[Federal Register Volume 63, Number 103 (Friday, May 29, 1998)]
[Notices]
[Pages 29462-29464]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: X98-10529]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 23203; 812-11050]
The Dreyfus/Laurel Funds, Inc., et al. Notice of Application
May 22, 1998.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of an application under section 17(b) of the Investment
Company Act of 1940 (the ``Act'') for an exemption from section 17(a)
of the Act.
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Summary of the Application: Applicants request an order to permit a
series of Dreyfus Index Funds, Inc. to acquire all of the assets and
liabilities of a series of Dreyfus/Laurel Funds, Inc.
Applicants: The Dreyfus/Laurel Funds, Inc. (``Company'') and
Dreyfus Index Funds, Inc. (``Index Funds'').
Filing Dates: The application was filed on March 6, 1998, and
amended on May 20, 1998.
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 the 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
June 16, 1998, and should be accompanied by proof of service on the
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 by writing to the SEC's Secretary.
ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C.
20549. Applicants, 200 Park Avenue, New York, New York, 10166.
FOR FURTHER INFORMATION CONTACT:
Annmarie J. Zell, Staff Attorney, (202) 942-0532, or Mary Kay Frech,
Branch Chief, (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, 450 Fifth
[[Page 29463]]
Street, N.W., Washington, D.C. 20549 (telephone (202) 942-8090).
Applicants' Representations
1. The Index Funds, a Maryland corporation, is registered under the
Act as an open-end management investment company. The Dreyfus
International Stock Index Fund (``Acquiring Fund'') is one of three
series of Index Funds. The Company, a Maryland corporation, is
registered under the Act as an open-end management investment company.
The Dreyfus International Equity Allocation Fund (``Acquired Fund'') is
one of eighteen series of the Company.
2. Dreyfus Corporation (``Dreyfus''), an investment adviser
registered under the Investment Advisers Act of 1940, serves as
investment adviser for both the Acquiring Fund and the Acquired Fund.
Dreyfus is a wholly owned subsidiary of Mellon Bank, N.A. (``Mellon
Bank''), which is a wholly owned subsidiary of Mellon Bank corporation.
As of March 30, 1998, Mellon Bank directly or indirectly owned with
power to vote approximately 71% of the outstanding shares of the
Acquired Fund, 33% of which Mellon directly owned in a fiduciary
capacity and 38% of which Mellon directly or indirectly owned (but not
in a fiduciary capacity). Also, as of March 30, 1998, Mellon owned
approximately 92% of the outstanding voting securities of the Acquiring
Fund.
3. The Acquired Fund issues two classes of shares, Investor shares
and Restricted shares, which are identical except with respect to
services and expenses. Investor shares are subject to rule 12b-1 fees
and are offered to any investor. Restricted shares are sold primarily
to bank trust departments and other financial service providers acting
on behalf of customers who have a qualified trust or investment account
or relationship at the institution, or to customers who have received
and hold shares of the Acquired Fund distributed to them by virtue of
such an account or relationship. The Acquiring Fund offers a single
class of shares. These shares are sold to any investor and are subject
to shareholder service fees and a redemption fee. Shares of the
Acquiring Fund received by former shareholders of the Acquired Fund
will not be subject to the redemption fee. Both Acquired Fund shares
and Acquiring Fund shares are sold without a front-end or deferred
sales charge.
4. On January 28, 1998, and February 11, 1998, respectively, the
boards of directors of the Company and the Index Funds (``Boards''),
including their disinterested directors, unanimously approved an
Agreement and Plan of Reorganization (``Agreement'') pursuant to which
the Acquiring Fund will acquire all of the assets and liabilities of
the Acquired Fund in exchange for shares of the Acquiring Fund having
an aggregate net asset value equal to the assets transferred minus the
liabilities of the Acquired Fund (``Reorganization''). The Acquired
Fund will endeavor to discharge all of its known liabilities and
obligations prior to closing, presently expected to occur at the close
of trading on the floor of the New York Stock Exchange on June 19, 1998
(``Closing Date'').
5. The Acquired Fund's shareholders will receive shares, without
class designation, of the Acquiring Fund. The number of full or
fractional shares of the Acquiring Fund to be issued to the Acquired
Fund will be determined by dividing the aggregate net asset value
attributable to the Investor and Restricted shares of the Acquired Fund
by the net asset value of one Acquiring Fund share. As soon as
practicable after the Closing Date, the Acquired Fund will distribute
the Acquiring Fund shares pro rata to its shareholders of record,
determined as of the close of business on the Closing Date. As a result
of the Reorganization, each Acquired Fund shareholder will receive
Acquiring Fund shares having an equal net asset value to the shares
held in the Acquiring Fund. After the distribution of the Acquiring
Fund shares and the winding up of its affairs, the Acquired Fund will
be terminated.
6. Each Board found that participation in the Reorganization is in
the best interests of the relevant Acquiring Fund and Acquired Fund
(collectively, ``Funds'') and that the interests of existing
shareholders will not be diluted as a result of the Reorganization. In
assessing the Reorganization, the Boards considered: (a) the relative
past growth in assets and investment performance of the Funds; (b) the
future prospects of the Funds, both under circumstances where they are
not reorganized and where they are reorganized; (c) the compatibility
of the investment objectives, policies and restrictions of the
Acquiring Fund and the Acquired Fund; (d) the effect of the
Reorganization on the expense ratios of each Fund based on a comparison
of the expense ratios of the Acquiring Fund with those of the Acquired
Fund on a ``pro forma'' basis; (e) the costs of the Reorganization to
the Funds; (f) whether any future cost savings could be achieved by
combining the Funds; (g) the tax-free nature of the Reorganization; and
(h) alternatives to the Reorganization. In considering the
Reorganization, each Board noted that the investment objectives,
policies and restrictions of the Acquiring Fund and the Acquired Fund
are similar.
7. Prior to the Closing Date, the Acquired Fund will declare a
dividend and/or other distributions so that all taxable income and
realized net gain are distributed for the current taxable year through
the Closing Date and prior taxable years. If the Reorganization is
consummated, the Funds will bear the expenses of the Reorganization pro
rata according to their respective net assets as of the Closing Date,
or if the Reorganization is not consummated, as of the date the
Reorganization is abandoned.
8. On March 4, 1998, a registration statement on Form N-14
containing a preliminary combined prospective/proxy statement, was
filed with the SEC. A final prospective/proxy was mailed to
shareholders of the Acquired Fund on or about April 14, 1998, for their
approval at a meeting scheduled to be held on June 9, 1998.
9. The Reorganization is subject to the following conditions: (a)
receipt of the affirmative vote of two-thirds of the votes of the
shareholders of the Acquired Fund; (b) the Acquiring Fund's and the
Acquired Fund's receipt of opinions of counsel to the effect that the
Reorganization will constitute a ``reorganization'' within the meaning
of section 368 of the Internal Revenue Code of 1986, as amended, and as
a consequence, the Reorganization will not result in federal income
taxes for the Acquired Fund or the Acquiring Fund or their shareholder;
and (c) the applicants have received exemptive relief from the SEC
which is the subject of the application. Applicants agree not to make
any material changes to the Agreement without prior SEC approval.
Applicants' Legal Analysis
1. Section 17(a) of the Act generally prohibits an affiliated
person of a registered investment company, or an affiliated person of
such a person, acting as principal, from selling any security to, or
purchasing any security from the company. Section 2(a)(3) of the Act
defines an ``affiliated person'' or another person to include (a) any
person that owns 5% or more of the outstanding voting securities of
such other person, (b) any person 5% or more of whose outstanding
voting securities are directly or indirectly owned, controlled, or held
with power to vote by such other person, (c) any person directly or
indirectly controlling, controlled by or under common control with the
other person, and (d) if such other person is an investment company,
any investment adviser of that company.
[[Page 29464]]
Rule 17a-8 under the Act exempts from the prohibitions of section
17(a) mergers, consolidations, or purchases or sales of substantially
all of the assets of registered investment companies that are
affiliated persons solely by reason of having a common investment
adviser, common directors/trustees, and/or common officers, provided
that certain conditions set forth in the rule are satisfied.
3. Applicants believe that they may not rely on rule 17a-8 because
the Funds may be affiliated for reasons other than those set forth in
the rule. Dreyfus, a wholly owned subsidiary of Mellon Bank, serves as
investment adviser to both Funds. Mellon Bank directly or indirectly
owns with power to vote approximately 71% of the outstanding shares of
the Acquired Fund and approximately 92% of the outstanding shares of
the Acquiring Fund. Because of this ownership, the Acquiring Fund may
be deemed an affiliated person of an affiliated person of the Acquired
Fund and vice versa under sections 2(a)(3)(B) and 2(a)(3)(C) of the
Act.
4. Section 17(b) of the Act provides that the SEC may exempt a
transaction from the provisions of section 17(a) if the terms of the
proposed transaction, including the consideration to be paid, are
reasonable and fair and do not involve overreaching on the part of any
person concerned, and that the proposed transaction is consistent with
the policy of each registered investment company concerned and with the
general purposes of the Act.
5. Applicants submit that the terms of the Reorganization satisfy
the standards set forth in section 17(b), Applicants note that the
Boards, including the disinterested directors, found that participation
in the Reorganization is in the best interests of each Fund and that
the interests of the existing shareholders of each Fund will not be
diluted as a result of the Reorganization. Applicants also note that
the exchange of the Acquired Fund's shares for the Acquiring Fund's
shares will be based on the Fund's relative net asset values and that
the Reorganization will be effected on a tax-free basis.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Dos. 98-14186 Filed 5-28-98; 8:45 am]
BILLING CODE 8010-01-M