As filed with the Securities and Exchange Commission
on July 28, 1998
Registration No. 333-47319
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.__ [ ]
Post-Effective Amendment No. 1 [x]
DREYFUS INDEX FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
200 Park Avenue - 55th Floor
New York, New York 10166
(Address of Principal Executive Offices)
(800) 225-5267
(Registrant's Area Code and Telephone Number)
Mark N. Jacobs, Esq.
200 Park Avenue
New York, New York 10166
(Name and Address of Agent for Service)
It is proposed that this filing will become effective immediately upon
filing pursuant to Rule 485(b) under the Securities Act of 1933.
<PAGE>
DREYFUS INDEX FUNDS, INC.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement contains the following papers and documents:
Cover Sheet
Contents of Registration Statement on Form N-14
Dreyfus International Stock Index Fund
Part C - Other Information
Signature Pages
Exhibits
<PAGE>
DREYFUS INTERNATIONAL STOCK INDEX FUND
The sole purpose of this filing is to file as an exhibit the opinion
and consent of counsel supporting the tax matters and consequences to
shareholders of the reorganization, as required by Item 16(12) of Form N-14. The
Dreyfus Index Funds, Inc. (the "Company") incorporates herein by reference the
cross-reference sheet required by Rule 495(a) under the Securities Act of 1933,
as amended (the "1933 Act"), and Parts A and B to the Registrant's Registration
Statement on Form N-14, which was filed electronically with the Securities and
Exchange Commission ("Commission") on March 4, 1998 pursuant to Rule 488 under
the 1933 Act (Accession No. 0000898432-98-000262) ("Initial Registration
Statement on Form N-14").
<PAGE>
DREYFUS INDEX FUNDS, INC.
PART C
Item 15. Indemnification.
Reference is made to Article SEVENTH of the Registrant's Articles of
Incorporation filed as Exhibit 1 and to Section 2-418 of the Maryland General
Corporation Law. The application of these provisions is limited by Article VIII
of the Registrant's By-Laws filed as Exhibit 2 and by the following undertaking
set forth in the rules promulgated by the Securities and Exchange Commission:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the registrant pursuant
to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public
policy as expressed in such Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the
successful defense of any such action, suit or proceeding)
is asserted by such director, officer or controlling person
in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as
expressed in such Act and will be governed by the final
adjudication of such issue
The Statement as to the general effect of any contract, arrangements or
statute under which a director, officer, underwriter or affiliated person of the
Registrant is insured or indemnified is incorporated herein by reference to Item
27 of Part C of Post-Effective Amendment No. 6 to the Registrant's Registration
Statement on Form N-1A, filed on February 8, 1994 ("Post Effective Amendment No.
6").
Reference is also made to the Distribution Agreement, which is
incorporated by reference to Exhibit 6 of Post-Effective Amendment No. 11 to the
Registrant's Registration Statement on Form N-1A, filed on June 12, 1997
("Post-Effective Amendment No. 11").
Item 16. Exhibits
1(a) Registrant's Articles of Incorporation are incorporated herein
by reference to Exhibit 1(a) of Post-Effective Amendment No.
6.
1(b) Registrant's Articles of Amendment are incorporated herein by
reference to Exhibit 1(b) of Post-Effective Amendment No. 6.
2 Registrant's By-Laws are incorporated herein by reference
to Exhibit 2 of Post-Effective Amendment No. 6.
3 Not Applicable.
<PAGE>
4 The Agreement and Plan of Reorganization is incorporated by
reference herein to Appendix A to Part A of the Initial
Registration Statement in Form N-14.
5 Not Applicable.
6 Registrant's Management Agreement is incorporated herein
by reference to Exhibit 5 of Post-Effective Amendment No. 11.
7(a) Registrant's Distribution Agreement is incorporated herein
by reference to Exhibit 6 of Post-Effective Amendment No. 11.
7(b) Registrant's Shareholder Services Plan Agreements are
incorporated by reference to Exhibit 9 of Post-Effective
Amendment No. 11.
8 Not Applicable.
9 Registrant's Amended and Restated Custody Agreement is
incorporated herein by reference to Exhibit 8 of
Post-Effective Amendment No. 9 to the Registrant's
Registration Statement on Form N-1A filed on December 26, 1996
("Post-Effective Amendment No. 9").
10 Not Applicable.
11(a) Opinion of Stroock & Stroock & Lavan, Counsel to Registrant,
as to the legality of the securities being registered is
incorporated herein by reference to Exhibit 10 of
Post-Effective Amendment No. 6.
11(b) Consent of Stroock & Stroock & Lavan, Counsel to Registrant is
incorporated herein by reference to Exhibit 11(b) of the
Initial Registration Statement on Form N-14.
12 Tax opinion and consent of Kirkpatrick & Lockhart LLP.
Filed herewith.
13 Registrant's Shareholder Services Plan is incorporated herein
by reference to Exhibit 9 of Post-Effective Amendment No. 11.
14(a) Consent of Coopers & Lybrand L.L.P., Independent Accountants
to Registrant, as to the use of their report dated December
18, 1997, concerning the financial statements of Dreyfus
International Stock Index Fund dated October 31, 1997 is
incorporated herein by reference to Exhibit 14(a) of the
Initial Registration Statement on Form N-14.
<PAGE>
14(b) Consent of KPMG Peat Marwick LLP, Independent Auditors to The
Dreyfus/Laurel Funds, Inc., as to the use of their report
dated December 17, 1997 concerning the financial statements of
Dreyfus International Equity Allocation Fund dated October 31,
1997 is incorporated herein by reference to Exhibit 14(b) of
the Initial Registration Statement on Form N-14.
14(c) Consent of Stroock & Stroock & Lavan, Counsel to Registrant,
as to the use of its opinion as to the legality of the
securities being registered and as to the use of its name as
Counsel to such Fund. See Exhibit 11(b).
14(d) Consent of Kirkpatrick & Lockhart LLP as to the use of its tax
opinion. See Exhibit 12.
15 Not Applicable.
16(a) Powers of Attorney of the Directors and Officers are
incorporated by reference herein to Other Exhibits of
Post-Effective Amendment No. 9.
16(b) Certificate of Secretary are incorporated by reference herein
to Other Exhibits of Post-Effective Amendment No. 9.
17 Form of Proxy Card is incorporated by reference to Exhibit
17 of the Initial Registration Statement on Form N-14.
Item 17. Undertakings.
1 The undersigned Registrant agrees that prior to any public
offering of the securities registered through the use of a
prospectus which is part of this registration statement by any
person or party who is deemed to be an underwriter within the
meaning of Rule 145(c) of the Securities Act, the reoffering
prospectus will contain the information called for by the
applicable registration form for offerings by persons who may
be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
2 The undersigned Registrant agrees that every prospectus that
is filed under paragraph (1) above will be filed as a part of
an amendment to the registration statement and will not be
used until the amendment is effective, and that, in
determining any liability under the Securities Act of 1933,
each post-effective amendment shall be deemed to be a new
registration statement for the securities offered therein, and
the offering of the securities at that time shall be deemed to
be the initial bona fide offering of them.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, the Registrant certifies that this
amendment to its registration statement has been signed on behalf of the
Registrant by the undersigned, in the City of New York and the State of New
York, on the 17th day of July, 1998.
DREYFUS INDEX FUNDS, INC.
By: Marie E. Connolly*
----------------------------
Marie E. Connolly
President
As required by the Securities Act of 1933, this amendment to the Registrant's
registration statement has been signed by the following persons in the
capacities and on the dates indicated. This instrument may be executed in one or
more counterparts, all of which shall together constitute a single instrument.
Signatures Title Date
- ---------- ---------- -------
President, Treasurer 7/17/98
/s/ Marie E. Connolly* (Principal Executive, Finan-
- ---------------------------- cial and Accounting Officer)
Marie E. Connolly
/s/ Joseph S. DiMartino*
- ---------------------------- Director, Chairman of the 7/17/98
Joseph S. DiMartino Board
/s/ David P. Feldman*
- ---------------------------- Director 7/17/98
David P. Feldman
/s/ John M. Fraser, Jr.*
- ---------------------------- Director 7/17/98
John M. Fraser, Jr.
<PAGE>
/s/ Ehud Houminer*
- ---------------------------- Director 7/17/98
Ehud Houminer
/s/ David J. Mahoney*
- ---------------------------- Director 7/17/98
David J. Mahoney
/s/ Gloria Messinger*
- ---------------------------- Director 7/17/98
Gloria Messinger
/s/ Jack R. Meyer*
- ---------------------------- Director 7/17/98
Jack R. Meyer
/s/ John Szarkowski*
- ---------------------------- Director 7/17/98
John Szarkowski
/s/ Anne Wexler*
- ---------------------------- Director 7/17/98
Anne Wexler
*By: /s/ Elba Vasquez
-----------------------
Elba Vasquez
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
Exhibits:
- --------
1(a) Registrant's Articles of Incorporation are incorporated herein by
reference to Exhibit 1(a) of Post-Effective Amendment No. 6.
1(b) Registrant's Articles of Amendment are incorporated herein by reference
to Exhibit 1(b) of Post-Effective Amendment No. 6
2 Registrant's By-Laws are incorporated herein by reference to Exhibit
2 of Post-Effective Amendment No. 6.
3 Not Applicable.
4 The Agreement and Plan of Reorganization is incorporated by reference
herein to Appendix A to Part A of the Initial Registration Statement
on Form N-14.
5 Not Applicable.
6 Registrant's Management Agreement is incorporated herein by reference
to Exhibit 5 of Post-Effective Amendment No. 11.
7(a) Registrant's Distribution Agreement is incorporated herein by reference
to Exhibit 6 of Post-Effective Amendment No. 11.
7(b) Registrant's Shareholder Services Plan Agreements are incorporated by
reference to Exhibit 9 of Post-Effective Amendment No. 11.
8 Not Applicable.
9 Registrant's Amended and Restated Custody Agreement is incorporated
herein by reference to Exhibit 8 of Post-Effective Amendment No. 9.
10 Not Applicable.
11(a) Opinion of Stroock & Stroock & Lavan, Counsel to Registrant, as to the
legality of the securities being registered is incorporated herein
by reference to Exhibit 10 of Post-Effective Amendment No. 6.
11(b) Consent of Stroock & Stroock & Lavan, Counsel to Registrant is
incorporated herein by reference to Exhibit 11(b) of the Initial
Registration Statement on Form N-14.
12 Tax opinion and consent of Kirkpatrick & Lockhart LLP. Filed
herewith.
13 Registrant's Shareholder Services Plan is incorporated herein by
reference to Exhibit 9 of Post-Effective Amendment No. 11.
14(a) Consent of Coopers & Lybrand L.L.P., Independent Accountants to
Registrant, as to the use of their report dated December 18, 1997,
concerning the financial statements of Dreyfus International Stock
Index Fund dated October 31, 1997 is incorporated herein by reference
to Exhibit 14(a) of Initial Registration Statement on Form N-14.
14(b) Consent of KPMG Peat Marwick LLP, Independent Auditors to The Dreyfus/
Laurel Funds, Inc., as to the use of their report dated December 17,
1997 concerning the financial statements of Dreyfus International
Equity Allocation Fund dated October 31, 1997 is incorporated herein
by reference to Exhibit 14(b) of the Initial Registration Statement on
Form N-14.
14(c) Consent of Stroock & Stroock & Lavan, Counsel to Registrant, as to the
use of its opinion as to the legality of the securities being
registered and as to the use of its name as Counsel to such Fund. See
Exhibit 11(b).
14(d) Consent of Kirkpatrick & Lockhart LLP as to the use of its tax opinion.
See Exhibit 12.
15 Not Applicable.
16(a) Powers of Attorney of the Directors and Officers are incorporated
by reference herein to Other Exhibits of Post-Effective Amendment
No. 9.
16(b) Certificate of Secretary are incorporated by reference herein to Other
Exhibits of Post-Effective Amendment No. 9.
17 Form of Proxy Card is incorporated by reference to Exhibit 17 of
the Initial Registration Statement on Form N-14.
Exhibit 12
June 26, 1998
The Dreyfus/Laurel Funds, Inc.
200 Park Avenue
New York, NY 10166
Dreyfus Index Funds, Inc.
200 Park Avenue
New York, NY 10166
Ladies and Gentlemen:
The Dreyfus/Laurel Funds, Inc. (formerly The Laurel Funds, Inc.)
("Laurel Funds"), on behalf of Dreyfus International Equity Allocation Fund, a
segregated portfolio of assets ("series") thereof ("Target"), and Dreyfus Index
Funds, Inc. (formerly Peoples Index Fund, Inc.) ("Index Funds"), on behalf of
Dreyfus International Stock Index Fund, a series thereof ("Acquiring Fund"),(1)
have requested our opinion as to certain federal income tax consequences of the
proposed acquisition of Target by Acquiring Fund pursuant to an Agreement and
Plan of Reorganization between them dated as of February 12, 1998 ("Plan").
Specifically, each Investment Company has requested our opinion:
(1) that Target's transfer of its assets to Acquiring
Fund in exchange solely for voting shares of common stock in
Acquiring Fund ("Acquiring Fund Shares") and the assumption
by Acquiring Fund of Target's liabilities, followed by the
distribution of those shares by Target pro rata to its
shareholders of record determined as of the Valuation Time
(as herein defined) ("Shareholders"), constructively in
exchange for their shares of common stock in Target ("Target
Shares") (such transactions sometimes being referred to
herein collectively as the "Reorganization"), will
constitute a "reorganization" within the meaning of section
368(a)(1)(D)(FN2) and that each Fund will be a "party
to a reorganization" within the meaning of section 368(b),
(2) that Target, the Shareholders, and Acquiring Fund
will recognize no gain or loss on the Reorganization, and
- ------------------
1 Target and Acquiring Fund are sometimes referred to herein individually as a
"Fund" and collectively as the "Funds," and Laurel Funds and Index Funds are
sometimes referred to herein individually as an "Investment Company" and
collectively as the "Investment Companies."
2 All section references are to the Internal Revenue Code of 1986, as amended
("Code"), and all "Treas. Reg. ss." references are to the regulations under the
Code ("Regulations").
<PAGE>
The Dreyfus/Laurel Fund, inc.
Dreyfus Index Funds, Inc.
June 26, 1998
Page 2
(3) regarding the basis and holding period after the
Reorganization of the transferred assets and the Acquiring
Fund Shares issued pursuant thereto.
In rendering this opinion, we have examined (1) the Funds' currently
effective prospectuses and statements of additional information ("SAIs"), (2)
the Plan, (3) the Prospectus/Proxy Statement dated April 8, 1998, that furnished
in connection with the solicitation of proxies by Laurel Funds's board of
directors for use at a special meeting of Target shareholders held on June 9,
1998 ("Proxy Statement"), and (4) other documents we have deemed necessary or
appropriate for the purposes hereof. As to various matters of fact material to
this opinion, we have relied, exclusively and without independent verification,
on statements of responsible officers of each Investment Company and the
representations described below and made in the Plan (as contemplated in
paragraph 8.7 thereof) (collectively "Representations").
FACTS
-----
Each Investment Company is a corporation organized under the laws of
the State of Maryland and is registered with the Securities and Exchange
Commission ("SEC") as an open-end management investment company under the
Investment Company Act of 1940, as amended ("1940 Act"). Target is a series of
Laurel Funds, and Acquiring Fund is a series of Index Funds. The Target Shares
are divided into two classes, designated "Investor Shares" and "Restricted
Shares." Acquiring Fund offers for sale only one class of shares.
The Reorganization, together with all related acts necessary to
consummate it ("Closing"), will take place on the first day on which the New
York Stock Exchange is open for business that occurs not less than seven
calendar days after the approval of the Plan by Target's shareholders, or such
other date as the parties may mutually agree on ("Closing Date"). On or before
the Closing Date, Target will declare and pay to its shareholders a dividend
and/or other distribution that, together with all previous dividends and other
distributions, will have the effect of distributing to those shareholders all of
its investment company taxable income for all taxable years ended before the
Closing Date and for its current taxable year through the Closing Date (computed
without regard to any deduction for dividends paid) and all net capital gain
realized in all such taxable years (after reduction for any capital loss
carryforward).
The Funds' investment objectives and policies, which are substantially
similar, are described in the Proxy Statement and their respective prospectuses
and SAIs. The Funds also have the same investment adviser, transfer agent,
custodian, and distributor.
In considering the Reorganization, each Investment Company's board of
directors (each a "board") made an extensive inquiry into a number of factors
(which are described in the Proxy Statement, together with a discussion of the
reasons for the Reorganization). Pursuant thereto, each board approved the Plan,
subject to approval of Target's shareholders. In doing so, each board, including
a majority of its members who are not "interested persons" (as that term is
defined in the 1940 Act) of either Investment Company, determined that the
Reorganization is in its Fund's best interests and that its Fund's shareholders'
interests will not be diluted as a result of the Reorganization.
<PAGE>
The Dreyfus/Laurel Fund, inc.
Dreyfus Index Funds, Inc.
June 26, 1998
Page 3
The Plan, which specifies that it is intended to be, and is adopted as,
a plan of a reorganization described in section 368(a)(1)(D), provides in
relevant part for the following:
(1) The acquisition by Acquiring Fund of all property,
including without limitation all cash, cash equivalents,
securities, commodities and futures interests, dividend and
interest receivables, claims and rights of action that are
owned by Target, and any deferred or prepaid expenses shown
as assets on its books, on the Closing Date, but not
including Target's corporate books, records, or minutes
(collectively "Assets"), in exchange solely for
(a) the number of full and fractional
Acquiring Fund Shares determined by dividing the
aggregate net asset value ("NAV") of Target as of
the close of trading on the floor of the New York
Stock Exchange (fifteen minutes after such close
in the case of options and futures contracts) on
the Closing Date ("Valuation Time") by the NAV of
one Acquiring Fund Share at that time, and
(b) Acquiring Fund's assumption of all
liabilities, debts, obligations, expenses, costs,
charges, and reserves of Target as of the
Valuation Time (collectively "Liabilities"),
(2) The constructive distribution of such Acquiring
Fund Shares to the Shareholders, and
(3) The subsequent termination of Target.
The distribution described in (2) will be accomplished by transferring
the Acquiring Fund Shares then credited to Target's account on Acquiring Fund's
books to open accounts on those books established in the Shareholders' names,
with each Shareholder's account being credited with the respective pro rata
number of full and fractional Acquiring Fund Shares due such Shareholder. For
these purposes, each Shareholder will be credited, with respect to each Target
Share held (whether an Investor Share or a Restricted Share), the number of full
and fractional Acquiring Fund Shares equal to the NAV of that Investor Share or
Restricted Share as of the Valuation Time divided by the NAV of one Acquiring
Fund Share at that time. All outstanding Target Shares, including any
represented by certificates, simultaneously will be cancelled on Target's books.
REPRESENTATIONS
---------------
Each Investment Company has represented and warranted to us as follows:
1. The fair market value of the Acquiring Fund Shares, when
received by the Shareholders, will be approximately equal to the fair
market value of their Target Shares constructively surrendered in
exchange therefor;
<PAGE>
The Dreyfus/Laurel Fund, inc.
Dreyfus Index Funds, Inc.
June 26, 1998
Page 4
2. Its management (a) is unaware of any plan or intention of
Shareholders to redeem or otherwise dispose of any portion of the
Acquiring Fund Shares to be received by them in the Reorganization and
(b) does not anticipate dispositions of those Acquiring Fund Shares at
the time of or soon after the Reorganization to exceed the usual rate
and frequency of dispositions of Target Shares as a series of an
open-end investment company. Consequently, its management expects that
the percentage of Shareholder interests, if any, that will be disposed
of as a result of or at the time of the Reorganization will be de
minimis. Nor does its management anticipate that there will be
extraordinary redemptions of Acquiring Fund Shares immediately
following the Reorganization;
3. The Shareholders will pay their own expenses, if any,
incurred in connection with the Reorganization;
4. The fair market value on a going concern basis of the
Assets will equal or exceed the Liabilities to be assumed by Acquiring
Fund and those to which the Assets are subject;
5. There is no intercompany indebtedness between the Funds
that was issued or acquired, or will be settled, at a discount;
6. Pursuant to the Reorganization, Target will transfer to
Acquiring Fund, and Acquiring Fund will acquire, at least 90% of the
fair market value of the net assets, and at least 70% of the fair
market value of the gross assets, held by Target immediately before the
Reorganization. For the purposes of this representation, any amounts
used by Target to pay its Reorganization expenses and redemptions and
distributions made by it immediately before the Reorganization (except
for (a) distributions made to conform to its policy of distributing all
or substantially all of its income and gains to avoid the obligation to
pay federal income tax and/or the excise tax under section 4982 and (b)
redemptions not made as part of the Reorganization) will be included as
assets thereof held immediately before the Reorganization;
7. None of the compensation received by any Shareholder who is
an employee of Target will be separate consideration for, or allocable
to, any of the Target Shares held by such Shareholder-employee; none of
the Acquiring Fund Shares received by any such Shareholder-employee
will be separate consideration for, or allocable to, any employment
agreement; and the consideration paid to any such Shareholder-employee
will be for services actually rendered and will be commensurate with
amounts paid to third parties bargaining at arm's-length for similar
services; and
8. Immediately after the Reorganization, the Shareholders will
be in "control" of Acquiring Fund within the meaning of section 304(c).
Laurel Funds also has represented and warranted to us as follows:
1. Target is a "fund" as defined in section 851(g)(2); for
each taxable year of its operation ended prior to the Closing Date, it
met all the requirements of Subchapter M of the Code ("Subchapter M")
for qualification and treatment as a regulated investment company
<PAGE>
The Dreyfus/Laurel Fund, inc.
Dreyfus Index Funds, Inc.
June 26, 1998
Page 5
("RIC"); it will continue to meet all such requirements for its taxable
year that includes the Closing Date; and it has no earnings and profits
accumulated in any taxable year in which the provisions of Subchapter M
did not apply to it;
2. The Liabilities were incurred by Target in the ordinary
course of its business;
3. Target is not under the jurisdiction of a court in a
proceeding under Title 11 of the United States Code or similar case
within the meaning of section 368(a)(3)(A);
4. Not more than 25% of the value of Target's total assets
(excluding cash, cash items, and U.S. government securities) is
invested in the stock and securities of any one issuer, and not more
than 50% of the value of such assets is invested in the stock and
securities of five or fewer issuers; and
5. Target will be terminated as soon as reasonably practicable
after the Reorganization, but in all events within six months after the
Closing Date.
Index Funds also has represented and warranted to us as follows:
1. Acquiring Fund is a "fund" as defined in section 851(g)(2);
for its taxable year ended October 31, 1997 (its first taxable year),
it met all the requirements of Subchapter M for qualification and
treatment as a RIC; it will continue to meet all such requirements for
its taxable year that includes the Closing Date; and it has no earnings
and profits accumulated in any taxable year in which the provisions of
Subchapter M did not apply to it;
2. No consideration other than Acquiring Fund Shares (and
Acquiring Fund's assumption of the Liabilities) will be issued in
exchange for the Assets in the Reorganization;
3. Acquiring Fund has no plan or intention to issue additional
Acquiring Fund Shares following the Reorganization except for shares
issued in the ordinary course of its business as a series of an
open-end investment company; nor does it have any plan or intention to
redeem or otherwise reacquire any Acquiring Fund Shares issued to the
Shareholders pursuant to the Reorganization, other than through
redemptions arising in the ordinary course of that business;
4. Acquiring Fund (a) will, after the Reorganization, continue
the historic business that Target conducted before the Reorganization,
(b) has no plan or intention to sell or otherwise dispose of more than
10% of the Assets by value, except for dispositions made in the
ordinary course of that business and dispositions necessary to maintain
its status as a RIC, and (c) expects to use a significant portion of
Target's historic business assets in that business;
5. There is no plan or intention for Acquiring Fund to be
dissolved or merged into another corporation or business trust or any
"fund" thereof (within the meaning of section 851(g)(2)) following the
Reorganization;
6. Immediately after the Reorganization, (a) not more than 25%
of the value of Acquiring Fund's total assets (excluding cash, cash
<PAGE>
The Dreyfus/Laurel Fund, inc.
Dreyfus Index Funds, Inc.
June 26, 1998
Page 6
items, and U.S. government securities) will be invested in the stock
and securities of any one issuer and (b) not more than 50% of the value
of such assets will be invested in the stock and securities of five or
fewer issuers; and
7. Acquiring Fund does not own, directly or indirectly, nor at
the Closing Date will it own, directly or indirectly, nor has it owned,
directly or indirectly, at any time during the past five years, any
shares of Target.
OPINION
-------
Based solely on the facts set forth above, and conditioned on (1) the
Representations being true at the time of Closing and (2) the Reorganization
being consummated in accordance with the Plan, our opinion (as explained more
fully in the next section of this letter) is as follows:
1. Target's transfer of the Assets to Acquiring Fund in
exchange solely for Acquiring Fund Shares and Acquiring Fund's
assumption of the Liabilities, followed by Target's distribution of
those shares to the Shareholders constructively in exchange for their
Target Shares, will constitute a reorganization within the meaning of
section 368(a)(1)(D), and each Fund will be "a party to a
reorganization" within the meaning of section 368(b);
2. Target will recognize no gain or loss on its transfer of
the Assets to Acquiring Fund in exchange solely for Acquiring Fund
Shares and Acquiring Fund's assumption of the Liabilities or on the
subsequent distribution of those shares to the Shareholders in
constructive exchange for their Target Shares (sections 361);
3. Acquiring Fund will recognize no gain or loss on its
receipt of the Assets from Target in exchange solely for Acquiring Fund
Shares and its assumption of the Liabilities (section 1032(a));
4. Acquiring Fund's basis for the Assets will be the same as
Target's basis therefor immediately before the Reorganization (section
362(b)), and Acquiring Fund's holding period for the Assets will
include Target's holding period therefor (section 1223(2));
5. A Shareholder will recognize no gain or loss on the
constructive exchange of all its Target Shares solely for Acquiring
Fund Shares pursuant to the Reorganization (section 354(a)); and
6. A Shareholder's basis for the Acquiring Fund Shares to be
received by it in the Reorganization will be the same as the basis for
its Target Shares to be constructively surrendered in exchange for
those Acquiring Fund Shares (section 358(a)), and its holding period
for those Acquiring Fund Shares will include its holding period for
those Target Shares, provided they are held as capital assets by the
Shareholder on the Closing Date (section 1223(1)).
The foregoing opinion (1) is based on, and is conditioned on the
continued applicability of, the provisions of the Code and the Regulations,
judicial decisions, and rulings and other pronouncements of the Internal Revenue
Service ("Service") in existence on the date hereof and (2) is applicable only
<PAGE>
The Dreyfus/Laurel Fund, inc.
Dreyfus Index Funds, Inc.
June 26, 1998
Page 7
to the extent each Fund is solvent. We express no opinion about the tax
treatment of the transactions described herein if either Fund is insolvent.
ANALYSIS
--------
I. The Reorganization Will Be a Reorganization under Section 368(a)(1)(D),
and Each Fund Will Be a Party to a Reorganization.
-----------------------------------------------------------------------
A. Each Fund Is a Separate Corporation.
-----------------------------------
A reorganization under section 368(a)(1)(D) (a "D Reorganization")
involves a transfer by a corporation of all or a part of its assets to another
corporation if immediately after the transfer the transferor, or one or more of
its shareholders (including persons who were shareholders immediately before the
transfer), or any combination thereof, is in control of the transferee
corporation; but only if, pursuant to the plan of reorganization, stock or
securities of the transferee corporation are distributed in a transaction that
qualifies under sections 354, 355, or 356.(3) For a transaction to qualify as a
D Reorganization, therefore, both entities involved therein must be corporations
(or associations taxable as corporations).
Although each Investment Company is a corporation, neither of them, as
such, is participating in the Reorganization; instead, series thereof are the
participants. Ordinarily, a transaction involving segregated pools of assets
(such as the Funds) could not qualify as a reorganization, because the pools
would not be corporations. Under section 851(g), however, each Fund is treated
as a separate corporation for all purposes of the Code save the definition
requirement of section 851(a) (which is satisfied by each Investment Company).
Thus, we believe that each Fund will be a separate corporation, and their shares
will be treated as shares of corporate stock, for purposes of section
368(a)(1)(D).
B. Satisfaction of Section 368(a)(2)(F).
------------------------------------
Under section 368(a)(2)(F), if two or more parties to a transaction
described in section 368(a)(1) (with an exception not relevant here) were
"investment companies" immediately before the transaction, then the transaction
shall not be considered a reorganization with respect to any such investment
company and its shareholders unless, among other things, the investment company
is a RIC or --
(1) not more than 25% of the value of its total assets is invested in
the stock and securities of any one issuer and
- --------------
3 For purposes of section 368(a)(1)(D), in the case of a transaction such as the
Reorganization, the term "control" means ownership of stock possessing at least
50% of the total combined voting power of all classes of stock entitled to vote
or at least 50% of the total value of shares of all classes of stock. See
sections 368(a)(2)(H) and 304(c).
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(2) not more than 50% of the value of its total assets is invested in
the stock and securities of five or fewer issuers.
Each Fund will meet the requirements for qualification and treatment as a RIC
for its respective current taxable year and will satisfy the foregoing
percentage tests. Accordingly, we believe that section 368(a)(2)(F) will not
cause the Reorganization to fail to qualify as a D Reorganization with respect
to either Fund.
C. Transfer of "Substantially All" of the Properties.
-------------------------------------------------
Section 354(b)(1)(A) provides that, for an exchange pursuant to a plan
of a D Reorganization to receive tax-free treatment under section 354 (see V
below), the transferee corporation must acquire "substantially all" of the
assets of the transferor. For purposes of issuing private letter rulings, the
Service considers the transfer of at least 70% of the transferor's gross assets,
and at least 90% of its net assets, held immediately before the reorganization
to satisfy the "substantially all" requirement. Rev. Proc. 77-37, 1977-2 C.B.
568. We believe the Plan constitutes a "plan of reorganization" within the
meaning of Treas. Reg. ss. 1.368-2(g); and the Reorganization will involve such
a transfer. Accordingly, we believe that the Reorganization will involve the
transfer to Acquiring Fund of substantially all of Target`s properties.
D. Requirements of Continuity.(4)
--------------------------
Treasury Regulation section 1.368-1(b) sets forth two prerequisites to
a valid reorganization: (1) a continuity of the business enterprise through the
issuing corporation -- defined in the Regulation as "the acquiring corporation
(as that term is used in section 368(a))," with an exception not relevant here
- -- under the modified corporate form as described in Treas. Reg. ss. 1.368-1(d)
("continuity of business") and (2) a continuity of interest as described in
Treas. Reg. ss. 1.368-1(e) ("continuity of interest").
1. Continuity of Business.
----------------------
The Reorganization must meet the "continuity of business enterprise"
requirement of Treas. Reg. ss. 1.368-1(d)(1). That Regulation requires that the
issuing corporation either (i) continue the target corporation's historic
business ("business continuity") or (ii) use a significant portion of the target
corporation's assets in a business ("asset continuity").
While there is no authority that deals directly with the requirement of
continuity of business in the context of a transaction such as the
- -------------
4 On January 23, 1998, the Service released final Regulations dealing with both
continuity requirements described below and temporary Regulations dealing with
the continuity of interest requirement (collectively, "Continuity Regulations").
The Continuity Regulations generally apply to transactions occurring after
January 28, 1998, with an exception not relevant here. Accordingly, the
references below to Treas. Reg. ss.ss. 1.368-1(b), (d), and (e) are to those
sections as adopted by the Continuity Regulations.
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Reorganization, Rev. Rul. 87-76, 1987-2 C.B. 84, deals with a somewhat similar
situation. In that ruling, P was a RIC that invested exclusively in municipal
securities. P acquired the assets of T in exchange for P common stock in a
transaction that was intended to qualify as a reorganization under section
368(a)(1)(C) (the acquisition by one corporation, in exchange solely for voting
stock, of substantially all the properties of another corporation), which also
is subject to the continuity of business requirement. Prior to the exchange, T
sold its entire portfolio of corporate securities and purchased a portfolio of
municipal securities. The Service held that this transaction did not qualify as
a reorganization for the following reasons: (1) because T had sold its historic
assets prior to the exchange, there was no asset continuity; and (2) the failure
of P to engage in the business of investing in corporate securities after the
exchange caused the transaction to lack business continuity as well.
The Funds' investment objectives and policies are substantially
similar, and they have the same investment adviser. Moreover, after the
Reorganization Acquiring Fund will continue the historic business that Target
conducted before the Reorganization. Accordingly, there will be business
continuity.
Acquiring Fund not only will continue Target`s historic business, but
Acquiring Fund also (1) has no plan or intention to sell or otherwise dispose of
more than 10% of the Assets, except for dispositions made in the ordinary course
of its business and dispositions necessary to maintain its status as a RIC, and
(2) expects to use a significant portion of Target's historic business assets in
its business. Accordingly, there will be asset continuity as well.
For all the foregoing reasons, we believe that the Reorganization will
meet the continuity of business requirement.
2. Continuity of Interest.
----------------------
Treasury Regulation section 1.368-1(e)(1)(i) provides that
"[c]ontinuity of interest requires that in substance a substantial part of the
value of the proprietary interests in the target corporation be preserved in the
reorganization. A proprietary interest in the target corporation is preserved
if, in a potential reorganization, it is exchanged for a proprietary interest in
the issuing corporation . . . ." That Regulation goes on to provide that
"[h]owever, a proprietary interest in the target corporation is not preserved
if, in connection with the potential reorganization, . . . stock of the issuing
corporation furnished in exchange for a proprietary interest in the target
corporation in the potential reorganization is redeemed. All facts and
circumstances must be considered in determining whether, in substance, a
proprietary interest in the target corporation is preserved."
The Fifth Circuit has ruled that a redemption of 48% of the stock of a
transferor corporation was not a sufficient shift in proprietary interest to
disqualify a transaction as a reorganization under section 368(a)(1)(F) ("a mere
change in identity, form, or place or organization") ("F Reorganization"), even
though only 52% of the transferor's shareholders would hold all the stock in the
transferee. Reef Corp. v. Commissioner, 368 F.2d 125 (5th Cir. 1966), cert.
denied, 386 U.S. 1018 (1967); see also Aetna Casualty and Surety Co. v. U.S.,
568 F.2d 811, 822-23 (2d Cir. 1976) (redemption of a 38.39% minority interest
did not prevent a transaction from qualifying as an F Reorganization). For
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purposes of issuing private letter rulings, the Service considers the continuity
of interest requirement satisfied if ownership in an acquiring corporation on
the part of a transferor corporation's former shareholders is equal in value to
at least 50% of the value of all the formerly outstanding shares of the
transferor corporation. Rev. Proc. 77-37, 1977-2 C.B. 568; but see Rev. Rul.
56-345, 1956-2 C.B. 206 (continuity of interest was held to exist in a
reorganization of two RICs where immediately after the reorganization 26% of the
shares were redeemed in order to allow investment in a third RIC); Rev. Rul.
61-156, 1961-2 C.B. 62 (a transaction qualified as an F Reorganization even
though the transferor's shareholders acquired only 45% of the transferee's
stock, while the remaining 55% of that stock was issued to new shareholders in a
public underwriting immediately after the transfer). Although shares of both the
target and acquiring funds held by the target's shareholders that are disposed
of before or after the transaction will be considered in determining
satisfaction of the 50% standard, the Service has recently issued private letter
rulings that excepted from that determination "shares which are required to be
redeemed at the demand of shareholders by . . . Target or by Acquiring in the
ordinary course of their businesses as open-end investment companies (or series
thereof) pursuant to Section 22(e) of the 1940 Act." Priv. Ltr. Ruls. 9823018
(Mar. 5, 1998) and 9822053 (Mar. 3, 1998).(5)
No minimum holding period for shares of an acquiring corporation is
imposed under the Code on the acquired corporation's shareholders. Rev. Rul.
66-23, 1966-1 C.B. 67, provides generally that "unrestricted rights of ownership
for a period of time sufficient to warrant the conclusion that such ownership is
definite and substantial" will suffice and that "ordinarily, the Service will
treat five years of unrestricted . . . ownership as a sufficient period" for
continuity of interest purposes. A preconceived plan or arrangement by or among
an acquired corporation's shareholders to dispose of more than 50% of an
acquiring corporation's shares could be problematic. Shareholders with no such
preconceived plan or arrangement, however, are basically free to sell any part
of the shares received by them in the reorganization without fear of breaking
continuity of interest, because the subsequent sale will be treated as an
independent transaction from the reorganization.
There is no plan or intention of Shareholders to redeem or otherwise
dispose of any portion of the Acquiring Fund Shares to be received by them in
the Reorganization, and each Investment Company's management does not anticipate
dispositions of those Acquiring Fund Shares at the time of or soon after the
Reorganization to exceed the usual rate and frequency of dispositions of shares
of Target as a series of an open-end investment company. Consequently, each such
management expects that the percentage of Shareholder interests, if any, that
will be disposed of as a result of or at the time of the Reorganization will be
de minimis, and neither such management anticipates that there will be
extraordinary redemptions of Acquiring Fund Shares immediately following the
Reorganization. Although Acquiring Fund's shares will be offered for sale to the
public on an ongoing basis after the Reorganization, sales of those shares will
arise out of a public offering separate and unrelated to the Reorganization and
not as a result thereof. See Reef Corp. v. Commissioner, 368 F.2d at 134; Rev.
Rul. 61-156, supra. Similarly, Shareholders may redeem Acquiring Fund Shares
- -----------------
5 Although, under section 6110(j)(3), a private letter ruling may not be cited
as precedent, tax practitioners look to such rulings as generally indicative of
the Service's views on the proper interpretation of the Code and the
Regulations. Cf. Rowan Companies, Inc. v. Commissioner, 452 U.S. 247 (1981).
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pursuant to their rights as shareholders of a series of an open-end investment
company (see Priv. Ltr. Ruls. 9823018 and 9822053, supra, and 8816064 (Jan. 28,
1988)); those redemptions will result from the exercise of those rights in the
course of Acquiring Fund's business as an open-end series and not from the D
Reorganization as such.
Accordingly, we believe that the Reorganization will meet the
continuity of interest requirement of Treas. Reg. ss. 1.368-1(b).
E. Control and Distribution by Target.
----------------------------------
As noted above, a corporation's transfer of assets to another
corporation will qualify as a D Reorganization only if (1) immediately
thereafter the transferor, or one or more of its shareholders (including persons
who were shareholders immediately before the transfer), or any combination
thereof, is in control of the transferee and (2) pursuant to the plan, stock or
securities of the transferee are distributed in a transaction that qualifies
under section 354, among others (and, pursuant to section 354(b)(1)(B), all such
stock or securities, as well as the transferor's other properties, are
distributed pursuant to the plan). For purposes of clause (1), as applicable
here (see sections 368(a)(2)(H) and 304(c)(1)), "control" is defined as the
ownership of stock possessing at least 50% of the total combined voting power of
all classes of stock entitled to vote or at least 50% of the total value of
shares of all classes of stock; the Shareholders will be in control (as so
defined) of Acquiring Fund immediately after the Reorganization. With respect to
clause (2), under the Plan -- which, as noted above, constitutes a plan of
reorganization -- Target will distribute all the Acquiring Fund Shares to the
Shareholders in constructive exchange for their Target Shares. As noted in V.
below, we believe that that distribution will qualify under section 354(a).
Accordingly, we believe that the control and distribution requirements will be
satisfied.
F. Business Purpose.
----------------
All reorganizations must meet the judicially imposed requirements of
the "business purpose doctrine," which was established in Gregory v. Helvering,
293 U.S. 465 (1935), and is now set forth in Treas. Reg. ss.ss. 1.368-1(b),
- -1(c), and -2(g) (the last of which provides that, to qualify as a
reorganization, a transaction must be "undertaken for reasons germane to the
continuance of the business of a corporation a party to the reorganization").
Under that doctrine, a transaction must have a bona fide business purpose (and
not a purpose to avoid federal income tax) to constitute a valid reorganization.
The substantial business purposes of the Reorganization are described in the
Proxy Statement. Accordingly, we believe that the Reorganization is being
undertaken for bona fide business purposes (and not a purpose to avoid federal
income tax) and therefore meets the requirements of the business purpose
doctrine.
For all the foregoing reasons, we believe that the Reorganization will
constitute a reorganization within the meaning of section 368(a)(1)(D).
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G. Each Fund Will Be a Party to a Reorganization.
---------------------------------------------
Section 368(b)(2) and Treas. Reg. ss. 1.368-2(f) provide that if one
corporation transfers substantially all of its properties to a second
corporation in exchange for all or a part of the voting stock of the second
corporation, then both corporations are parties to a reorganization. Target is
transferring all its properties to Acquiring Fund in exchange for Acquiring Fund
Shares. Accordingly, we believe that each Fund will be "a party to a
reorganization."
II. Target Will Recognize No Gain or Loss.
-------------------------------------
Under sections 361(a) and (c), no gain or loss shall be recognized to a
corporation that is a party to a reorganization if, pursuant to the plan of
reorganization, (1) it exchanges property solely for stock or securities in
another corporate party to the reorganization and (2) distributes that stock or
securities to its shareholders. (As noted above, such a distribution is required
for qualification as a D Reorganization.) Section 361(c)(4) provides that
sections 311 and 336 (which require recognition of gain on certain distributions
of appreciated property) shall not apply to such a distribution.
Section 357(a) provides in pertinent part that, except as provided in
section 357(b), if a taxpayer receives property that would be permitted to be
received under section 361 without recognition of gain if it were the sole
consideration and, as part of the consideration, another party to the exchange
assumes a liability of the taxpayer or acquires from the taxpayer property
subject to a liability, then that assumption or acquisition shall not be treated
as money or other property and shall not prevent the exchange from being within
section 361. Section 357(b) applies where the principal purpose of the
assumption or acquisition was a tax avoidance purpose or not a bona fide
business purpose.
As noted above, it is our opinion that the Reorganization will
constitute a D Reorganization, each Fund will be a party to a reorganization,
and the Plan constitutes a plan of reorganization. Target will exchange the
Assets solely for Acquiring Fund Shares and Acquiring Fund's assumption of the
Liabilities and then will be terminated pursuant to the Plan, distributing those
shares to its shareholders in constructive exchange for their Target Shares. As
also noted above, we believe that the Reorganization is being undertaken for
bona fide business purposes (and not a purpose to avoid federal income tax); we
also do not believe that the principal purpose of Acquiring Fund's assumption of
the Liabilities is avoidance of federal income tax on the proposed transaction.
Accordingly, we believe that Target will recognize no gain or loss on the
Reorganization.(6)
- ----------------
6 Notwithstanding anything herein to the contrary, we express no opinion as to
the effect of the Reorganization on either Fund or any Shareholder with respect
to any asset as to which any unrealized gain or loss is required to be
recognized for federal income tax purposes at the end of a taxable year (or on
the termination or transfer thereof) under a mark-to-market system of
accounting.
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III. Acquiring Fund Will Recognize No Gain or Loss.
---------------------------------------------
Section 1032(a) provides that no gain or loss shall be recognized to a
corporation on the receipt by it of money or other property in exchange for its
shares. Acquiring Fund will issue Acquiring Fund Shares to Target in exchange
for the Assets, which consist of money and securities. Accordingly, we believe
that Acquiring Fund will recognize no gain or loss on the Reorganization.
IV. Acquiring Fund's Basis for the Assets Will Be a Carryover Basis, and
Its Holding Period Will Include Target's Holding Period.
-----------------------------------------------------------------------
Section 362(b) provides, in pertinent part, that the basis of property
acquired by a corporation in connection with a reorganization to which section
368 applies shall be the same as it would be in the hands of the transferor
immediately before the exchange, increased by the amount of gain recognized on
the transfer (a "carryover basis"). As noted above, it is our opinion that the
Reorganization will qualify as such a reorganization and Target will recognize
no gain on the Reorganization. Accordingly, we believe that Acquiring Fund's
basis for the Assets will be the same as Target's basis therefor immediately
before the Reorganization.
Section 1223(2) provides in general that the period for which a
taxpayer has held acquired property that has a carryover basis shall include the
period for which the property was held by the transferor. As noted above, it is
our opinion that Acquiring Fund's basis for the Assets will be a carryover
basis. Accordingly, we believe that Acquiring Fund's holding period for the
Assets will include Target's holding period therefor.
V. A Shareholder Will Recognize No Gain or Loss.
--------------------------------------------
Under section 354(a)(1), no gain or loss shall be recognized if stock
in a corporation that is a party to a reorganization is exchanged pursuant to a
plan of reorganization solely for stock in that corporation or another corporate
party to the reorganization. Pursuant to the Plan, the Shareholders will receive
solely Acquiring Fund Shares for their Target Shares. As noted above, it is our
opinion that the Reorganization will qualify as a D Reorganization, each Fund
will be a party to a reorganization, and the Plan constitutes a plan of
reorganization. Although section 354(a)(1) requires that the transferor
corporation's shareholders exchange their shares therein for shares of the
acquiring corporation, the courts and the Service have recognized that the Code
does not require taxpayers to perform useless gestures to come within the
statutory provisions. See, e.g., Eastern Color Printing Co., 63 T.C. 27, 36
(1974); Davant v. Commissioner, 366 F.2d 874 (5th Cir. 1966). Therefore,
although Shareholders will not actually surrender Target Share certificates in
exchange for Acquiring Fund Shares, their Target Shares will be canceled on the
issuance of Acquiring Fund Shares to them (all of which will be reflected on
Acquiring Fund's books) and will be treated as having been exchanged therefor.
See Rev. Rul. 81-3, 1981-1 C.B. 125; Rev. Rul. 79-257, 1979-2 C.B. 136.
Accordingly, we believe that a Shareholder will recognize no gain or loss on the
constructive exchange of all its Target Shares solely for Acquiring Fund Shares
pursuant to the Reorganization.
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VI. A Shareholder's Basis for Acquiring Fund Shares Will Be a Substituted
Basis, and its Holding Period therefor Will Include its Holding Period
for its Target Shares.
-----------------------------------------------------------------------
Section 358(a)(1) provides, in pertinent part, that in the case of an
exchange to which section 354 applies, the basis of the property permitted to be
received thereunder without the recognition of gain or loss shall be the same as
the basis of the property exchanged therefor, decreased by, among other things,
the fair market value of any other property and the amount of any money received
in the exchange and increased by the amount of any gain recognized on the
exchange by the shareholder (a "substituted basis"). As noted above, it is our
opinion that the Reorganization will constitute a D Reorganization and, under
section 354, a Shareholder will recognize no gain or loss on the constructive
exchange of all its Target Shares solely for Acquiring Fund Shares in the
Reorganization. No property will be distributed to the Shareholders other than
Acquiring Fund Shares, and no money will be distributed to them pursuant to the
Reorganization. Accordingly, we believe that a Shareholder's basis for the
Acquiring Fund Shares it receives in the Reorganization will be the same as the
basis for its Target Shares to be constructively surrendered in exchange for
those Acquiring Fund Shares.
Section 1223(1) provides in general that the period for which a
taxpayer has held property received in an exchange that has a substituted basis
shall include the period for which the taxpayer held the property exchanged
therefor if the latter property was a capital asset (as defined in section 1221)
at the time of the exchange. As noted above, it is our opinion that a
Shareholder will have a substituted basis for the Acquiring Fund Shares it
receives in the Reorganization. Accordingly, we believe that a Shareholder's
holding period for the Acquiring Fund Shares it receives in the Reorganization
will include its holding period for the Target Shares constructively surrendered
in exchange therefor, provided those Target Shares were capital assets at the
time of the Closing.
We hereby consent to this opinion accompanying the registration
statement of Index Funds on Form N-14 filed with the SEC on April 9, 1998, and
to the references to our firm under the captions "Summary -- Tax Consequences"
and "Information about the Reorganization -- Federal Income Tax Consequences" in
the Proxy Statement.
Very truly yours,
KIRKPATRICK & LOCKHART LLP
By: /s/ Theodore L. Press
-----------------------------
Theodore L. Press
