[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