[Federal Register Volume 63, Number 89 (Friday, May 8, 1998)]
[Notices]
[Pages 25528-25530]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-12265]


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SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-23168; 812-10598]


Dean Witter Select Equity Trust, et al.; Notice of Application

May 1, 1998.
AGENCY: Securities and Exchange Commission (``SEC'' or ``Commission'').

ACTION: Notice of application under sections 6(c), 12(d)(1)(J), and 
17(b) of the Investment Company Act of 1940 (the ``Act'') for an 
exemption from sections 12(d)(1)(F)(ii) and 17(a) of the Act.

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SUMMARY OF APPLICATION: The requested order would permit a trust of 
funds relying on section 12(d)(1)(F) to offer units with a sales load 
in excess of the 1.5% limit in section 12(d)(1)(F)(ii) of the Act. In 
addition, the requested order would permit a terminating series of the 
trust to sell certain fund shares and fixed income securities issued by 
the United States government (``Treasuries'') to a new series of the 
trust.

APPLICANTS: Dean Witter Reynolds Inc. (the ``Sponsor'' or ``Dean 
Witter''); Dean Witter Select Equity Trust and Dean Witter Select 
Investment Trust (collectively, the ``Trusts''); and certain subsequent 
series of the Trusts sponsored by Dean Witter (each, a ``Trust 
Series'').

FILING DATES: The application was filed on March 27, 1997, and amended 
on October 15, 1997. Applicants have agreed to file an additional 
amendment, the substance of which is incorporated in this notice, 
during the notice period.

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 
applicants with a copy of the request, personally or by mail. Hearing 
requests should be received by the SEC by 5:30 p.m. on May 26, 1998, 
and should be accompanied by proof of service on applicants, 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.

ADDRESSES: Secretary, SEC, 450 5th Street, N.W., Washington, D.C. 
20549. Applicants, Two World Trade Center, New York, New York 10048. 
Attention: Steven M. Massoni.

FOR FURTHER INFORMATION CONTACT:
Elaine M. Boggs, Senior Counsel, at (202) 942-0572, or Christine Y. 
Greenlees, 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 at the 
SEC's Public Reference Branch, 450 5th Street, NW, Washington, DC 20549 
(telephone (202) 942-8090).

Applicants' Representations

    1. Each Trust Series will be a series of one of the Trusts, each a 
unit investment trust (``UIT'') registered under the Act. Dean Witter 
will be the sponsor of each Trust Series.
    2. The Sponsor intends to offer certain Trust Series based on an 
asset allocation model. The portfolio of each Trust Series will contain 
a different asset allocation of shares of one or more open-end 
investment companies or series thereof, none of which will be an 
affiliated person of applicants (the ``Funds''), and, in some cases, 
Treasuries. The shares of the Funds will be deposited in each Trust 
Series at the shares' net asset value and the Treasuries will be valued 
by an independent evaluator (the ``Independent Evaluator''), who will 
be a ``qualified evaluator'' as defined in rule 22c-1(b)(2) under the 
Act, based on the Treasuries' offer-side valuation.

[[Page 25529]]

    3. Simultaneously with the deposit of Fund shares and Treasuries 
and/or cash with instructions to the Trust's trustee (the ``Trustee'') 
to purchase the securities, the Trustee will deliver to the Sponsor a 
certificate or receipt for units (``Units'') representing the entire 
ownership of the Trust Series. The Units will be offered at prices 
based upon the aggregate underlying value of the Fund shares and 
Treasuries, plus a sales charge. The sales charge imposed on the Units 
will not, when aggregated with any sales charge or service fees paid by 
the Trust Series with respect to shares of the underlying Funds, exceed 
the limits set forth in rule 2830(d) of the National Association of 
Securities Dealers' (``NASD'') Conduct Rules. A Trust Series may invest 
in a Fund with an asset-based sales charge, provided that any asset-
based sales charge received by the Sponsor or the Trustee from a Fund 
will be rebated to the Trust Series. Although a Trust Series may invest 
in a Fund with an asset-based sales charge greater than .25% of the 
Fund's average net assets, if any of the asset-based sales charge is 
received by the Sponsor or the Trustee as a Fund distribution expense, 
that amount will not be retained by the Sponsor or the Trustee but will 
be paid to the Trust Series for the benefit of the Trusts' unitholders.
    4. Each Trust Series will terminate approximately one year after it 
is offered for sale (``Rollover Series''). At that time, the Sponsor 
intends to create and offer a new Trust Series (``New Trust Series''), 
the portfolio of which will reflect the then current asset allocation 
model for the corresponding Trust Series. Investors in the Rollover 
Series may elect to invest in the New Trust Series.
    5. In order to minimize the potential for overreaching, Dean Witter 
will certify in writing to the Trustee, within five days of each sale 
of securities from a Rollover Series to a New Trust Series: (a) that 
the transaction is consistent with the policy of both the Rollover and 
New Trust Series, as recited in their respective registration 
statements and reports filed under the Act, (b) the date of the 
transaction, and (c) the price determined by the Independent Evaluator 
for the sale date of the Treasuries. The Trustee will then countersign 
the certificate, unless, in the event that the Trustee disagrees with 
the price listed on the certificate, the Trustee immediately informs 
Dean Witter orally of any such disagreement and returns the certificate 
within five days to Dean Witter with corrections duly noted. Upon Dean 
Witter's receipt of a corrected certificate, Dean Witter and the 
Trustee will jointly determine the correct sales price by reference to 
a mutually agreeable, published list of prices for the date of the 
transaction.

Applicants' Legal Analysis

A. Section 12(d)(1)

    1. Section 12(d)(1)(A) of the Act provides that no registered 
investment company may acquire securities issued by another investment 
company if such securities represent more than 3% of the total 
outstanding voting stock of the acquired company, more than 5% of the 
value of the total assets of the acquiring company, or if securities 
issued by the acquired company and all other investment companies have 
an aggregate value in excess of 10% of the value of the total assets of 
the acquiring company.
    2. Section 12(d)(1)(F) provides that section 12(d)(1) does not 
apply to securities purchased or otherwise acquired by a registered 
investment company if, immediately after the purchase or acquisition, 
not more than 3% of the total outstanding stock of the acquired company 
is owned by the acquiring company, and the acquiring company does not 
impose a sales load on its shares of more than 1.5%. In addition, no 
acquired company may be obligated to honor any acquiring company's 
redemption request in excess of 1% of the acquired company's securities 
during any period of less than 30 days.
    3. Section 12(d)(1)(J) provides that the SEC may exempt persons or 
transactions from any provision of section 12(d)(1) if and to the 
extent such exemption is consistent with the public interest and the 
protection of investors. Applicants request an exemption under section 
12(d)(1)(J) to permit a Trust Series to offer Units with a sales load 
in excess of the 1.5% limitation. For the reasons below, applicants 
believe that the requested relief meets the standards of section 
12(d)(1)(J).
    4. Applicants argue that section 12(d)(1) is intended to mitigate 
or eliminate actual or potential abuses that might arise when one 
investment company acquires sharing of another investment company, 
including the excessive layering of sales charges. For the reasons 
stated below, applicants do not believe that their proposal will result 
in excessive sales charges.
    5. While each Trust Series will charge a sales load, the Sponsor 
will deposit the Fund shares at net asset value (i.e., without any 
sales charge). To further limit the extent to which unitholders may pay 
indirectly for distribution costs of the underlying Funds, any asset-
based sales charges received by the Sponsor of the Trustee from a Fund 
with regard to the Fund shares will be rebated to the Trust Series. In 
addition, applicants have agreed as a condition to the relief that any 
sales charge assessed with respect to the Units of a Trust Series, when 
aggregated with any sales charge or service fees paid by the Trust 
Series with respect to securities of the underlying Funds, will not 
exceed the limits set forth in rule 2830(d) of the Conduct Rules of the 
NASD. As a result, the aggregate sales charges will not exceed the 
limit that otherwise could be charged at any single level.
    6. Applicants believe that it is appropriate to apply the NASD's 
rules to the proposed arrangement instead of the sales load limitation 
in section 12(d)(1)(F)(ii). Applicants further believe that the 
condition subjecting any sales charges or service fees to the limits 
established by the NASD will provide ongoing regulation with the 
flexibility to accommodate continuing developments in the industry.
    7. Administrative fees may be charged at both the Trust Series and 
underlying Fund levels. Applicants believe, however, that certain 
expenses of the Trusts may be reduced under the proposed arrangement. 
For example, when a Trust Series invests in Fund shares (whose net 
asset value is readily available), applicants anticipate that the 
evaluator would charge a lower fee, if any at all.
    8. Applicants assert that the proposal will benefit potential 
unitholders as well as shareholders of the Funds. Applicants believe 
that a Trust Series provides a simple means through which investors can 
obtain a professionally selected and maintained mix of investment 
company shares in one package and at one sales load for a relatively 
small initial investment. In addition, applicants believe that 
purchasing shares in large quantities will enable a Fund to obtain 
certain economies of scale, and will benefit certain Funds by 
permitting them to carry a Trust Series on their books as a single 
shareholder account, even though there are numerous unitholders, and by 
providing them with a stable net asset base.

B. Section 17

    1. Section 17(a) of the Act generally makes it unlawful for an 
affiliated person of a registered investment company to sell securities 
to or purchase securities from the company. Investment companies under 
common control are considered affiliates of one another. The Trust 
Series may be deemed to be under common control

[[Page 25530]]

because they have Dean Witter as a sponsor and, therefore, unable to 
sell and buy securities to and from each other without an exemption 
from section 17(a). Accordingly, applicants request relief to permit a 
Rollover Series to sell Fund shares and Treasuries to a New Trust 
Series.
    2. Section 17(b) permits the SEC to grant an order permitting a 
transaction otherwise prohibited by section 17(a) if it finds that the 
terms of the proposed transaction, including the consideration to be 
paid or received, are fair and reasonable and do not involve 
overreaching on the part of any person concerned and the proposed 
transaction is consistent with the policy of the registered investment 
company and the general purposes of the Act. Section 6(c) permits the 
SEC to exempt any person or transaction from any provision of the Act, 
if such exemption is necessary or appropriate in the public interest 
and consistent with the protection of investors and the purposes fairly 
intended by the policies and provisions of the Act. For the reasons 
stated below, applicants believe that the terms of the transactions 
meet the standards of sections 6(c) and 17(b).
    3. Rule 17a-7 under the Act p[permits registered investment 
companies that might be deemed affiliates solely by reason of having 
common investment advisers, directors, and/or officers, to purchase 
securities from or sell securities to one another at an independently 
determined price, provided certain conditions are met. Applicants 
represent that they will comply with all of the provisions of rule 17a-
7, other than paragraphs (b) and (e).
    4. Paragraph (e) of the rule requires an investment company's board 
of directors to adopt and monitor procedures for these transactions to 
assure compliance with the rule. Since a UIT does not have a board of 
directors, there can be no board review of the transaction. Applicants 
state, however, that review in the context of a UIT would serve little 
useful purpose in connection with Fund shares and Treasuries because 
independently verifiable prices are readily available.
    5. Paragraph (b) of rule 17a-7 requires that the transactions be 
effected at the independent current market price of the security. The 
Fund shares and Treasuries would fall within the paragraph (b)(4) 
category of ``all other securities,'' for which the current market 
price under rule 17a-7(b) is the average of the highest current 
independent bid and lowest current independent offer determined on the 
basis of reasonable inquiry.
    6. With respect to Fund shares, applicants state that Fund shares 
do not trade at a bid or offer price but at an independently determined 
net asset value. Applicants state that the Funds' shares will be issued 
by investment companies that will not be affiliated with the Sponsor 
and that each Fund will calculate the net asset value of its shares 
daily. The net asset value would be the price at which the Rollover 
Series would sell Fund shares to the New Trust Series.
    7. With respect to Treasuries, applicants state that the Treasuries 
would be sold by a Rollover Series to a New Trust Series at the 
Treasuries' offer-side evaluation. Other Treasuries acquired by the New 
Trust Series will be acquired at the offer-side evaluation and the New 
Trust Series would be valued during the Trusts' initial offering period 
based on the Treasuries' offer-side evaluation. Applicants state that, 
therefore, there will be uniformity as to price for all of the 
Treasuries evaluated (both Treasuries bought in the market and 
Treasuries purchased from a Rollover Series). In addition, all 
unitholders of the New Trust Series, both unitholders from a Rollover 
Series and new unitholders, will acquire Unites with a value based on 
the offer-side evaluation of the Treasuries, which applicants state is 
consistent with the Trusts' acquisition cost.
    8. Applicants believe that engaging in transactions for securities 
for which market quotations are readily available at an independently 
determined price will not disadvantage either Trust Series. Applicants 
state that the sales between Trust Series will reduce transaction costs 
to unitholders of the Trust Series and will reduce costs to the Fund. 
In addition, applicants state that the purchases and sales between 
Trust Series will be consistent with the policy of each Trust Series, 
as only securities that would otherwise be bought and sold on the open 
market pursuant to the policy of each Trust Series will be involved in 
the proposed transactions.

Applicants' Conditions

    Applicants agree that the order granting the requested relief will 
be subject to the following conditions:
    1. Each Trust Series will comply with section 12(d)(1)(F) in all 
respects except for the sales load limitation of section 
12(d)(1)(F)(ii).
    2. Any sales charges or service fees charged with respect to Units 
of a Trust Series, when aggregated with any sales charges or service 
fees paid by the Trust Series with respect to securities of the 
underlying Funds, will not exceed the limits set forth in rule 2830(d) 
of the NASD's Conduct Rules.
    3. Each sale of Fund shares between the Trust Series will be 
effected at the net asset value of the Fund shares as determined by the 
Fund on the sale date. Each sale of Treasuries between the Trust Series 
will be effected at the Treasuries' offer-side evaluation as determined 
by an Independent Evaluator as of the evaluation time on the sale date. 
Such sales will be effected without any brokerage charges or other 
remuneration except customary transfer fees, if any.
    4. The nature and conditions of such transactions will be fully 
disclosed to investors in the appropriate prospectus of each future 
Rollover Series and New Trust Series.
    5. The Trustee of each Rollover Series and New Trust Series will 
(a) review the procedures relating to the sale of securities from a 
Rollover Series and the purchase of securities for deposit in a New 
Trust Series and (b) make changes to the procedures as the Trustee 
deems necessary that are reasonably designed to comply with paragraphs 
(a), (c), and (d) of rule 17a-7.
    6. A written copy of these procedures and a written record of each 
transaction pursuant to the requested order will be maintained as 
provided in rule 17a-7(f).
    7. No Trust Series will acquire securities of an underlying Fund 
which, at the time of acquisition, owns securities of any other 
investment company in excess of the limits contained in section 
12(d)(1)(A) of the Act.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 98-12265 Filed 5-7-98; 8:45 am]
BILLING CODE 8010-01-M