investment company from acquiring any security issued by any person
who is a broker, dealer, underwriter, or investment adviser. Rule 12d3-
1(b) under the Act exempts the purchase of securities of an issuer that
derived more than fifteen percent of its gross revenues in its most
recent fiscal year from securities related activities, provided that,
among other things, immediately after such acquisition, the acquiring
company has invested not more than five percent of the value of its
total assets in securities of the issuer. Section 6(c) of the Act
provides that the SEC may exempt a person from any provision of the Act
or any rule thereunder, if and to the extent that the exemption is
necessary or appropriate in the public interest and consistent with the
protection of investors and the purposes fairly intended by the policy
and provisions of the Act.
2. Applicant requests an exemption under section 6(c) from section
12(d)(3) to permit any Series to invest up to approximately 20%, but in
no event more than 20.5%, of the value of its total assets in
securities of an issuer that derives more than fifteen percent of its
gross revenues from securities related activities. Applicant and each
Series will comply with all provisions of rule 12d3-1, except for the
five percent limitation in paragraph (b)(3) of the rule.
3. Section 12(d)(3) was intended to prevent investment companies
from exposing their assets to the entrepreneurial risks of securities
related businesses, to prevent potential conflicts of interest, and to
eliminate certain reciprocal practices between investment companies and
securities related business. One potential conflict could occur if an
investment company purchased securities or other interests in a broker-
dealer to reward that broker-dealer for selling fund shares, rather
than solely on investment merit. Applicant believes that this concern
does not arise in connection with its application because neither
applicant nor the Sponsor has discretion in choosing the portfolio
securities or percentage amount purchased. The security must first be
included in the DJIA, which is unaffiliated with the Sponsor and
applicant, and must also qualify as one of the five lowest dollar price
per share stocks of the ten highest dividend yielding securities in the
DJIA.
4. Applicant also believes that the effect of a Series' purchase on
the stock of parents of broker-dealers would be de minimis. Applicant
asserts that the common stocks of securities related issuers
represented in the DJIA are widely held, have active markets, and that
potential purchases by any Series would represent an insignificant
amount of the outstanding common stock and the trading volume of any of
these issues. Accordingly, applicant believes that it is highly
unlikely that Series purchases of these securities would have any
significant impact on the securities' market value.
5. Another potential conflict of interest could occur if an
investment company brokerage to a broker-dealer in which the company
has invested to enhance the broker-dealer's profitability or to assist
it during financial difficulty, even though that broker-dealer may not
offer the best price and execution. To preclude this type of conflict,
applicant and each Series agree, as a condition of this application,
that no company held in the portfolio of a Series nor any affiliate
thereof will act as a broker for [[Page 31175]] any Series in the
purchase or sale of any security for its portfolio. In light of the
above, applicant believes that its proposal meets the section 6(c)
standards.
Condition
The Applicant and each Series agree that any order granted under
this Application may be conditioned upon no company held in the Series'
portfolio nor any affiliate thereof acting as broker for any Series in
the purchase or sale of any security for the Series' portfolio.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-14438 Filed 6-12-95; 8:45 am]
BILLING CODE 8010-01-M