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 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
 

IRVING l- PICAl:O
 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 

Page 2 

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 noaction 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 ,

,
 

Page 6
 , 

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
 

Page 7
 , 

,

, 

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
 

.. 

.. 

. 

. . 

. 

FS(Hi096