[Federal Register Volume 63, Number 203 (Wednesday, October 21, 1998)]
[Notices]
[Pages 56270-56271]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-28167]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-23487; 812-11178]


The Dreyfus/Laurel Tax-Free Municipal Funds; Notice of 
Application

October 15, 1998.
AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of application for an order 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 APPLICATION: Applicant requests an order to permit one 
series of The Dreyfus/Laurel Tax-Free Municipal Funds (``Trust'') to 
acquire all of the assets and liabilities of two other series of the 
Trust.

FILING DATES: The application was filed on June 17, 1998, and amended 
on September 28, 1998. Applicant has agreed to file an amendment during 
the notice period, the substance of which is reflected in this notice.

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 November 9, 
1998, 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 who wish to 
be notified of a hearing may request notification by writing to the 
SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C. 
20549. Applicant: 200 Park Avenue, New York, NY 10166.

FOR FURTHER INFORMATION CONTACT:
Timothy R. Kane, Staff Attorney, at (202) 942-0615, or Mary Kay Frech, 
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 Fifth Street, N.W., Washington, D.C. 
20549 (telephone 202-942-8090).

Applicant's Representations

    1. The Trust, a Massachusetts business trust, is registered under 
the Act as an open-end management investment company. Dreyfus Premier 
Limited Term Municipal Fund (``Acquiring Fund'') is one of seven series 
of the Trust. Dreyfus Premier Limited Term California Municipal Fund 
(``California Fund'') and the Dreyfus Premier Limited Term New York 
Municipal Fund (``New York Fund'') are also series of the Trust. 
California Fund and New York Fund are collectively referred to as the 
``Acquired Funds.'' The Acquiring Fund and the Acquired Funds 
collectively are referred to as the ``Funds.''
    2. The Dreyfus Corporation (``Adviser''), an investment adviser 
registered under the Investment Advisers Act of 1940, serves as 
investment adviser for the Acquiring Fund and the Acquired Funds. The 
Adviser is a wholly-owned subsidiary of Mellon bank, N.A., which is a 
wholly-owned subsidiary of Mellon Bank Corporation (``Mellon''). Mellon 
owns, with power to vote in the aggregate, approximately 58% of the 
outstanding voting securities of the California Fund, approximately 57% 
of the outstanding voting securities of the New York Fund, and 
approximately 53% of the outstanding voting securities of the Acquiring 
Fund.
    3. On April 23, 1998, the Trust's board of trustees (``Board''), 
including the non-interested trustees, unanimously approved an 
Agreement and Plan of Reorganization (``Plan of Reorganization'') for 
each Acquired Fund pursuant to which the Acquiring Fund will acquire 
all of the assets and liabilities of each Acquired Fund in exchange for 
shares of the corresponding classes of the Acquiring Fund having an 
aggregate net asset value equal to the assets transferred minus the 
liabilities of the Acquired Fund (``Reorganization''). Each Acquired 
Fund will endeavor to discharge all of its known liabilities and 
obligations prior to closing of the Reorganization, presently expected 
to occur on or about November 13, 1998 (``Closing Date'').
    4. The Acquiring Fund and the Acquired Funds offer four share 
classes: Class A, Class B, Class C, and Class R. Each class of the 
Acquired Funds has identical rights and expense ratios as its 
corresponding share class of the Acquiring Fund. Class A shares are 
sold with a maximum sales charge of 3%, Class B shares are subject to a 
maximum 3% contingent deferred sales charge (``CDSC'') if redeemed 
within five years of purchase, and convert to Class A shares in 
approximately six years after the date of purchase; Class C shares are 
subject to a 0.75% CDSC if redeemed within one year of purchase; and 
Class R shares pay no sales charges. Classes A, B, and C pay for 
distribution expenses at various rates through a rule 12b-1 plan.
    5. As a result of the Reorganization, each Acquired Fund 
shareholder will receive Acquiring Fund shares having an aggregate net 
asset value equal to the aggregate net asset value of the corresponding 
Acquired Fund's shares held by that shareholder calculated as of the 
Closing Date. For purposes of calculating the CDSC on Classes B and C 
and the conversion rights of Class B shares, Class B and Class C 
shareholders of the Acquired Funds will be deemed to have held Class B 
and Class C shares of the Acquiring Fund since the date the 
shareholders initially purchased the shares of the Acquired Funds.
    6. The investment objectives of the Acquiring Fund and each 
Acquired Fund are to maximize current income exempt from federal income 
tax. The California Fund has the additional objective of seeking income 
exempt from California's state income tax; the New York Fund has the 
additional objective of seeking income exempt from both the state of 
New York's

[[Page 56271]]

income tax and New York City's personal income tax.
    7. The Board found that participation in the Reorganization was in 
the best interests of the relevant Fund and that the interests of the 
existing shareholders of each relevant Fund would not be diluted as a 
result of the Reorganization. The Board considered a number of factors 
in authorizing the Reorganization including: (a) The compatibility of 
the Funds' investment objectives, management policies and restrictions, 
as well as shareholder services offered by the respective Funds; (b) 
the comparative investment performance of the Funds; (c) the terms and 
conditions of the Reorganization; (d) the Funds' expense ratios; (e) 
the increased tax liability to shareholders in the Acquired Funds who 
invest to reduce their state and local tax liabilities; (f) the 
Acquired Funds' inability to attract larger levels of assets; (g) the 
costs to the Funds of the Reorganization; and (h) alternatives to the 
Reorganization. The Reorganization is expected to be tax-free to 
shareholders of the Acquired Funds and each Fund will bear its pro rata 
share of Reorganization expenses.
    8. On June 12, 1998, the Acquiring Fund filed with the SEC a 
registration statement on Form N-14 containing a preliminary combined 
prospectus/proxy statement for the Reorganization. On July 24, 1998, 
the Acquiring Fund filed the final prospectus/proxy statement with the 
SEC and mailed it to shareholders on July 27, 1998. The shareholders of 
the Acquired Funds held a joint special meeting on September 15, 1998, 
which was adjourned until September 29, 1998, and approved the 
Reorganization.
    9. The Reorganization is subject to a number of conditions 
including: (a) Each Fund will have received an opinion of counsel 
stating, among other things, that the Reorganization will not result in 
federal income tax liability for the Fund or its shareholders; (b) the 
Acquired Funds' shareholders will have approved the Reorganization; and 
(c) the Funds will have received from the SEC an order exempting the 
Reorganization from the provisions of section 17(a) of the Act. 
Applicant agrees not to make any material changes to the Plans of 
Reorganization without prior SEC approval.

Applicant's Legal Analysis

    1. Section 17(a) of the Act generally prohibits an affiliated 
person of a registered investment company, or any affiliated person of 
the person, acting as principal, from selling any security to, or 
purchasing any security from the company. Section 2(a)(3) of the Act 
defines the term ``affiliated person'' of another person to include (a) 
any person directly or indirectly owning, controlling, or holding with 
power to vote, 5% or more of the outstanding voting securities of the 
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 the other person; (c) any person directly or 
indirectly controlling, controlled by, or under common control with, 
the other person; and (d) if the other person is an investment company, 
any investment adviser of the person.
    2. Rule 17a-8 under the Act exempts from the prohibitions of 
section 17(a) of the Act 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, and/or common officers,'' 
provided that certain conditions are satisfied.
    3. Applicant believes that it cannot rely on rule 17a-8 under the 
Act because the Acquiring and Acquired Funds may be affiliated for 
reasons other than those set forth in the rule. The Funds may be 
affiliated persons of Mellon because Mellon and its affiliates, as 
fiduciaries for their customers, own of record more than 5% of the 
outstanding securities of the Funds. Mellon, in turn, is an affiliated 
person of an affiliated person of the funds because its wholly-owned 
subsidiary serves as investment adviser to the Funds.
    4. Section 17(b) of the Act provides that the SEC may exempt a 
transaction from section 17(a) of the Act if evidence establishes that 
(a) 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; (b) the proposed transaction is 
consistent with the policy of each registered investment company 
concerned; and (c) the proposed transaction is consistent with the 
general purposes of the Act.
    5. Applicant requests an order under section 17(b) of the Act 
exempting it from section 17(a) of the Act to the extent necessary to 
consummate the Reorganization. Applicant submits that the 
Reorganization satisfies the provisions of section 17(b) of the Act. 
Applicant states that its Board has determined that the Reorganization 
is in the best interests of the shareholders of the Acquiring and the 
Acquired Funds and that the interests of the existing shareholders will 
not be diluted as a result of the Reorganization. In addition, 
applicant states that the exchange of the Acquired Funds' shares for 
shares of the Acquiring Funds will be based on the relative net asset 
values.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-28167 Filed 10-20-98; 8:45 am]
BILLING CODE 8010-01-M